The simple version

5.00 percent APY on a savings account is real and currently advertised at FDIC-insured institutions. It almost never applies to every dollar without conditions. The headline rate is usually capped at a balance threshold, gated on a direct deposit requirement, or tied to a checking account at the same bank. Above the cap, the rate steps down sharply.

This matters because the FDIC's national average savings rate is 0.38 percent. The gap between 0.38 and 5.00 is the difference between a savings account that pays almost nothing and one that pays a meaningful amount. The reader's job is to know the gap and read the fine print before opening the account. This is a piece about both.

The numbers

• FDIC national average savings APY: 0.38 percent, posted May 18, 2026 (FDIC National Rates and Rate Caps, May 2026 release).
• Federal funds target range: 3.50 to 3.75 percent as of the April 29, 2026 FOMC decision (Federal Reserve).
• Varo Bank, an FDIC-insured national bank, advertises 5.00 percent APY on the first $5,000 of a savings balance, with 2.50 percent APY on any balance above $5,000. To qualify, the account must receive $1,000 or more in direct deposits during the qualifying month and end the month with a positive balance in both the Varo bank and savings accounts. Source: Varo's own published Savings Interest Rates and Information disclosure.

The fine print, decoded

Three patterns show up across the banks currently advertising rates at or near 5.00 percent. Knowing which pattern applies to a given account changes the math considerably.

• Balance cap. The headline rate applies only up to a threshold, often $5,000 or $10,000. Above the cap, the rate steps down to a much lower tier. The bigger the balance, the lower the blended yield.
• Direct deposit gate. The headline rate requires recurring direct deposits from an employer or other source. Move the deposit elsewhere and the rate drops the following month.
• Promotional window. Some accounts offer the headline rate for a fixed number of months (six is common), after which the rate reverts to the bank's standard tier.

The Real Cost lens

Take $10,000 sitting in a savings account, untouched. The math on a flat 5.00 percent rate would produce $500 in interest the first year. The math at Varo's actual two-tier structure produces $250 on the first $5,000 plus $125 on the second $5,000, total $375. The blended effective APY on $10,000 is 3.75 percent. Still meaningfully higher than the FDIC national average. Just not 5.00 percent.

Compounded across 10 years at that blended 3.75 percent, $10,000 becomes about $14,450. At the FDIC national average of 0.38 percent compounded across the same 10 years, $10,000 becomes about $10,387. Difference: roughly $4,063 on the same starting balance, with no additional deposits, just from where the money is held.

Stretch the same comparison to 30 years and the gap widens. At 3.75 percent, $10,000 becomes about $30,182. At 0.38 percent, $10,000 becomes about $11,206. Difference: roughly $18,976. The calculation assumes constant rates, which will not hold. Future Fed moves will pull both sides. The order of magnitude is the point.

What this means

Two practical reads from the FDIC data. First, the 'my bank pays nothing' experience that most people describe is statistically accurate. The national average really is below half a percent. Second, the headline 5.00 percent rates that get advertised do not usually apply to a full balance, but the gap between the megabank rate and even a blended 3.75 percent online rate is still a four-figure decision across a decade. The number to read is the effective rate after the fine print, not the marketing number.

What this is NOT

Not a recommendation of Varo Bank or any other named institution. Not a suggestion to chase the highest advertised rate without reading the disclosure. Not advice to move money out of any account. Not a prediction that current rates will hold. Just the FDIC's most recent published national average, one named bank's currently published rate structure, and the math that comes out the other side.

Sources

• Federal Deposit Insurance Corporation, National Rates and Rate Caps, May 2026 release, posted May 18, 2026 (fdic.gov/national-rates-and-rate-caps)
• Federal Reserve, Federal Open Market Committee statement, April 29, 2026 (federalreserve.gov/newsevents/pressreleases/monetary20260429a.htm)
• Varo Bank, N.A., Savings Interest Rates and Information disclosure (support.varomoney.com/hc/en-us/articles/21994196784788)
• Federal Reserve Bank of St. Louis, FRED series SNDR, National Rate: Savings (fred.stlouisfed.org/series/SNDR)