At its June meeting, the Federal Reserve voted to pause interest rates in the 3.50% to 3.75% range yet again. This latest in a series of pauses has left savers in limbo.

With inflation topping 4% and most savings accounts barely keeping pace, where is the best place to stash the cash you don't need right now?

If you don't want it to lose value amid rising inflation but you also don't want to risk exposing it to the market by investing it, a certificate of deposit (CD) account is one of your best options.

But how do you choose the right term length? That really comes down to what the Federal Reserve's next move is. While a 5-year CD was your best bet in the past, with fed rates still above average while inflation was ticking downward, the uncertainty in today's economy makes those longer-term CDs less attractive.

With the outlook for both inflation and future Fed rate moves uncertain, your best bet right now is a short-term CD so you can lock in today's rate while still having flexibility to shift your cash somewhere else depending on where the market goes.

Why a short-term CD is your best after the fed meeting

Like high-yield savings accounts, CD rates generally move in the same direction as Federal Reserve policy. The difference is that a CD locks in a fixed rate for the entire term, while savings account rates can rise or fall at any time.

With many short and long-term CDs offering around 4% right now, locking in those above-average rates for as long as possible was a great idea when inflation was trending downward. But now that inflation is back above 4% and only a few savings accounts are beating it, a short-term CD, with a term of, say, six or so months, might be a better bet.

This allows you to lock in higher rates for a few months while you wait to see what happens with inflation and what kind of signals the Federal Reserve puts out about where interest rates might land by the end of the year.

If the Federal Reserve raises rates in response to stubbornly high inflation, you'll have the opportunity to lock in those new higher rates after the term is up. If inflation, instead, starts falling again, you can move your cash after those few months to a longer-term CD to lock in these rates for longer.

With that in mind, use the tool below to find the top CD rates available today:

Economic signs to watch to anticipate the future of interest rates

After stashing your cash in a short term CD, you can keep an eye on the economy in the next few months while you wait for it to mature. That way, when it does mature, you'll have a good idea of where to move your cash next to maximize your yields.

• Watch for clues as to how Kevin Warsh will change the Fed. Warsh has historically been a proponent of keeping rates higher rather than risking inflation. But some analysts speculate that he might be more likely to give in to pressure from President Donald Trump to cut rates. Keep tabs on what he says in upcoming meetings to get a sense of which way he might lean in the future.
• Keep up with the monthly CPI reports. The consumer price index released every month by the Bureau of Labor Statistics not only gives you a broad picture of how your own costs are changing, but it's an important measure of inflation tracked by the Federal Reserve. If inflation keeps going up, the Fed is likely to either keep rates paused or hike them further. If inflation slows, rate cuts might be in the future.
• Check the latest jobs reports. In addition to inflation, the Federal Reserve also closely watches employment data, including unemployment rates and wage levels, when setting its monetary policy.
• Track the 10-year Treasury yield. Especially for longer-term savings accounts, such as your CD, rates can be influenced by yields on multiyear Treasury bonds. This is also an important economic indicator to watch if you might be buying a house soon, as the 10-year Treasury yield also influences mortgage rates.

Even if you don't want to track economic indicators that closely for the rest of the year, you can stash your cash in a short term CD now and set a reminder to check in on what's going on in the market in the weeks before it matures.

From there, you can decide whether to move your cash into another short-term CD or lock in rates for longer by opting for a multiyear CD.

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Certificates of deposit (CDs) are a tried-and-true investment that retirees and others often turn to when they want to preserve their money while earning at least a smidgen of interest.

These investment stalwarts serve as quiet guardians of your money rather than as risk-takers that could expose you to danger. Those traits are both their strength and their weakness.

Yes, the money in a CD is insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 and guaranteed to give you the promised rate of return. But because of the low interest rates that CDs typically come with, they sometimes even struggle to keep up with inflation.

In other words, the spending power of your money is often just holding steady rather than making gains.

What are market-linked CDs?

Fortunately, these reliable but low-return CDs have a cousin of sorts with significantly more upside: market-linked CDs. If you're unfamiliar with them, an explanation is in order.

Market-linked CDs differ from traditional CDs in that they have a return on investment that's connected to an underlying asset, which could be a group of stocks, an index (such as the Russell 2000) or a commodity (such as gold).

That means they offer a significantly higher upside than their traditional counterparts because their performance is tied to how well the market is doing and not to a set interest rate.

At the time of this writing, many traditional CDs are paying slightly under or slightly over 4%. In contrast, a market-linked CD can soar with the rest of the market during good times, although the issuer may place a cap on the CD's value.

Generally, though, the growth potential of a market-linked CD is higher than that of a traditional CD. In a good year, that might be a 12% to 15% return.

Of course, we all know that good times aren't constant in the market. In the worst of times, the market can drop precipitously.

To lessen the blow in such circumstances, market-linked CDs often come with a minimum guarantee, which limits how much their value can drop if the market takes a turn for the worse.

Length of investment

Another way in which traditional CDs and market-linked CDs differ is the length of time you hold them.

Although traditional CDs may have longer maturity dates, some can mature within a few months, giving you the option to cash in or roll them over in a short period.

With market-linked CDs, the minimum maturity term is one year, and for many, it's several years.

In other words, they are not a particularly liquid investment; the money you put into them won't be available to you during their term — unless you're willing to pay a penalty for early withdrawal.

That means you need to think carefully about how long you feel comfortable tying up your money.

Typically, I would say three to five years is a good range, which most people can handle, assuming they have other funds stashed away that they can quickly access if needed.

With some market-linked CDs, you may be investing your money for up to 10 years, but I would steer clear of these. That's a long time not to have access to your money.

Advantages and disadvantages

As with any investment, market-linked CDs come with advantages and disadvantages.

Some advantages include:

• Like traditional CDs, market-linked CDs are FDIC-insured for up to $250,000, giving you added confidence that your money is preserved
• You have the potential to reap higher returns — in some instances, much higher — than with a traditional CD
• Your principal is preserved, no matter what happens in the market

Some disadvantages include:

• The earnings cap limits how much you can make, while there is no limit to how much money you can earn if you invest in the market
• You may not make any money at all, ending up with the amount you initially invested
• Market-linked CDs are taxed as ordinary income rather than at the lower capital gains rate

As with many investments, a market-linked CD should comprise only a portion of your overall portfolio.

A financial professional can help you review your current investments, determine whether a market-linked CD might be suitable and discuss with you the advantages and disadvantages based on your individual situation.

For investors wanting to add more diversity to their investments and looking for a potentially solid return while limiting their risk, market-linked CDs can be an attractive alternative.

Ronnie Blair contributed to this article.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

The Federal Reserve will keep short-term interest rates unchanged when it concludes its next meeting, experts say, as solid economic growth, moderating inflation and a "low-hire, low-fire" labor market support current policy.

Of more interest is how Fed Chair Jerome Powell handles the press conference following the release of the central bank's policy statement. The Fed's independence has come under question, and Powell is set to preside over just two more meetings before his term as Fed chief ends on May 15. While Powell could remain on the Fed board for the remainder of his full term, he could also choose to step aside entirely.

As for the state of the economy, fourth-quarter gross domestic product (GDP) is tracking at a strong growth rate of 5.4%, according to the Federal Reserve Bank of Atlanta's GDPNow model.

Meanwhile, the jobs market remains sluggish but steady. As for inflation, while it's still above the Fed's long-term target, recent readings have come in better than expected. Fears of a tariff-driven surge have thus far proven unfounded.

Matthew Luzzetti, chief U.S. economist at Deutsche Bank, suggests Powell’s press conference could veer into "non-economic issues," such as current threats to the Fed's independence. On the "fundamental" side, Luzzetti expects Powell to describe policy as "well positioned," as it is plausible to argue that rates are currently neutral.

"Powell might also sound somewhat more sanguine on the labor market, while still emphasizing downside risks," Luzzetti adds.

As of this writing, market participants expect the Fed's rate-setting committee, the Federal Open Market Committee (FOMC), to stand pat on the federal funds rate.

Indeed, as of January 26, interest rate traders assigned a 97% probability to the FOMC keeping the target rate steady at 3.5% to 3.75%, according to CME Group's FedWatch.

With the Fed set to leave rates unchanged at an increasingly complex time, we turned to economists, strategists and other experts for their thoughts on monetary policy going forward. Please see a selection of their commentary, sometimes edited for brevity or clarity, below.

