Banks Raise APYs to 5% as Fed Easing Fuels Deposit Competition

Fortune's savings roundup.>

Savings accounts offering up to 5.00% annual percentage yield (APY) remain a top draw for savers in October 2025, as financial institutions compete to retain deposits amid shifting Federal Reserve policy. Varo Money leads the market with its 5.00% APY, while Axos Bank, Presidential Bank, and SoFi also offer rates near or exceeding 4%, according to the Fortune piece. The surge in high-yield accounts reflects banks' efforts to maintain customer loyalty following the Fed's first rate cut of 2025 in September, which marked the beginning of a broader easing cycle, according to Fortune's Oct. 22 analysis.

The Federal Reserve's decision to lower the federal funds rate by 25 basis points in September has prompted banks to reassess their deposit strategies. While the national average savings rate remains at 0.40%, high-yield accounts continue to outperform by an order of magnitude, offering returns that far exceed traditional savings products, according to Yahoo Finance's rate roundup. Analysts note that further rate cuts—expected at the Fed's October and December meetings—could pressure banks to reduce APYs, but the current competitive landscape suggests institutions will maintain elevated rates to attract funds, as the Fortune Oct. 22 analysis observes.

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Banks reporting strong quarterly performance have provided the financial flexibility to sustain high APYs. Independent Bank Corp (IBC), for instance, is projected to report earnings of $0.84 per share on October 28, with revenue expected to rise 10.1% year-over-year to $46.09 million, according to the Reuters preview. Similarly, Preferred Bank's third-quarter results showed a 16.91% return on equity and $74.98 million in revenue, outperforming analyst estimates, according to a DA Davidson estimate. These earnings gains, driven by robust net interest income and fee-based revenue, underscore banks' capacity to offer generous savings rates while maintaining profitability.

The broader banking sector has also benefited from favorable funding costs. American Riviera Bancorp reported a 16.8% increase in net interest income pre-provision for Q3 2025, aided by a 5.7% decline in total interest expense due to reduced deposit rates and lower borrowing costs, as noted in a Morningstar report. Meanwhile, Affinity Bancshares' net interest margin held steady at 3.49%, reflecting disciplined balance sheet management amid rate volatility, according to a Morningstar release.

Innovation in financial services is further amplifying competition for deposits. Alpha Modus Holdings announced the launch of AlphaCash, a network of AI-driven kiosks targeting unbanked and underbanked populations, according to an Alpha Modus press release, while VersaBank unveiled "Real Bank Deposit Tokens," leveraging its federally licensed status to offer digital deposit receipts, as detailed in a Marketscreener article. These initiatives highlight banks' growing focus on technology and alternative channels to expand market reach and diversify revenue streams.

Experts caution that savers should remain vigilant as the Fed's easing cycle progresses. "While high APYs are attractive, they may not persist if the Fed continues to cut rates," said a Bloomberg analyst. "Consumers should lock in current rates where possible and monitor for potential rate reductions." The Federal Reserve's next meeting in October will be a critical inflection point for savings accounts, with further cuts likely to reshape the landscape of deposit offerings.