As the Federal Reserve hiked interest rates through 2022-2023, rates on high-yield savings accounts and CDs rose in tandem. But since the Federal Reserve began holding interest rates steady (which it did at a fifth consecutive meeting in March), savings rates have started to fall. If the Fed cuts interest rates later this year, as expected, savings rates will likely drop even further. As rates continue to go down, consider locking in rates while they're still high.
To combat inflation, the Federal Reserve hiked interest rates in an attempt to drive spending down, as consumers realized higher commercial interest rates on mortgages, credit card APRs and other loans. There was a silver lining, however — as the federal funds rate increased, interest rates on high-yield savings accounts and CDs did too, as is typical. Offering a high APY (annual percentage yield) on accounts is an effective way for banks to compete for customers and attract deposits.
But at its latest meeting, the Federal Reserve decided to once again keep the federal funds rate steady. This fifth consecutive pause in rate hikes means the federal funds rate, a key bank lending rate, will remain at a target range of 5.25% to 5.5%, the highest it’s been in 23 years.
In the official statement, The Federal Reserve stated: "The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent."
However, the Federal Reserve maintains their projection that there will be three interest rate cuts in 2024, reducing the federal funds rate to a range of 4.5% to 4.75%.
Our new comparison tool — in partnership with Bankrate — will help you find the best rates available now.
How to find the best savings rates
Compare high yield rates online: Online banks typically offer more generous APYs on savings accounts, so banking online could help you get the best savings rate possible. So, changing from your traditional savings account at a brick-and-mortar bank to an online one might be a good option.
Avoid teaser rates and tiered interest rates: Teaser rates are promotional rates banks use to attract new customers, but these rates are typically short-lived. Tiered interest rates pay a different yield based on the balance in your account, but if you plan on using your savings at some point, opting for an account with a flat APY is likely a better choice.
Take into account any fees: While high-yield savings accounts do offer higher than average APY on deposits, some have strings attached. Some high-yield accounts will have fees or balance requirements that could potentially decrease their overall value, so it's important to consider this to find the best options.
Here are some of the best high yield savings accounts.
Poppy Bank: 5.50% APY; $1,000 minimum opening deposit
My Banking Direct: 5.35% APY; $500 minimum opening deposit
Ivy Bank: 5.30% APY; $2,500 minimum opening deposit
TAB Bank: 5.27% APY; $0 minimum opening deposit
UFB Direct: 5.25% APY; $0 minimum opening deposit
Newtek Bank: 5.25% APY; $0 minimum opening deposit