Fed rate decision: what the experts say

"After three straight rate cuts last year, the Federal Reserve is widely expected to keep interest rates unchanged at the next meeting. We may see another dissent (in favor of an additional cut) from Governor Miran before his term ends on January 31, but the real focus will be on Chair Powell's press conference. Investors want to know whether this will simply be a one-meeting 'pause' or the beginning of a longer hold. Right now, the economy still looks surprisingly sturdy." – Larry Adam, chief investment officer at Raymond James

"We expect the Fed to hold rates steady and present a somewhat more upbeat view about the economy through the policy statement and Chair Powell's press conference. The statement is likely to upgrade the growth assessment to 'solid,' note tentative evidence that unemployment has stabilized, and hint at an improving balance of risks to the outlook." – Matthew Luzzetti, chief U.S. economist at Deutsche Bank

"Markets are now not really expecting a Fed rate cut until June, or the first meeting after Jay Powell has left the Chair. We remain a bit more dovish than the market, expecting three quarter-point trims this year. True, real GDP growth expectations are being lifted, but it's coming from better productivity, and the job market remains sluggish while core inflation is stable to lower." – Douglas Porter, chief economist at BMO Capital Markets

"We don't expect to learn a lot at the January FOMC meeting. The Fed is on hold but remains data dependent. The balance of risks around the two mandates hasn't changed much since December. Chair Powell's press conference might be dominated by questions about politics rather than policy. On the latter, however, market pricing creates risks of a dovish surprise." – Aditya Bhave, U.S. economist at BofA Securities

"We expect no policy change in the January meeting. Our base case anticipates 25 to 50 bps of additional easing this year, moving towards neutral and generally supporting our constructive economic and market outlook." – Lauren Goodwin, chief market strategist at New York Life Investments

"While no change in interest rates is expected, markets will be highly attentive to the tone of the statement and Chair Powell's press conference. Any adjustment in how the Fed characterises inflation, labour market conditions or downside risks to growth could quickly influence rate-cut expectations. A message that reinforces patience and acknowledges cooling momentum would likely support equities and pressure the dollar, while a more cautious or hawkish tilt could revive volatility across risk assets." – Daniela Hathorn, senior market analyst at Capital.com

"We expect the Federal Reserve to hold rates steady at the January FOMC meeting, following three consecutive rate cuts in 2025, as policymakers take time to assess the impact of past easing. Assuming inflation continues to trend lower and growth remains resilient, we see room for moderate rate cuts in 2026." – Gargi Chaudhuri, chief investment and portfolio strategist at BlackRock

"The FOMC is widely expected to leave the fed funds rate unchanged at its January meeting. We expect the post meeting statement and press conference to signal maximum flexibility as the Committee strives to keep its options open. Our forecast remains for two 25 bps rate cuts at the March and June meetings, but the risks to our forecast look increasingly skewed toward later and possibly less easing this year." – Sarah House, senior economist at Wells Fargo

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My savings strategy is to maximize earnings while having liquidity. After all, you never know what expenses are around the corner, and the last thing you want is to lock up your money in a long-term CD, where you'll have to pay the bank to access it. That's no good.

Arguably, the best option to achieve both is a no-penalty CD. As its name implies, you can store your money away, as no-penalty CD rates earn well above 4%, with access to your cash when you need it.

That way, if the Fed does cut rates sometime this year, you can lock them in when they're still high and have the flexibility to find better investment opportunities if inflation rises.

So, what's the catch, and is this the best savings strategy for you to employ? Let's dive in.

How a no-penalty CD can help you

Let's start with the good:

• You'll earn rates as high as 4.34%
• Terms are short, giving you time to pivot investments if the Fed cuts rates
• You'll have access to withdraw some of your cash fee-free
• They're easy to set up

The pros indicate this is a great savings option if you want to tuck away your money for a short time, earn a rate outpacing inflation and have quick access to your cash. Whether you have an upcoming expense you want to earmark some money for or want a risk-free way to diversify some of your savings, a no-penalty CD offers it.

If you're interested in trying one, the tool below powered by Bankrate, can help you compare options from multiple banks quickly:

What to consider with this CD

As its name implies, no-penalty CDs come with the option to withdraw some of your cash should you need it during the term. However, it isn't as flexible as a high-yield savings account when it comes to access.

Usually, you'll need to keep all of your money in the account for at least seven days, up to 30 days with some banks, after funding it. For most savers, this isn't a deal-breaker since the intention is to take advantage of the higher rates of return. And the longer you keep it in, the more you'll earn.

Moreover, some banks and credit unions restrict how often you can withdraw money. Some will only allow you to do it once per month, while others allow you to take it all after the initial holding period.

Another thing to keep in mind is that some banks automatically renew CDs once they reach their maturity date. With this in mind, set a reminder on your calendar or phone a week before it matures, so it gives you time to investigate other options.

If you decide to switch to a high-yield savings account down the road, this tool from Bankrate can help you compare and find a suitable option:

Will the Fed cut rates?

While the future remains murky, some are projecting that the chances of upcoming rate cuts are increasing. Chief among them is Oxford Economics, which states there's an increasing chance of the Fed cutting rates by up to 50 basis points in December.

However, that isn't because the economy will be in a strong place.

"We do see a growing risk that the first move is larger, i.e., 50 basis points, because we think the Fed at that point may have some catching up to do with the labor market," Nancy Vanden Houten, lead U.S. economist at Oxford Economics, told Fortune. Her statement indicates that the tail end of this year could see the Fed coming to rescue a dwindling labor market.

If the Fed cuts, it impacts savers by way of lower rates. The good news is that if you have a no-penalty CD locked in, it won't impact your earning potential.

And you gain access to your cash quicker. That way, if inflation rises, you can pivot and put your money in an investment that could potentially keep you further ahead of rising costs.

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Things might be changing soon for savers. Kiplinger Investing for Income editor Jeffrey Kosnett recently said: "You might be wise to lock in Treasury-bill and CD ladders sooner rather than later."

The reason? Rates on CDs are still high, with many terms earning you over 4%. However, those rates might be coming down in the future if the Fed decides to cut interest rates.

And that's becoming more of a reality. CNBC conducted a survey of economists, fund managers and analysts, and 65% believe a rate cut will happen this year on account of a wobbling economy. This is up from 44% in March, so it's clear a shift is starting to happen.

If a rate cut happens, it means you only have a narrow time to lock in a higher rate of return. Take a look at how a CD ladder allows you achieve long-term financial growth, with the flexibility to pivot investments as you see fit.

How does a CD ladder work?

A CD ladder is a savings strategy where you don't put all of your eggs into one basket. You essentially open multiple CD accounts, but not at the same time.

To demonstrate, say you have $100,000 to devote to savings. You could put it all in a jumbo CD and earn 4.50% with some accounts. But what if you want to diversify?

With a CD ladder, you would instead spread your investments out, like this:

• $20,000 in a one-year CD
• $20,000 in a two-year CD
• $20,000 in a three-year CD
• $20,000 in a four-year CD
• $20,000 in a five-year CD

The goal of this approach is to stagger maturity dates. That way, you have access to some cash if you need it, while also having the flexibility to take everything earned on a CD and reinvest it to continue climbing the ladder.

The other benefit of a ladder is there's not one specific way to do it. You could start with a few CDs to see how you manage and continually add more from there. That also gives you opportunities to see where rates stand in a moment of uncertainty.

Using this Bankrate tool, you can find CDs to start this approach:

What to consider with a CD ladder

A CD ladder requires more maintenance than a normal CD. As you approach one maturity date, you'll have to decide what to do with your cash from there. And the more CDs you have, the more you'll have to do this.

Some banks and credit unions will automatically renew your CDs unless you set a plan with them. Therefore, make sure to set a reminder on your phone a few weeks before the maturity date, as it will give you ample time to research whether to keep your money in one or try another option.

Another thing to keep in mind is inflation. While you can earn a good rate of return on a five-year CD now, we also don't know how the trade wars and other policies will impact inflation moving forward. If inflation does rise enough, it would lower the purchasing power on what you earn with a CD.

On the other hand, if the Fed does cut rates sometime this year, it's vital to start your CD ladder sooner than later to take advantage of the higher rates.

