Traditional major banks and credit unions are still paying low annual percentage yields on savings accounts. But many credit unions and online banks are raising high-yield savings and CD rates alongside the Federal Reserve’s rate hikes. Right now, you can find APYs over 4.00% to earn a few extra bucks on your savings.
But the peak for rates could be near. Inflation seems to be slowing down and that could signal a pause at the May 2 to 3 Federal Open Market Committee meeting, based on the latest Consumer Price Index report. As a result, the pace for Fed rate increases may slow down or even remain stagnant for a while.
If there’s a pause in rate hikes, savings rates aren’t likely to change for a while. If you invest your money in a high-yield savings account, you’ll have a variable rate that changes when the benchmark rate does. Even though rates aren’t expected to drop anytime soon, your return in a high-yield savings account is more unpredictable. But if you put money in a CD, you’ll lock in your rate for the entire CD term, regardless of whether the benchmark rate rises or falls. But, you also won’t have access to your funds until your CD term expires.
With the current economy in mind, here’s how experts say you should look at CDs and high-yield savings accounts for now and in the long term. But first, here’s the latest CD and savings rates for this week.
The best savings rates this week
Many rates remained stagnant for high-yield savings accounts this week. The average savings rate remained the same at 4.23% based on the high-yield savings accounts we track at CNET. Below are a few of the highest savings rates available this week and the minimum deposit required to open an account.
| Bank | APY | Minimum deposit |
| UFB Direct | 5.02% | $0 |
| My Banking Direct | 4.38% | $500 |
| Bask Bank | 4.45% | $0 |
| Citizens Access | 4.25% | $0 |
| Bread Savings | 4.50% | $100 |
| Tab Bank | 4.40% | $0 |
The best CD rates this week
Most CD rates for the banks we track at CNET also remained the same for the week of April 10, 2023, sitting near 4.00% APY for short- and long-term CDs. Comparatively, the average CD rates across all banks are barely over 1.00% based on data from the Federal Deposit Insurance Corporation. The FDIC average includes rates from major national banks with much lower APYs than most online banks.
| 6-month | 1-year | 3-year | 5-year | |
| FDIC | 0.97% | 1.49% | 1.31% | 1.35% |
| CNET | 4.08% | 4.47% | 3.75% | 3.81% |
Here are the best CD rates by term this week:
6-month term
- MYSB Direct: 5.00%
- CIT Bank: 5.00%
- Bask Bank 4.85%
1-year term
- CFG Bank: 5.20%
- MYSB Direct: 5.15%
- Barclays Bank: 5.00%
3-year term
- CFG Bank: 4.60%
- MYSB Direct: 4.50%
- Alliant Credit Union: 4.45%
5-year term
- Barclays: 4.50%
- CFG Bank: 4.50%
- MYSB Direct: 4.40%
Read more: Now’s a Good Time to Earn More Interest on Your Money. Here are 8 Ways to Start
Where savings and CD rates will go next
Experts don’t agree on what the Fed’s next move will be. And since CD and savings rates move alongside the federal funds rate, that means they also disagree about where deposit account APYs will go this year. Some experts predict that rates will peak this year, and it will be a good time to lock in a long-term CD to get the best rate before APYs begin to fall.
A few signs point toward rates reaching the top soon. The latest Consumer Price Index report shows that inflation only rose by 0.1% in March -- much less than months prior. As inflation slows, the Fed may hesitate to implement future rate hikes, and banks may follow suit.
”CDs are used to fund loans, so they are driven by the demand side of the equation, Warren Ward, certified financial planner and founder of WWA Planning and Investments.” That said, if the economy and other factors slow down, banks won’t need the funds. In return, they won’t raise rates as aggressively.
When short-term CD rates are higher than long-term CD rates, it indicates an inverted yield curve. This may suggest a peak is either already here or is approaching, said Kirill Semenov, a certified financial planner and wealth advisor for IntelliCapital Advisors. Once the economy and rates level off, the curve will begin to normalize -- which means long-term rates will exceed short-term rates -- and we’ll be past the high peak rate.
On the other hand, some experts believe there’s still work to do to fight inflation, which may mean higher savings rates will stick around even longer.
“The Fed started raising the rates dramatically to tame inflation and until there are solid signs that it has done just that, I do not believe the Fed will end the hikes,” said Semenov. “Unless we see solid evidence that things are back to normal, I believe rates will continue creeping up or at least remain at this level.”
Gary Grewal, a certified financial planner and author of Financial Fives, echoed these thoughts. “I think rates will probably increase another 0.25% as the Fed tries to bring inflation under control and moderate the labor market to more normal levels”, he said. “At their most recent address [in March], they did not feel like they had reached that goal yet.”
While we wait to see what happens next, it’s best to keep your savings flexible, Grewal added. High-yield savings, money market accounts and no-penalty CDs are all good for savings that don’t require you to lock into a fixed rate for a long time.
Another option is to consider a ladder approach to your savings, as Ward recommended. You can build a CD ladder with short-term CDs, such as three, six, and 12-month terms. As each CD term ends, you can roll the money into a new CD with a better rate and longer term. This way, if rates rise, you’ll have money handy to reinvest in a higher-rate CD. And if rates drop, you’ll still earn a solid CD rate.
What causes savings and CD rates to move
The Federal Reserve is tasked with keeping inflation around 2%. When inflation climbs too high above the figure, the Fed’s main course of action is to raise the federal funds rate to help slow the economy. This indirectly leads to other rates rising -- like the interest rates on credit cards, auto loans, personal loans and even mortgages. But it also means savings rates tend to increase.
The Federal Reserve’s federal funds rate is the rate at which banks borrow. When the Fed raises the rate, banks tend to move in lockstep with the Fed. For instance, if the Fed raises its rate by 25 basis points, you may see a small increase in your savings or CD account APY. Since March 2022, the Fed has repeatedly raised the federal funds rate to combat inflation.
But there are other reasons why your savings rate at a particular bank might change. “There is usually one institution that needs more deposits, so it is paying higher rates,” said Semenov.
Regardless of whether rates are rising or falling, you’ll usually find the best savings and CD rates at online-only banks. That’s because they have fewer overhead costs and can pass the savings down to account holders in the form of better rates. Credit unions also may offer higher savings rates, because their profits are returned to their members, rather than investors, usually in the form of better savings rates and other member perks.
FAQs
You’ll earn interest on both high-yield savings and CD accounts. Which one you choose will depend on your financial situation and needs. A high-yield savings account is best if you want to make regular contributions or transfers. We recommend stashing your emergency fund in a high-yield savings account for easy access.
If you don’t need your money right away, a CD can be a good place to park your savings since it earns a guaranteed fixed rate that won’t rise or fall during your CD term. But, if you withdraw money from a CD before the term ends, you’ll pay an early withdrawal fee.
It’s always a good idea to diversify your savings. If you put all your savings in a CD, you won’t have access to the funds until the term ends. And if you withdraw your money before then, you’ll pay a penalty fee. It’s best to keep some savings and your emergency fund in a high-yield savings or money market account to earn interest while keeping the money easily accessible.
While CDs and savings accounts are great vehicles for storing short-term savings, you should save for longer-term goals, like retirement through a tax-advantaged retirement account like a 401(k) or IRA.
A CD guarantees a certain return with a fixed APY, while a savings account’s rate may fluctuate with the market. However, both accounts are secure if the bank or credit union are FDIC or NCUA insured. Most banks offer $250,000 per person per account type in case of a bank failure or loss.
