Savers keeping cash in traditional bank accounts are losing ground to a simple alternative that pays several percentage points more in annual interest. More than $7 trillion now sits in U.S. money-market funds that track short-term government rates, while the national average yield on bank savings accounts remains close to zero. The gap between these two options has persisted for months, and federal data from both the FDIC and the SEC confirm that ordinary depositors are leaving significant income on the table.
How the Fed’s rate floor keeps money-fund yields elevated
The Federal Reserve’s overnight reverse repurchase agreement facility acts as a rate floor for money-market funds. Government and prime funds park cash in Treasury bills, repurchase agreements, and other short-term instruments that reflect this floor. The FOMC’s implementation note issued January 28, 2026, set the administered rates that feed directly into money-fund portfolio yields. Because fund managers can access this facility daily, their returns stay tightly linked to the policy rate, which has kept yields near 4 percent for investors who hold these funds.
Banks, by contrast, face no obligation to pass that same rate through to depositors. The FDIC’s national rate data for both January and March 2026 show the average savings account yield far below the ON RRP offering rate. That spread is not a quirk of one reporting period. The FRED series tracking the ON RRP offering rate, sourced from the Federal Reserve Bank of New York, shows the policy floor has remained elevated across recent quarters, yet bank deposit pricing has barely moved in response.
FDIC and SEC filings show the size of the deposit-rate gap
Two independent federal datasets frame the problem. The FDIC publishes national average rates each month, calculated from a weighted survey of insured institutions. The March 2026 edition confirms that savings account averages remain a fraction of money-fund yields. On the other side, the SEC’s Division of Investment Management released its money-market fund statistics for January 2026, aggregating data from mandatory Form N-MFP filings that every registered money fund must submit. Those statistics are compiled in a dedicated SEC report that summarizes assets, yields, and portfolio composition across the industry.
The underlying monthly filings, available through the SEC’s Form N-MFP portal, allow anyone to verify what individual funds hold and what yields those holdings generate. The result is a transparent, regulator-maintained evidence base showing that money-fund investors earn policy-linked returns while bank depositors do not.
The hypothesis that banks are deliberately keeping deposit rates low to protect net interest margins fits the available evidence. Banks earn returns on their own asset portfolios, including loans and securities, that benefit from higher rates. Raising deposit costs would compress the spread between what they earn on assets and what they pay on liabilities. Quarterly call-report data, filed with federal banking regulators, would show this margin widening as policy rates rose, even while the FDIC’s published averages indicate that what savers receive has barely budged.
Why depositors tolerate below-market yields
Behavioral and practical factors help explain why so much money remains in low-yield accounts. Many households value the familiarity of a checking or savings account and rarely revisit their initial choice, even when market conditions change. Automatic bill payments, direct deposit arrangements, and long-standing relationships with local branches create switching frictions that make it easier to accept a low rate than to open a new account or move cash into a fund.
There is also a perception gap. Money-market funds are often conflated with stock or bond mutual funds, leading some savers to assume they carry the same level of risk. In reality, registered money funds operate under strict liquidity, maturity, and credit-quality rules, and the SEC’s Form N-MFP regime forces granular, monthly disclosure of holdings. While these funds are not bank deposits and are not insured by the FDIC, the regulatory framework and transparent data make their risk profile far more visible than that of a typical bank’s balance sheet.
What savers can do to close the gap
For households and small businesses, the first step is information. Comparing the rate on an existing savings account to the yields reported by large money-market funds or high-yield online savings accounts quickly reveals whether cash is under-earning. The FDIC’s national averages give a baseline for what banks are paying, while the SEC’s published statistics show what policy-linked instruments are returning.
Moving every dollar out of a bank is neither necessary nor prudent. Transaction accounts still provide essential payment services, FDIC insurance up to legal limits, and immediate access to cash. But many savers can segment their balances, keeping a working cushion in traditional accounts and shifting longer-term cash reserves into higher-yielding vehicles that track short-term government rates more closely.
As long as the Federal Reserve maintains an elevated policy floor and banks continue to lag that benchmark, the income gap between passive depositors and more active cash managers will persist. The data compiled by federal regulators make that divergence plain. Whether households choose to act on it will determine who captures the benefit of today’s higher-rate environment: the banks that hold the deposits, or the savers whose cash makes the system run.