Some of my top CD recommendations

Along with the Bankrate tool, here are a few CD recommendations that can help you build your ladder:

Now is an excellent time to start a CD ladder, especially if there might be rate cuts later this year. With a CD ladder, you'll be able to diversify your savings to help you reach your goals.

This approach also gives you a chance to change up CDs as you need to maximize savings. Just remember to set reminders on when each CD matures, as it gives you time to decide where to park your cash next.

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Since the Federal Reserve started cutting short-term interest rates last September, yields on bank accounts have been falling.

Savers who have significant sums to stash away may be able to earn a little extra interest by putting their money in “jumbo” certificates of deposit or money market deposit accounts, which have larger minimum balance requirements than standard accounts but offer higher yields.

The minimum amount required to open a jumbo account varies, but usually, you’ll need to deposit at least $25,000.

My eBanc, for example, offers an online six-month jumbo CD that recently yielded 4.5% if you have a balance of at least $50,000; otherwise, the bank’s six-month CD yields 4.35%, with a $5,000 minimum deposit.

And if you deposit at least $100,000 in My eBanc’s money market account, you get a 3.9% yield. Balances of less than $100,000 earn 3.4% (if your balance falls below $5,000, you’ll be charged a $15 monthly fee).

Justice Federal Credit Union offers a 4.21% yield on a 12-month CD if you deposit at least $100,000. (This jumbo CD is not in the table below because we assume a smaller deposit when listing those accounts.)

Otherwise, its 12-month CD yields 4.10%. Anyone can become a member of Justice FCU by joining a qualifying association.

The Federal Deposit Insurance Corporation and the National Credit Union Share Insurance Fund provide up to $250,000 in insurance per depositor against the failure of a bank or credit union.

If your combined balances in deposit accounts would exceed the limit at a single institution, you may want to spread your funds among multiple banks or credit unions.

To help make the most of your savings, we’ve compiled a list of top-yielding accounts that offer competitive interest rates.

Whether you're considering a high-yield savings account, a money market account or a jumbo CD, this table provides key details, including minimum deposit requirements, current interest rates and any notable terms or conditions.

• * Fund is waiving all or a portion of its expenses
• ? Internet only
• # Money market deposit account
• & Must be a member; to become a member, see website or call
• ‡ CD term is 36-59 months

Sources: Bankrate, DepositAccounts, Money Fund Report (iMoneyNet).

• * To earn the maximum rate, you must meet requirements such as using your debit card several times monthly and receiving electronic statements
• ^ Portion of the balance higher than the listed range earns a lower rate or no interest
• & Must be a member; to become a member, see website.

Source: DepositAccounts.

As of April 30, 2025. EE savings bonds purchased after May 1, 2005, have a fixed rate of interest. Bonds purchased before May 1, 1995, earn a minimum of 4% or a market- based rate from date of purchase. Bonds bought between May 1, 1995, and May 1, 2005, earn a market-based rate from date of purchase.

Source for Treasuries: U.S. Treasury

What if a jumbo account isn’t the right fit?

If a jumbo account doesn’t align with your financial needs, there are still plenty of ways to earn competitive interest on your savings.

High-yield savings accounts, standard certificates of deposit and money market accounts offer great alternatives with lower minimum deposit requirements.

Explore some of today’s best savings accounts with the tool below, in partnership with Bankrate, to compare current interest rates:

Are jumbo accounts the right choice for your savings?

Jumbo accounts can be a smart option for big savers who want to earn higher interest rates. Whether you choose a jumbo CD or a money market account, these accounts typically offer better yields than standard savings options.

However, they also come with higher minimum deposit requirements and, in some cases, fees if your balance drops below a certain threshold.

Before committing, compare rates, terms and insurance protections to ensure a jumbo account aligns with your financial goals and provides the best return on your savings.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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In its third meeting of the year, the Federal Reserve voted to hold interest rates at the 3.50% to 3.75% range. That's disappointing for those hoping to refinance a mortgage, but good news for consumers looking to save.

As we head into spring, there are still some CDs offering yields above 4%. That's higher than CD rates have been in the last decade and higher than inflation, which currently sits at 3.3% as of March. However, some economists expect the Fed to resume cutting rates later this year.

Your best bet is to lock in current higher rates for as long as you can with a 5-year CD. Right now, the best 5-year CD rates are around 4%. While shorter-term CDs are about the same, the benefit of securing higher yields for the next five years is worth taking the slightly lower rate.

If rates do keep dropping through the rest of this year, you might not find offers this good again when your short-term CD matures in a few months or a year from now.

So, if you can afford to lock up your cash for a few years, a 5-year CD is one of the best places to store your cash.

5-year CDs we recommend after the Fed meeting

With 5-year CD rates still around 4%, this is a great time to lock in inflation-beating yields for the long term.

Since rates are fixed for the entire term, these longer term CDs allow you to secure today's above-average rates before the decreases expected later this year.

Here are some of the top 5-year CD accounts you can open today:

Short-term CDs are still a good choice if you need flexibility

Locking up your cash for five years isn't a realistic option for everyone. If you know you'll need to tap into those savings sooner, there are plenty of attractive shorter-term CDs to choose from.

The best 1-year CD rates are hovering around 4%. You can also find 3-month or 6-month CDs offering similar yields. So if you need a little more flexibility with your funds, it's worth considering a shorter-term CD.

Use the tool below to compare the best CD rates by term and APY, powered by Bankrate:

When to consider a high-yield savings account

With the pause on rate cuts, now is a good time to open a high-yield savings account. You won't be able to lock in rates for a fixed term like you can with a CD, but there's also no penalty for dipping into those savings as needed.

With some of the best high-yield savings accounts offering rates as high as 4.20% APY, this is the best place to stash your emergency fund, vacation savings, or other cash that you need regular access to.

Use the Bankrate tool below to find the best fit for your savings:

How to make the most of today's CD rates

With the Federal Reserve's rate pause, locking in a 5-year CD remains one of the best ways to maximize your savings. With yields still above 4%, these accounts continue to beat inflation and can protect your money from further rate declines expected later this year.

If you need more flexibility, shorter-term CDs or high-yield savings accounts are still strong choices for keeping your cash accessible while earning a competitive return.

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• What Is APY? Here's How to Score the Highest Rates
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Did you open a CD with a stellar APY only to have it called back before its maturity date? If you have what’s known as a “callable CD,” you may not have actually locked in that high CD rate for the entire term.

Typically, callable CDs offer higher rates than traditional CDs, but they require more investment strategy. Getting the highest yield possible may sound like a great reason to open a callable CD — until the bank redeems your CD far before its maturity date, leaving you to open another account at a lower rate.

Didn’t read the fine print and had your CD “called” back unexpectedly? Here’s what you need to know about callable CDs.

What is a callable CD?

Callable CDs are similar to traditional CDs, but there is one key difference. Callable CDs let the bank or brokerage firm call back your CD before its official maturity date. You will still receive your entire principal and any interest you have earned until that point, but you’ll miss out on future earning potential. Often, callable CDs have longer terms than traditional CDs, with maturities usually ranging from 15 to 20 years.

When savings rates fall, a bank is more likely to call back a CD. If you open the CD with a 5% interest rate and rates have fallen significantly since then, it’s not in the bank's best interest to pay that 5% rate. On the other hand, if rates increase, your CD is less likely to be called.

Rates on savings accounts have been steadily dropping, especially after the Fed’s September meeting, when it cut interest rates for the first time in four years. Back in 2022, when the Fed began its rate-hiking campaign, savings rates skyrocketed, leading to a surge in popularity among CD accounts. However, as inflation cooled, the Fed paused rate hikes before eventually cutting rates by 50 basis points, which caused yields on CD accounts to fall significantly.

To browse current rates on traditional CD accounts, use our tool below, powered by Bankrate.

However, the bank can't call a CD until the call protection period has ended. The call protection period is the timeframe from when you open the account until the issuer can call back the CD, which can range from a few months to a few years, depending on the maturity of the account.

Bottom line

While callable CDs offer higher rates than traditional CD accounts, they have one huge caveat — the bank can revoke the CD before its set maturity day, which is typically done when rates fall. And rates have been on the decline in recent months. So before you open a CD, be sure to read the fine print, or you could miss out on future earnings. And if you do decide to open a callable CD, ensure you have an investment strategy in place for when it gets called.

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CD rates have taken a hit after the Fed’s latest policy-setting meeting, which cut interest rates for the first time in four years. But despite this, several accounts still offer generous annual percentage yields (APYs). So if you’re looking to open a CD account, make sure you’re choosing one that still has a solid APY to get the most out of your money.

