The Federal Reserve raised rates again Wednesday, this time by a quarter point, bringing the federal funds rate to a target range of 4.75% to 5%. As interest rates rise, savings rates for high-yield savings accounts usually do, too.
In fact, Greg McBride, chief financial analyst for Bankrate, noted, “Returns on savings accounts and CDs are the best in 15 years.”
Should you get a new savings account now?
Typically, as the federal funds rate is increased, banks will raise interest rates on high-yield accounts to stay competitive in the market and attract deposits, meaning you’re more likely to see these rate increases among smaller, online banks as opposed to brick-and-mortar institutions.
With rates on savings accounts already surpassing 5% in some cases, it's a good idea to park your cash in one of these top-yielding accounts to take advantage of rates while they're still high. As inflation continues to decline, savings rates could go down with it when the Fed starts lowering rates.
McBride says, “With rates still rising and inflation now declining, it is the best of both worlds for savers.” He recommends consumers “consider locking in longer-term CDs, which are peaking now, and seek out one of the top-yielding savings accounts, which are pulling in more than 4% and are still rising.”
Below are today’s high-yield savings rates. If you’re earning a low rate on your savings account, now is a good time to gain massively with the best rates. While the national average yield for savings accounts is only 0.23% APY, high-yield accounts offer much more than that, with some rates over 5%.
Wednesday’s Fed action means rates on mortgages, credit card APRs and other loans will also increase.
This is the ninth time the Fed has increased the fed funds rate since March 2022 in an attempt to combat high inflation by driving spending down as consumers realize higher commercial interest rates.
Consumers looking for higher savings rates should act soon, though, as some on Wall Street are speculating that the Fed will start cutting rates, to 3.84% by March of 2024 and 3.2% a year later. “The markets are screaming that we’re going to see rate cuts,” says New York City financial adviser Eric Beiley. This is because inflation has fallen from 9.1% at its high, to 6%, and given banks’ recent failings, they could also start cutting back on lending.
