Banks offer to pay you interest on the money you deposit because they can make a profit from taking your money and loaning it out to people who need mortgages and other loans. But just how much interest you can earn from your bank account depends on where you bank and what kind of account you have. While some online banks offer depositors 2%, 2.5%, even 3% interest or more, many banks pay less than 1% interest—or nothing at all.

Checking Account Interest Rates
Some checking accounts pay interest, others don’t. If your checking account doesn’t pay interest, hopefully it’s free. (If not, start shopping). If it does pay interest, there may be fees attached to the account if you don’t keep a minimum balance in the account. Consider your checking account features, interest rates, and fees carefully.

If you pay just one $2 ATM fee per month and earn 2% interest, you’ll need a balance of no less than $1,200 in your account at all times just to break even. As you can see, unless you have a big balance in your checking account, it may be better to go with a free checking account with lower fees than one that pays interest. See the most current checking account interest rates »

Savings Account Interest Rates
Savings account interest rates vary dramatically. Many banks require you to have a savings account with at least $5, $10, or $100 in it in order to get a checking account. But did you know that these accounts usually earn less than 1% interest?

Meanwhile, several online savings banks like ING Direct, E*Trade, FNBO Direct, and others pay interest rates that are four, five, even six times higher than most accounts. Most of them don’t require a minimum balance; the only drawback is you can’t go to a teller to get your cash; you make deposits and withdrawals online. See the most current savings account interest rates »

Certificate of Deposit (CD) Interest Rates
When you “buy” a certificate of deposit (CD), you get a higher interest rate than many savings accounts in exchange for agreeing not to withdraw you money for a set period of time. (If you withdraw money early, you lose most if not all of the interest earned). Usually CDs are purchased in increments of as little as three months up to five years. The longer you deposit the money, the better the rate you earn.

Another feature of CDs is that your interest rate is usually “locked”. This means that if the interest rate stays the same regardless of whether other interest rates go up or down. Some CDs may offer you the chance to get a rate that can go up but never down. See the most current CD interest rates »

This article is part of the series Banking 101.