But you’ll want to act soon. Rates on some accounts fell by as much as 1.30% after the first rate cut. There’s a good chance additional rate cuts will come later this year. And while cuts to the federal funds rate won’t impact CDs directly, banks will usually follow suit and change rates accordingly. According to Kiplinger’s Interest Rates Outlook, “the members of the Fed’s policy-making committee indicated that most saw only quarter-point cuts at one or both of the next two meetings, which will take place on November 7 and December 18.” 

Locking in rates before the next Fed meeting can help you secure the best APY. But which CDs currently offer the best rates? We’ve done the hard part and scoured the internet for some of the best yields currently available, so you don’t have to. Here’s what we found. Also, check out our article — The Fed Just Cut Rates. What Should Savers Do About CDs and High-Yield Accounts? — to learn more about how to manage your savings

Three top-earning CD accounts still available

Here are three of the top-earning CD accounts available, even after the Fed’s rate cut of 50 basis points.

Lafayette Federal Credit Union

Maturity: 5 years

APY: 4.32%

Minimum opening deposit: $500

The longer you keep your money in a CD, the more interest you’ll earn. So if you can comfortably lock up your cash for 5 years, it’ll pay off in the long run. This is why we suggest locking in rates with a long-term CD account now that savings rates have started significantly decreasing. Just be sure you won’t need to access this cash until the CD matures, or you’ll be charged an early withdrawal fee that can easily offset any interest you’ve earned.

The highest-yielding 5-year CD we’ve found is offered by Lafayette Federal Credit Union and earns a 4.32% APY. If you put $5,000 in the account, after five years you’d have $6,177.43, earning $1,177.43 in interest. 

Lafayette Federal Credit Union

Maturity: 3 years

APY: 4.52%

Minimum opening deposit: $500

If five years is a bit too long to tie up your cash, consider a 3-year CD. The highest-yielding 3-year CD we’ve found, also offered by Lafayette Federal Credit Union, has an APY of 4.52% and a minimum opening deposit of $500. If you put $5,000 in the account, after three years you’d have $5,709.11, earning $709.11 in interest.

National Cooperative Bank 

Maturity: 1 year

APY: 5.18%

Minimum opening deposit: $500

So maybe you can only commit to locking up your cash for a year. You’ll still earn a guaranteed rate of return on your savings, with little effort and no risk. National Cooperative Bank still offers a competitive rate of 5.18% on its 1-year CD account. If you put $5,000 in the account, after one year you’d have $5,259.00, earning $259 in interest.

You can also use our tool below, powered by Bankrate, to compare CD rates today:

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The Federal Reserve meet on December 17-18 to determine if they need to cut rates for a third time this year. They previously met in November, where they cut rates by 25 basis points, or 0.25%. In a poll conducted by Reuters, 90% of economist believe the Fed will cut rates by another 25 basis points when they meet next week.

With rates dropping, now is a good time to reassess your approach to CDs and high-yield savings accounts to make sure you get the most out of your money. Here’s what you should do about CDs and high-yield savings accounts before the Fed might cut rates again.

What should savers do about CDs and high-yield accounts before a Fed rate cut?

HYSAs

If you don’t already have a high-yield savings account, it’s still worth getting one, even after the recent drop in savings rates. Keeping your cash in a high-yield savings account is an easy way to maximize your savings through compound interest, and rates are still much, much higher than rates you’d find on standard savings or checking accounts.

As of December 2, the national average savings account yield was 0.60%, according to Bankrate. Rates for the best high-yield savings accounts still top 4%, even after a drop in rates.

Keep in mind that high-yield savings accounts have variable interest rates, meaning the APY on your account will fluctuate based on the market. Because of this, you won’t be able to lock in rates. However, savings rates might fall gradually over the coming months, instead of falling off immediately — so take advantage of high APYs while you still can.

If you already have a high-yield savings account, now's a good time to check your rates and potentially shop around for an account that will let you earn even more.

Compare rates by using our tool below, powered by Bankrate.

CDs

If you opened a CD account during the boon to savings rates, it may be nearing maturity soon. While many individuals opted for short-term CDs, thanks to their impressive rates, it may now be more prudent to open a long-term CD. Keep in mind that typically, banks renew a CD at a similar term automatically once it matures, so be sure to contact your financial institution before this happens.

Opening a five-year CD can be an easy way to maximize the amount of interest earned on your savings, because of course, the longer you keep your money in a CD, the more interest you’ll earn. Just be sure you’re okay with the time commitment — you won’t be able to withdraw funds or you’ll be charged a fee, offsetting any interest you may have earned.

You can use our tool below, powered by Bankrate, to compare CD rates today.

Bottom line

Starting in March 2022, the Federal Reserve raised interest rates 11 times to combat high inflation. However, as inflation started to cool, the central bank began holding the federal funds rate steady at its 23-year high — a target range of 5.25% to 5.50%

After eight consecutive meetings of holding rates steady, the Fed finally cut rates twice, and might be poised to do so again next week. While this should provide some relief for borrowers as interest rates go down, savings rates will also decline. Rates are expected to continue declining throughout 2026.

You won't be able to lock in rates with a high-yield savings account, so the earlier you start taking advantage of high yields, the better. And while you can lock in rates with a CD, make sure you won't need to access your cash before it matures. If you're okay with tying up a good amount of money for several years, it'll pay off in the long run.

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The Federal Reserve held interest rates steady at its June meeting. For savers, that decision keeps yields on products like high-yield savings accounts and certificates of deposit relatively the same — at least for now.

While economists had initially expected rate cuts by the end of this year, the recent uptick in inflation, which hit 4.2% as of the latest CPI report, has some shifting their forecast to rate hikes by the year's end.

That leaves savers in a tricky position: Today’s CD rates are still attractive, but most accounts don't outpace inflation anymore. There are also too many variables to know whether to expect even higher rates later or accept that these are the best rates you're likely to see for a while.

If you've waited to open a CD account until now or if your current CD account is nearing maturity, you're likely considering locking in rates ahead of the next meeting. Which CD should you open before the conclusion of the Fed meeting — a short-term or long-term account?

Should you get a long- or short-term CD before the Fed meeting?

When comparing current CD rates, you'll notice that the best rates offered are mainly on short-term CDs. However, the difference is minimal.

If you're comfortable with a long-term time commitment, a five-year CD is a solid option now, with some of the top-earning accounts offering 4.10% APY. While many one-year CDs have rates of up to 4.03%, locking in those rates for longer could pay off in the long run.

Putting $5,000 into a one-year CD with a rate of 4% will earn you more than $200 in interest if compounded daily. But if you want to open another CD once that one matures, you might have to settle for a much lower rate, depending on what happens in the next year.

On the other hand, if you lock in that 4% for a five-year CD, you'd maintain that savings rate for five years, earning more than $1,000 in total, if compounded daily. But if inflationary pressure pushes the Fed to raise rates later, you might miss better rates down the road.

Use the tool below, powered by Bankrate, to explore and compare some of today's top CD offers:

Locking in high yields for as long as possible can be a smart savings strategy, but there's one factor to consider before you fund the account: When putting money into a CD, you must be prepared to "set it and forget it."

That means not accessing the cash until the CD matures, which can prove challenging if your cash is tied up for several years. If you withdraw funds early, you'll be charged a fee that can offset any interest earned.

If you can't commit to a long-term CD, it's still worth opening a short-term one. While you run the risk of rates dropping after it matures, it will still help you earn extra cash without tying up your money for an extended time.

It's also worth opening a high-yield savings account, although these accounts won't allow you to lock in rates. For any savings (such as an emergency fund) that you need to be able to access at any time, a high-yield savings account allows you to earn a little interest without tying up your cash.

Use the tool below to explore and compare some of today's top savings offers, powered by Bankrate:

Rates for long-term CDs are on the rise

In the last several years, there was a surge in the popularity of CD accounts driven by rapidly rising rates in response to the Fed's interest rate-hiking campaign in 2022 and 2023, which pushed the federal funds rate to its highest level since 2001.

Now, there's been uncertainty as people wait to see the impact of tariffs as well as stock market volatility in the face of geopolitical concerns. This week's meeting was also the first with newly appointed Kevin Warsh as the Fed Chair.

