Why Your Bank's Savings Rate Moves Slower Than the Fed's

I spent a large part of my career on the other side of this question, sitting in the room where a bank decides what to pay depositors. Readers of the SwitchWize Research Desk's deposit beta explainer already know the pattern: big banks pass through almost none of a Fed move, online banks pass through most of it. What I want to explain here is the part that pattern doesn't show you: the actual meeting where that decision gets made, and why, for a lot of banks today, there is no meeting happening at all. Savings rates on this page were last verified recently.

The room where your rate actually gets decided

At most banks, deposit pricing is overseen by an Asset-Liability Committee, known internally as ALCO. It typically meets weekly or monthly, and its job, amongst other things, is to optimize the bank's cost of funds against its lending and investment income. When the ALCO looks at savings and money market rates, it is not just asking "what did the Fed do." It is asking three narrower questions: What would it cost us to raise the same money another way, e.g. through an FHLB advance or a brokered CD? How much of our deposit base is actually at risk of leaving if we do nothing? And how much margin do we want to give up to keep it?

A bank sitting on trillions of dollars in checking and savings balances that customers have held for years already knows the answer to the second question. Attrition is low. Direct deposit, autopay, a mortgage, a mobile app the household already trusts -- all of it makes moving the money feel like more trouble than it is worth to most customers. When ALCO models that attrition and finds it negligible, raising the rate has a cost (lower net interest margin) and close to no benefit (deposits weren't leaving anyway). The rational decision, from inside that room, is to leave the rate alone. That is not an oversight. It is a rational approach to optimizing/maximizing profits for the bank.

What the live data actually shows right now

I pulled current rate_observations data directly rather than repeat last quarter's numbers. As of Aug. 30, 2026:

That is not a lag of a few weeks. It is a standing gap of roughly 100 to 400 times, and it has held through the Fed's most recent move: a 25-basis-point cut on Dec. 11, 2025, taking the target range from 3.75%-4.00% down to 3.50%-3.75%, where it has sat since. Named megabanks were already close to zero before that cut. There was effectively nothing for their committees to give up, which is the more precise way to describe what is happening than calling it a "lag." A bank cannot pass through a cut it never priced in the first place.

Beta is a choice, not a physical constant

The banking industry has a term for the share of a Fed move a bank passes through to depositors: deposit beta. It is a useful shorthand, but it can make the behavior sound automatic, like a dial the Fed turns. It is not automatic. Every rate you see in that table above was approved by a committee that could have set it higher. An online bank with no branch network and no legacy deposit base has to win every dollar on rate, so its committee runs a high beta because the alternative is losing the deposits entirely. A megabank's committee runs a beta near zero because it can, and because nothing in its cost structure forces it to do otherwise.

This cuts both ways, and it is worth saying plainly: a high-beta bank will also cut its own rate faster if the Fed cuts again. But it is cutting from a rate multiples higher than a megabank's, so the gap in your favor holds up across a full cycle, not just the moment right after a Fed decision.

What this means heading into the next Fed meeting

I write more about the Fed's own calendar in what the September meeting means for savers, but the short version for this piece: whatever the FOMC does on Sept. 16, do not expect it to move your megabank's committee. A hike gives a low-rate bank more room to pay you, not more reason to. A cut gives an already-near-zero bank nothing left to cut. The committee's decision is driven by attrition risk, not the fed funds rate directly, and attrition risk does not change on a Fed announcement.

If you want to see the dollar size of that gap on your own balance rather than just the rate spread, our Bank Gap Index turns exactly this dynamic into a single number.

Sources

• Live institution-level APY data: SwitchWize rate_observations, verified Aug. 30, 2026
• Federal Reserve: FOMC meeting calendars, statements, and projections
• FRED: Federal Funds Effective Rate (FEDFUNDS)
• FDIC: National rate data

Methodology

Named-institution APYs are pulled directly from SwitchWize's daily rate-tracking pipeline, cross-referenced against each bank's own published rate page at the time of verification noted above. Fed funds figures come from the Federal Reserve's own published target range and FRED's effective-rate series. This is an explanation of how bank deposit pricing works, drawing on the author's professional background in bank treasury management. It is educational information, not personalized financial advice.