Bank Gap by State

The Bank Gap in South Dakota

South Dakota has no state income tax, funded instead largely through sales and excise taxes, which removes the tax angle from the Bank Gap decision entirely.

Big-bank average0.38%

Best available4.20%

$955/yrlost on a $25k balance · 3.82 pp spread

Last reviewed September 22, 2026 · SwitchWize Research Desk

Best savings APY

4.20%

high-yield

National average

0.38%

big-bank avg

APY gap

3.82 pp

spread

SD tax on interest

None

no income tax

Source: S&P Capital IQ Pro; SNL Financial Data. Calculations: FDIC. Reflects the $2,500 product tier for savings and interest checking accounts.

No state tax — full gap is yours

$955/yr

on a $25,000 balance

On a $25,000 balance, the gap is about $955 a year. South Dakota has no state income tax, so you keep the full amount.

Estimated Bank Gap by balance

Estimated annual Bank Gap by balance at 0.38% current APY versus 4.20% better-fit APY
Balance	Current earnings	Better-fit earnings	Estimated Bank Gap
$1,000	$4	$42	$38
$5,000	$19	$210	$191
$10,000	$38	$420	$382
$25,000	$95	$1,050	$955
$50,000	$190	$2,100	$1,910
$100,000	$380	$4,200	$3,820

Estimates over 12 months at 0.38% current APY and 4.20% better-fit APY. Example only — your result depends on your balance, rates, and time horizon.

Local economy

South Dakota's unemployment rate

SD unemployment

2.00%

South Dakota

National unemployment

4.10%

U.S.

Federal Reserve (FRED), as of 2026-08-01. Historical data, not a forecast.

Real local data

What South Dakota's own local banks actually pay

Weighted by real FDIC deposit data across the banks that hold 98% of South Dakota's tracked deposit base and have a current, observed rate — not the national average, South Dakota's own local mix.

Local weighted APY

0.02%

deposit-weighted

Best available APY

4.10%

nationwide, any state

Per-household gap

$294

typical balance, per year

Who actually holds deposits in South Dakota

Wells Fargo · 62%Citibank · 35%

Ranked #2 nationally by per-household gap. Full methodology and data sources.

Why South Dakota changes the math

South Dakota levies no state income tax, so savings interest is taxed only at the federal level. That removes the state-tax advantage that makes Treasuries attractive elsewhere — in South Dakota the simplest, highest-value move is the top-yielding FDIC-insured savings account.

A below-average cost of living keeps typical South Dakota emergency-fund balances modest, and with no state tax, the full Bank Gap on that balance flows through untouched.

Cost of living in South Dakota is below the national average, which shapes how large an emergency fund needs to be and therefore how many dollars the Bank Gap quietly costs on idle cash.

After-tax tip

Because South Dakota has no state income tax, the Treasury state-tax advantage does not apply. The simplest high-value move is to put liquid cash in the highest-yielding FDIC-insured savings account.

Open the short-term savings tool

Frequently asked questions

Does South Dakota tax high-yield savings account interest?

No. South Dakota has no state income tax, so savings account interest is taxed only at the federal level. There is no state tax drag on the extra interest you earn by switching to a better account.

Is a high-yield savings account worth it in South Dakota?

Yes. With no state income tax, the after-tax case is simple: moving cash from a national-average account to a top high-yield savings account keeps more in your pocket, and there is no state-tax wrinkle to weigh.

Are T-Bills better than a HYSA for South Dakota savers?

Usually not on tax grounds. The main edge T-Bills have elsewhere is exemption from state income tax, and South Dakota has none. For most South Dakota savers the highest-yielding FDIC-insured savings account is the cleaner choice for liquid cash.

Your personal Bank Gap

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Educational information, not tax or financial advice. State tax rules are summarized at a high level and depend on your full situation. Rates are illustrative of current market conditions and should be confirmed with the provider. Confirm tax treatment with a qualified professional.