When there is uncertainty, consumers seek ways to keep their savings strong for as long as they can. For many, this now means using longer-term CDs.

While consumer demand for shorter-term CDs dominated for much of 2025, the balance might soon start to shift. In December, five-year CDs saw more APY increases than shorter-term CDs for the first time in more than a year, according to a CD Valet analysis.

"Going longer than 12 months comes with risk (but also potential reward), as the economy is now the wild card in the future path of deposit rates," John Blizzard, founder of CD Valet, told Kiplinger.

If you can afford to lock up your cash for longer than a year, that might be where you find the strongest yields ahead of the upcoming Fed meeting.

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The Federal Reserve is going to cut interest rates at the next Fed meeting, experts say. Only the size and pace of the central bank's easing campaign remain in doubt.

To recap: the worst bout of inflation to hit the U.S. economy since the Carter and Reagan administrations compelled the central bank's rate-setting committee to raise the short-term federal funds rate to a 23-year high. It has been sitting at a target range of 5.25% to 5.5% for more than a year. Inflation peaked more than a year ago but remains sticky, making the rate-setting committee, the Federal Open Market Committee (FOMC), cautious about easing too soon. 

However, the Fed has a dual mandate. In addition to stable prices, it is supposed to support maximum employment. And, alas, the lagged effects of restrictive monetary policy are beginning to show up in the labor market. Fed Chief Jerome Powell has always said the FOMC would be data dependent, and he acknowledged risks to the jobs side of the mandate at the July Fed meeting. Powell doubled down on his dovish turn at Jackson Hole in August.

Unless it's an emergency, the Fed doesn't make changes to policy without telegraphing them well in advance. A rate cut at the next Fed meeting isn't a certainty, but it would be a shock if the FOMC stood pat. 

A rate cut is coming

"History back to 1990 supports the idea that an initial Fed rate cut of 50 basis points signals an imminent recession (2001 and 2007)," write Nicholas Colas and Jessica Rabe, co-founders of DataTrek Research, in a note to clients. "Initial cuts of 25 basis points (1995, 1998, 2019) do not carry that baggage. Powell and the FOMC know this history."

Colas and Rabe expect a quarter-point cut, or 25 basis points (0.25%), at the next Fed meeting. However, a cut of 50 basis points (bps) remains very much in play. 

As of September 16, interest rate traders assigned a 61% probability to 50 bps of cuts, according to CME Group's FedWatch Tool, up from 50% the previous session. Meanwhile, the probability of a quarter-point cut fell to 39% from a coin flip.

It's also important to know that market participants might have a bit of a blind spot as they head into the next Fed meeting. After all, we're set to get a new Summary of Economic Projections (SEP), also known as the dot plot. This collection of forecasts from Fed governors and presidents tends to upset the market's previous assumptions.

The bottom line is that regardless of how much the Fed cuts at its next meeting, the race is already on to predict the trajectory of future reductions to borrowing costs. 

With the Fed set to pivot, we turned to economists, strategists, investment officers and other experts for their thoughts on monetary policy going forward. Please see a selection of their commentary, sometimes edited for brevity or clarity, below.

Fed rate cuts: what the experts say

"We interpret comments from Fed officials just ahead of the blackout period to mean that the FOMC is more likely to cut by 25 bps than 50 bps. We think a 50 bps cut would be a sensible precaution against further labor market softening, but the Fed leadership has communicated a sufficiently dovish reaction function for the bond market to price cuts between 25 bps and 50 bps for several meetings, which also lowers borrowing rates and eases financial conditions today." – Jan Hatzius, chief economist at Goldman Sachs

"The Fed has the green light to cut 25 bps given that the August CPI report was in line with expectations. It's possible that some will be disappointed that there wasn't a lower-than-expected inflation reading, which might have given the Fed more room to cut 50 bps, but most of the Fed speakers have already telegraphed their desire to start slowly and not begin with a jumbo cut. Going forward, the risks are clearly weighted toward slowing growth and a deteriorating labor market, and that's why there are still four 25 bps cuts priced in with only three meetings left in the year (i.e. implying at least one of the three meetings would have a 50 bps), but if the economy continues to slow – and not drop into an abrupt recession – the Fed will be able to cut at a measured, 25 bps-per-meeting pace." – Chris Zaccarelli, chief investment officer at Independent Advisor Alliance

"The Fed probably should cut 50 bps next week … 

As the Fed themselves have said, inflation risks are moving into the rearview mirror, and they do not want to see further labor market weakness. Though strong wage growth suggests the bottom has not yet fallen out of the labor market, jobs creation has declined quickly. In an environment where policy is already restrictive by around 200 bps, moving more quickly towards neutral is a highly reasonable stance, in our view.

... but unless we see a downside surprise on inflation, my base case is that they'll cut 25 bps." – Lauren Goodwin, economist and chief market strategist at New York Life Investments

"Following the payrolls report last week, we updated our Fed call. We now expect the Fed to cut rates by 25 basis points (bps) per meeting starting next week and until March 2025. After these cuts, we think the Fed will be more gradual and resort to one cut per quarter. We still see outsized recession-like cuts as unlikely unless the economy materially deteriorates." – Antonio Gabriel, global economist at BofA Securities

"August's CPI report cemented market expectations that the FOMC will ease by 25 bps at its next meeting. The implied probability of a 25 bps move jumped to 83% from 66% shortly after the August core CPI print. We think investors are now well positioned for September's meeting, but we still see a strong chance of 50 bps cuts in both November and December." – Ian Shepherdson, chairman and chief economist Pantheon Macroeconomics

"Stable producer prices should drive investment and that will drive the economy. It is time for the Fed to cut, but they may well take it slow and steady. That seems to be their operating model. A 25 bps cut in September is the most likely outcome." – Scott Helfstein, head of investment strategy at Global X 

"The Federal Reserve is set to start shifting policy and lower rates at their next meeting. The big question will be whether the Fed cuts by 25 bps or 50 bps, and it'll likely come down to Chair Powell as to whether they go big to get ahead of clearly slowing labor market trends." – Sonu Varghese, global macro strategist at Carson Group

"The Fed is weighing the stickiness of service price inflation on the one hand against the softening of the job market on the other hand. The tradeoff makes them more likely to cut rates by a quarter percent at next week's decision than make a larger half-percent cut." – Bill Adams, chief economist at Comerica Bank

"Inflation trends will give the Fed the opportunity to pivot toward the employment mandate for the rest of this year. Given the stickiness of services inflation, the Fed will likely cut by 25 bps in the upcoming meeting and reserve the potential for more aggressive action later this year if we have further deterioration in the job market." – Jeffrey Roach, chief economist at LPL Financial

"Sticking the landing on rate policy is important to the Fed, but so is controlling the narrative and maintaining the central bank's credibility. With that in mind, there was nothing in the August inflation report that was likely to sway policymakers from the measured quarter-percent cut that they've been guiding expectations toward for some time." – Jim Baird, chief investment officer at Plante Moran Financial Advisors

"We find ourselves at a point where the markets are pricing in an aggressive policy rate cutting cycle, which to us appears to be overdone relative to what the Fed has suggested would be appropriate and relative to the underlying economic conditions at this stage. So, while we're quite certain that the Fed will commence with its rate cuts at its next meeting, there are several significant unknowns that cloud the extent and speed of rate cuts. From election/policy uncertainty for 2025, U.S. debt/Treasury supply dynamics and a particularly impactful period for volatile seasonal factors in economic data, there is a good deal we don't now know about the year ahead." – Rick Rieder, chief investment officer of global fixed income at BlackRock and head of the BlackRock global allocation investment team

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The Federal Reserve meets on January 29 and they'll decide whether to keep rates steady or cut them. Either decision could impact your savings account. Both high-yield savings accounts and CD accounts are currently offering rates well above 4% but rates might not remain this high for very long. While cuts to the federal funds rate won’t impact CDs directly, banks will usually follow suit and change rates accordingly.

Some cuts are expected throughout 2025 as the Fed incrementally drops rates from their 23-year high. So if you’re looking to take advantage of rates while they’re still this high, you’ll want to act soon.

Since high-yield savings accounts have variable rates, meaning they fluctuate with the market, you won’t be able to lock in a steady rate with one of those accounts. On the other hand, CDs offer a fixed APY, letting you secure high rates until the CD matures. Opening a longer-term CD can be an easy way to maximize the amount of interest earned on your savings, but you’ll need to be careful when choosing a term length.

