The Federal Reserve meets on January 27-28. Unlike the previous three meetings where they issued rate cuts, CME Group FedWatch projects a 95% chance the Fed won't cut rates this time around.
When the Fed cuts rates, it impacts savers by way of lower APYs. However, it can take weeks to months for banks to lower rates, and even with a minor reduction, high-yield savings accounts will still earn a rate surpassing inflation.
With this in mind, here's why we still recommend a HYSA in the interim. We also present another risk-free savings option that'll help you maximize returns.
Why it’s worth getting a high-yield savings account before the next Fed meeting
While opening a high-yield savings account before the next Fed meeting won’t lock in current rates, as the APY on these accounts fluctuates with the market, it’s still worth it to open one.
Why? Because the rates are still high. Our top choice, Newtek Bank, offers a 4.35% APY with no account minimums or fees. It's a great way to build an emergency savings, or for established savers to set aside money to meet short-term savings goals. Best of all, the account doesn't come laden with fees to impede savings growth.
Along with Newtek, you can compare rates on high-yield accounts by using the tool below, powered by Bankrate:
Before opening a high-yield account, keep in mind the following:
- High-yield savings accounts have fixed interest rates, so if the Fed decides to cut rates again, it can lower your APY
- Find a bank offering FDIC or NCUA-insurance (for credit union members), as it'll protect your deposits up to $250,000 per person
- Keep your money in a separate savings account so it's more difficult to access, reducing impulse purchases and allowing your savings to grow
When to consider a CD account
Unlike high-yield savings accounts, CD accounts offer a fixed APY. This means that if rates go down after you've opened a CD, your earnings won't be affected.
If you're concerned about earning a lower rate of return, then it's wise to consider this over a high-yield savings account. You can shop and find the best CD term for your needs, using this tool powered by Bankrate:
While opening a CD account can be a smart way to take advantage of high rates for as long as possible, there's one caveat: You'll need to make sure you don't make any withdrawals before the CD matures. Doing so will result in fees that can offset any interest earned (unless you have a no-penalty CD account).
One other thing to keep in mind is that many banks autorenew CDs. Set a reminder on your phone a week before its maturity, as it gives you time to explore more options.
The bottom line on high-yield savings accounts
Taking advantage of today’s high-yield savings and CD account rates can help you maximize your earnings. Luckily, you might have some breathing room, as it's likely there won't be a rate cut at this meeting.