Best CDs to check out before the Fed meets

While the Fed likely won't increase rates at its next meeting, there might be further rate cuts down the road. Locking in a high rate now could be a smart move. But you’ll need to be prepared to lock your cash away for the full term, or you could offset any earned interest by paying an early withdrawal fee.

If you already have an emergency fund and can commit to setting aside extra cash for a year or more, consider the following CDs, which can help you earn a fixed, predictable rate of return on your savings:

Prime Alliance Bank

Maturity: 1 year

APY: 4.45%

Minimum opening deposit: $500

One of the highest earning 1-year CD accounts is offered by Prime Alliance Bank. The CD has an impressive APY of 4.45% and a reasonable minimum opening deposit of just $500.

If you were to put $5,000 in the CD initially, once it matured you’d earn $222.50 in interest, leaving you with $5,222.50 after one year — a fairly reasonable time frame to lock up your cash.

Transportation Federal Credit Union

Maturity: 5 years

APY: 4.40%

Minimum opening deposit: $1,000

The longer you keep your money in a CD, the more interest you’ll earn. If you’re OK with the longer time commitment, consider opting for a 5-year CD.

The highest-yielding 5-year CD we’ve found is offered by Transportation Federal Credit Union and earns a 4.40% APY. If you put $5,000 in the account, after five years you’d have $6,201.15 , earning $1,201.15 in interest.

All in One Credit Union

Maturity: 3 years

APY: 4.07%

Minimum opening deposit: $1,000

If five years is a bit too long, consider a 3-year CD. Maybe you have a specific savings goal in mind — you might be planning on purchasing a new vehicle or paying for your grandkid’s wedding in three years — and are looking for a risk-free way to grow your savings.

The highest-yielding 3-year CD we’ve found, also offered by All in One Credit Union, has an APY of 4.07% and a minimum opening deposit of $1,000. If you put $5,000 in the account, after three years you’d have $5,635.68, earning $635.68 in interest.

You can also use our tool below, powered by Bankrate, to compare CD rates today:

Bottom line

Opening a CD account can be an easy way to earn a guaranteed return on your savings. With the Fed meeting this week, many anticipate rates will remain steady, but more rate cuts could be coming later this year. This could lead to lower yields on savings tools like CDs, so it’s wise to consider locking in current rates now before a potential drop.

But before you open a CD, you’ll need to choose a term length that makes sense for you. If you're unsure, compare 1-year vs 5-year CD accounts for more information.

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Savings rates won’t be this high forever. In fact, now may be your last chance to score some of the best savings rates. Rates on many top-earning accounts have noticeably been dropping over the last two weeks, so opening an account now, rather than later, could pay off. However, despite the decline in rates, several accounts still offer impressive yields, in some cases 6% or more. 

6% interest or higher

Here are some of the highest-yielding accounts available, offering at least 6% APY.

Orion Federal Credit Union

APY: 6.00%

Based in Memphis, Tennessee, the Orion Federal Credit Union Premium Checking account offers 6% APY on balances up to $10,000. And higher balances still earn a solid rate of 5%. To qualify for the best rate, you’ll need to make electronic deposits totaling at least $500 per month, as well as spend at least $500 a month on your Orion debit or credit card. If requirements are not met, you’ll be charged a $5 monthly fee. The account has no minimum balance requirements.

Nuvision Credit Union

APY: 6.00%

You can score a 10-month CD with an APY of 6% with Nuvision Credit Union, but you’ll want to act fast. This rate is only available until July 31, 2024. The account has a minimum opening requirement of $1,000, and balances cannot exceed $5,000. There are no monthly fees. After your CD matures, it will convert to a 12-month CD. 

Digital Federal Credit Union

APY: 6.17%

The Primary Savings account from Digital Federal Credit Union offers an APY of 6.17% on balances up to $1,000. Balances above $1,000 will only earn 0.15% APY. There is a $5.00 minimum to open the account, but a minimum balance requirement to earn APY. Plus, there are no monthly fees.

Landmark Credit Union 

APY: 7.50%

With Landmark Credit Union’s Premium Checking account, you can earn up to 7.50% APY, but only on balances up to $500. You’ll need to enroll in eDocuments and have a direct deposit of at least $250 a month to qualify. The Minimum deposit required to open the account is $35 and there are no monthly maintenance fees. While this account offers an extremely impressive rate, it might not be the best place to store your cash, as you’ll only earn 7.50% on the first $500 you put in the account.

5.50% APY or higher 

Though there are few accounts offering rates of over 6%, plenty of high-yield savings accounts and CD accounts offer rates well over 5% — a solid return on your cash. You can browse some of the highest rates available today by checking out our article on the best high-yield savings accounts as well as the best CD rates.

Here are several top accounts offering APYs of 5.50% or more.

Flagstar Bank: High-yield savings account
APY: 5.55%
Minimum opening deposit: $25,000

Poppy Bank: High-yield savings account
APY: 5.50%
Minimum opening deposit: $1,000

Bask Bank: 3 month CD
APY: 5.53%
Minimum deposit: $1,000

Total Direct Bank: 6-month CD
APY: 5.51%
Minimum deposit: $25,000

Paramount Bank: 11-month CD
APY: 5.55%
Minimum deposit: $1,000

You can also use our tools below — powered by Bankrate — to browse rates on both high-yield savings accounts and CD accounts.

What will happen to savings rates in 2024?

When the Federal Reserve began its rate hiking campaign back in March 2022 in order to combat high inflation, savings rates began to rise along with interest rates. Overall, the central bank raised the fed funds rate, a key overnight bank lending rate, 11 times between March 2022 and July 2023, but as inflation began to cool, rates were held steady. And when the pause on rate hikes began, savings rates began to slightly inch down. Rates on savings accounts will soon drop even further as the Fed expects one quarter-point cut later this year.

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Interest rates are pretty high these days. That’s great for retirees who need their savings to generate income — but don’t assume that just because rates are high you’re automatically getting them. The going rate at many banks and brokerage houses is abysmally low.

The national average interest rate paid on savings is 0.46% (as of April 15, 2024), according to the Federal Deposit Insurance Corporation (FDIC). Considering the Effective Federal Funds Rate is 5.33% (as of May 2024), if you have money in a savings account, there’s a good chance you could be earning a lot more interest somewhere else.

There’s good news: If you’re among those receiving lower interest on your savings, it’s a problem that’s easy to remedy. In most instances, it only takes a few clicks online or a few taps on your phone. It’s easy to secure an interest rate of around 5% these days. Money market funds, certificates of deposit (CDs) and U.S. Treasuries are all low-risk ways of generating a nice return.

How much you stand to gain by switching

In most instances, your financial institution isn’t going to do it for you. The time invested to move your cash around is well worth it. If you’re earning the national average on $100,000 of savings, you’re being paid $460 a year. By switching to one of the many investments that offer a 5% yield, you could put an extra $4,540 in your pocket this year.

So which instrument should you use? That depends on you and your situation.

Option No. 1: Money market funds

Money market mutual funds (not to be confused with a bank money market account, which is different) are great for providing liquidity, as they should be easy to get in and out of. However, there are new rules that create liquidity fees and redemption gates in place when investors want to cash out during “times of uncertainty.” That’s a vague description to be sure, but you can imagine an instance where we’re in a deep financial crisis and everyone is trying to liquidate their money market funds. Fees and gates mean you could either be charged to access your own money or limited in how much you can withdraw. It’s at the discretion of the fund’s board of directors.

The chances this ever applies to you are slim, but most people aren’t aware of this risk, and you should be if you own a money market fund.

Option No. 2: CDs

CDs don’t have the immediate liquidity of money market funds. In fact, there’s typically a penalty to access your money early. So you’ll want to be thoughtful about how much money you need for expenses and when you’ll need it before buying a CD. However, they come with a wonderful feature that money market funds don’t. CDs (like other deposit accounts) are insured by the FDIC up to $250,000. That means in the event of a bank failure, you’re still covered.

Option No. 3: Treasury bills and notes

Short-term U.S. Treasury bills (issued for terms of four weeks to one year) and notes (issued for terms of two, three, five, seven and 10 years) are also attractive. The U.S. Treasury securities market is the largest and most liquid government securities market in the world. You shouldn’t have any trouble buying or selling your Treasuries whenever you want. And the U.S. government is generally considered an ultra-low-risk debtor. However, the recurring threats of government shutdowns and general political divisiveness do make these a shade riskier than they may have been in the past.

Outlier risks aside, Treasuries, money market funds and CDs are all conservative options to potentially increase what you’re earning on your cash. Cash and cash-like instruments are an essential part of your retirement portfolio. They can be used to cover your expenses and as an emergency fund. But having too much cash on hand comes with its own price. Cash typically lags behind the returns of riskier assets. And the purchasing power of the dollar has steadily eroded over time thanks to inflation.

Cash is an important part of an overall investment allocation. But for many investors, it should be a small part. At SAM, we generate income using a variety of different securities. Short-term Treasuries are our favorite cash proxy. But we’re finding higher cash yields in real estate investment trusts (REITs), closed-end funds, and merger arbitrage opportunities, just to name a few. We also use cash tactically — we like to keep dry powder on hand to deploy opportunistically.

If you haven’t already, you may want to work with a professional to figure out exactly how much cash you should be holding. Then make sure you’re getting paid fairly for the cash you’re sitting on!

Related Content

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• Protect Your Wealth Against Inflation in Three Easy Steps
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

With the S&P 500 index of the largest U.S. stocks rising about 26% on a total return basis (price change plus dividends) in 2023, many folks are looking for smart ways to invest in 2024. 

But as the old saying goes, past performance is no guarantee of future returns. It's important to take stock of the current economic environment as well as your personal risk tolerance before plowing your hard-earned cash into what's popular.

The good news is that there are plenty of smart ways to invest your money this year. In fact, for most investors with a modest amount of cash, it's easier than ever before to put just a few hundred dollars to work and improve your personal finances significantly.

Smart ways to invest your money: CDs

With the recent increase in interest rates, it's easier than ever before to tap into safe returns that are nearly guaranteed. One of the most rock-solid options out there is a CD, or certificate of deposit. CDs are similar to high-yield savings accounts – these vehicles are basically just bank accounts where you get a fixed rate of return – only can't withdraw your money before a deadline without penalty. 

"For disciplined consumers, CDs can be a great way to set aside money while earning higher interest rates on their balances," writes Kiplinger contributor Seychelle Thomas in her feature on whether or not CDs make a good investment. "However, it's critical to have a readily accessible form of savings even if the rates aren't as high compared to a CD." 

If you don't need your cash immediately, a 1-year CD can offer as much as a 5.5% return right now. Rates, minimum deposits and durations may vary, so make sure to shop around for the best option that fits for you.

Smart ways to invest your money: Bond funds

If you want more "liquid" interest-bearing assets that are low-risk, bonds are a good option. Bonds are investment vehicles where investors give some cash to governments or corporations in exchange for repayment plus interest. Think of it as you, the investor, acting as the bank, and getting paid for the service of loaning out your money.

Rather than do the research for individual bonds, many investors prefer bond funds – which can include both traditional mutual funds or bond ETFs (exchange-traded funds). Both of these options are baskets of hundreds or even thousands of bonds, offering built-in diversification and a structured way to invest your money on Monday but get it back out on Tuesday if you really need it.

The largest bond fund at present is the Vanguard Total Bond Market ETF (BND), with more than $300 billion in total net assets. As the name implies, it holds a wide array of bonds from corporate debt to U.S. Treasury bonds to mortgage-backed securities. 

There are other more tactical options, but with almost 11,000 individual bonds in BND, you get easy access to the totality of this marketplace in a single holding. Right now, this Vanguard bond fund yields 4.3% – meaning the investment offers a slightly smaller rate of return than CDs, but more flexibility.

BND also trades as a mutual fund, the Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX). It requires a $3,000 initial investment.

Smart ways to invest your money for growth: Stocks

If CDs are all but guaranteed to give you your principal investment back, and bonds offer low volatility but more liquidity, stocks round out the list of smart ways to invest your money with a more aggressive but also potentially more profitable option to invest your money.

Stocks are investment stakes in publicly traded companies. And unlike the prior two options, stocks don't deliver a fixed rate of return. Instead, they generally deliver profits by appreciating in value based on those companies achieving better results.

The big success story many folks talk about is Tesla (TSLA). If you invested just $1,000 in its stock on the first day it traded back in 2010, you would have about $140,000 today! Of course, predicting future performance is easier said than done. There are plenty of horror stories, too. Some companies ultimately do go bankrupt and investors lose everything.

So, as with bonds, the safer route is typically to invest in a diversified basket of stocks via an ETF or mutual fund. The largest and most popular vehicle out there is the SPDR S&P 500 ETF Trust (SPY) with almost $500 billion in assets. Tied to the popular S&P index of the 500 largest U.S. stocks that includes Apple (AAPL) and other popular names, this S&P 500 ETF gives you exposure to the biggest companies on Wall Street in one holding that's easy to buy and sell.

Just remember that stocks are much riskier than bonds or CDs. So make sure you assess your own goals and risk tolerance before investing in SPY or any other stock market investment.

Related content

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• Should You Still Have Bonds in Your Portfolio?

If you’re thinking about putting your cash in a CD in 2025, now may be the best time. Currently, rates on CDs are still somewhat high — in most cases offering over 4% on your cash — but they likely won’t go higher than they are now. The reason for this is the Federal Reserve cut interest rates three times in 2024, with the last rate cut being 0.25% on December 18.

For this reason, the beginning of this year could be a great time to lock-in CD rates and earn interest on your savings. In fact, many CD accounts have begun to slightly drop rates in recent weeks, so consider taking advantage of the best possible rates while you still can.

How to open a CD in 2025

Opening a CD is fairly straightforward, and can help maximize your savings with little to no effort. In fact, opening a CD can be done in five simple steps:

• 1. Choose a CD term
• 2. Choose a provider
• 3. Apply for the CD
• 4. Choose how to receive your interest
• 5. Fund the account

There might be reasons why you don't want to open a CD. Some of the most common obstacles involve people not wanting to temporarily lose access to funds, not wanting to open a CD with an online-only bank and not seeing the value of having a CD.

CDs hold a fixed amount of money for a fixed period of time, which can be anywhere from three months to five years, and are good options for individuals looking for a fixed, predictable rate of return on their savings.

While CD accounts offer higher savings rates than standard savings accounts, there is one drawback. You'll have to wait until your CD's maturity date before you can withdraw funds. Failure to do so will cost you a fee, which can offset any interest you may have earned (unless you have a no-penalty CD account).

But if you're okay with setting your money aside for a certain period of time, you could easily maximize your savings with the best rates on the market. For those hesitant to lock their cash away, a high yield savings account is a better option. However, because rates on these accounts are variable, you won't be able to lock-in rates. These accounts are also simple to set up, and are a no-brainer for those looking to earn more on their hard-earned cash. By not putting your savings into a high yield savings account or CD, you're leaving money on the table.

Unlike high yield savings accounts, rates on CDs are fixed, meaning your APY won't fluctuate over time. And because savings rates have been leveling off lately, in some cases even dropping, opening a CD account now, rather than later, can help you secure the best rates before they drop further.

You can compare current CD rates below by using our tool — powered by Bankrate.

Also check out Kiplinger's savings calculator below to see just how much you could earn with a high APY.

Savings rates 2025

Savings rates have been on the rise since March 2022, when the Federal Reserve began hiking interest rates in an attempt to combat high inflation. Since then, the Fed began a trio of rate cuts in 2024, with the third one being a 0.25% cut on December 18. Moving forward, the Fed might not make as many rate cuts in 2025.

Since the Fed started holding rates steady, APYs on CDs have begun to level out, and in several cases, decrease. For this reason, consider taking advantage of savings rates while they're still high.

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• Best 5-Year CD Rates
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CD rates are exceptionally high — but they won’t stay this way forever. Rates on savings vehicles like CDs and high-yield savings accounts have skyrocketed since 2022, with many of the top accounts offering rates of return of over 4% to 5%. If you wait too long to lock in rates, however, you could miss out on these high rates of savings.  

The Federal Reserve has been raising interest rates over the last 18 months in an effort to fight high inflation, lifting the federal funds rate a total of 11 times. The fed funds rate, a key overnight bank lending rate that impacts all kinds of other rates, is currently set at a target range of 5.25% to 5.5%, which is the highest its been in 22 years. The bright side, however, is that when interest rates rise, savings rates typically do as well.

At its last meeting, the Federal Reserve decided to hold off on another rate hike and keep the federal funds rate steady. However, the possibility of another rate hike later this year is on the table. If that happens, rates on savings accounts could inch a little bit higher. On the other hand, as inflation starts to cool, the Federal Reserve may decide to hold rates steady once again and rates on savings accounts could drop. For this reason, it's a good idea to lock into a CD account while rates are still outstandingly high.

12-month CD, Credit Human — 6% APY

Currently, Credit Human is offering one of the highest rates available on the market. The 12-month CD from Credit Human offers a 6% APY, a rate you aren't likely to find elsewhere. Plus, you won’t have to meet any steep deposit requirements, you’ll just need to maintain a balance of $500 to earn the APY. Deposits at Credit Human are federally insured up to $250,000 by the National Credit Union Administration (NCUA), letting you keep your savings safe. 

Normally, longer-term CDs offer higher rates of return than shorter-term CDs. However, the market is experiencing what is called an "inverted yield curve," meaning you’ll earn more from a 1-year CD compared to a 5-year CD. Plus, if you're hesitant about locking away your cash for too long, a 12-month CD can provide a good middle ground between shorter-term and longer-term CDs.

Use our tool below, in partnership with Bankrate, to compare the best CD, widely available rates for you today. It's updated daily.

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You want to earn higher yields on your spare cash but you’re unsure of which account to store it in. Learn whether a CD or money market is a better fit for you. 

In a high-interest rate environment, it pays to save your money. There are several savings vehicles to choose from, but CDs and money market accounts typically pay higher interest rates or Annual Percentage Yield (APY) for storing your extra cash. The two account types bear a few similarities, but which one is better for boosting your savings? 

You can check out our tools, in partnership with Bankrate, to see the most up-to-date CD and savings rates available.

Certificates of Deposit (CDs) 

CDs or Certificates of Deposit are a type of savings account that allows you to lock in higher APYs for a set time of anywhere from three months to ten years. The money stored in a CD is locked away until the end of the term. Think of it as promising the bank they can hold your cash for a certain length of time. If you withdraw your money before the time you promised, you’ll face penalty fees. 

 Money Market Accounts (MMAs) 

Most financial institutions offer money market accounts as a higher-yield alternative to traditional savings accounts. This savings option has higher minimum balances, higher maintenance fees, and a higher APY compared to a standard savings account. These are still FDIC- and NCUA-insured accounts, so it’s not the same as a money market fund.

Pros and cons

Here are a number of differences to consider when thinking about where you want to put your money.

Money market accounts take the cake over CDs for accessibility. While some banks still limit withdrawals to six per month (despite the indefinite suspension of Regulation D), you’ll still have easy access to your money with an MMA. Money markets typically have ATM cards and check-writing privileges at certain banks. If you need to withdraw for emergencies or unplanned expenses, it’s not much of an issue. 

In comparison, CDs charge a penalty for early withdrawals. In some cases, this equates to a portion of your interest. For example, a 12-month CD from both Goldman Sachs and Bask Bank charges 180 days' worth of interest for early withdrawals. This means you could lose money on your investment if you need to withdraw in an emergency. 

If you’ve ever heard mature investors reminisce about CD interest in the 80s, you’ve probably considered using one. Back in 1984, a five-year CD had an average interest rate of 11.74% APY and a one-year CD wasn’t far behind at 11.17% APY, according to Bankrate. These days, CD rates are far more modest with five-year and one-year CDs averaging a little over one percent with highs of 5.60% for 12 months. 

That’s still significantly higher than average Money Market rates. As of September 21st, 2023, USA Today reported an average APY of 0.54% for MMAs with a balance of $10,000.  

With both of these account types offering FDIC- and NCUA-backing for deposits, they’re both considered safe if your bank or credit union becomes insolvent. FDIC insurance covers your bank deposits for up to $250,000 per depositor. 

Money markets have higher balance requirements than a typical savings account. Most start at a balance minimum of $1,000 but it varies by bank. If you don’t meet the balance requirements, there’s also a higher maintenance fee associated with the account. CDs usually have similar balance requirements with minimums of $1,000, but there typically aren’t monthly maintenance fees. 

Bottom Line

Despite similarities, CDs and Money Market accounts are both suited for different purposes. CDs are best for savers who may struggle with discipline since these accounts penalize you for withdrawing. It’s also for those who want to gain higher yields on their money they don’t plan to touch by locking in rates ahead of forecasted interest rate declines. MMAs are better suited for savers who plan to stash money for emergencies and want to earn slightly more than the average savings account. Ultimately, the account you choose depends on your personal goals and the plans you have for your savings. 

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Savings rates have been continuously increasing since March of last year, when the Fed began hiking interest rates to fight steep inflation. Since then, the Federal Reserve has raised interest rates 11 times, bringing the federal funds rate to a target range of 5.25% to 5.5%. And although this means higher commercial interest rates, there is a bright side. Rates on savings vehicles, like CDs and high yield savings accounts, are also exceptionally high.  

Three CD accounts in particular stand out, one from Newtek Bank, Forbright Bank and CFG Bank. With rates of over 5.6%, these CD deals are some of the best on the market and can potentially help you maximize your savings. Plus, all banks are FDIC-insured, helping you keep your savings safe. 

Newtek Bank

Typically, CD rates are fixed. This means that when opening a CD account, the APY will remain consistent until the account's maturity, regardless of whether or not the market changes. For this reason, CD’s can be a good savings option if you're looking to lock-in rates before they begin to drop. On the other hand, if rates go up and you're locked into a lower rate, you'll miss out on higher earnings.

Unlike traditional CDs, Newtek Bank just released a new CD account with a variable interest rate. Similar to rates on high yield savings accounts, the account offers a competitive interest rate that adjusts monthly with the US Treasury Bill. Currently, the APY on Newtek's variable CD account is 5.62% and has a 24-month maturity. The minimum deposit for this account is steep, however, like deposits on jumbo CD accounts. You’ll need a minimum deposit of $50,000, and balances cannot exceed $220,000.

While a variable CD can be a good option if rates continue to go up, if rates go down, so will your earnings. Keep in mind that if inflation keeps cooling and the Federal Reserve holds off on raising interest rates further (as it opted to do at the September policy-setting meeting), this could happen. 

Use the following tool, in partnership with Bankrate, to compare current CD rates. 

Forbright Bank

If you’re more interested in a traditional CD with a fixed APY, Forbright Bank is offering an account with an APY even higher than that offered by Newtek Bank. The current APY for a 12-month CD account from Forbright is 5.65%, and the minimum opening balance for this account is only $1,000. 

What may draw you to Forbright is the bank's focus on sustainability. Founded in 2003, Forbright Bank is committed to financing the sustainable businesses and clean energy projects that are driving progress toward a low-carbon economic system. Their website states: "We are guided by the belief that sustainable finance is good for customers, our business, and society as a whole." So, if you're looking for a bank that will provide a "brighter, greener, and more sustainable future," Forbright could be the answer. 

CFG Bank

Topping the list with the highest APY is a 1-year CD account from CFG Bank, which offers an impressive 5.57% APY. Plus, compared to both Newtek and Forbright, it has the smallest deposit requirement. In order to earn the 5.57% APY, you'll need to keep a minimum daily balance of only $500. The maximum initial funding limit is $500,000. 

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Looking for places to store your cash to beat rising inflation? With the CPI report showing inflation rose 4.20% year-over-year, there aren't many savings accounts offering yields outpacing it.

Thankfully, jumbo CDs are among the smartest places to park your cash. You'll earn up to 4.15% APY, with quick access to your cash within six months to a year. If you're looking to make a few thousand dollars effortlessly, this is the best place to turn.

I'll explain how a jumbo CD works, the best options available and how much you can earn with one.

Top-earning jumbo CD rates for July 2026

Here are some of the top-earning jumbo CD accounts available for a range of term lengths:

What is a jumbo CD?

A jumbo CD account is practically the same as a regular CD account, with one main difference — jumbo CD accounts require a higher minimum deposit to open.

Typically, most banks require a deposit of $100,000; however, this amount varies from bank to bank. You'll also have shorter maturity dates, ranging from six months to one year, although some banks offer longer terms.

Why I like jumbo CDs

There are a few reasons why I suggest savers consider a jumbo CD:

• Shorter maturity terms: Jumbo CDs don't always require you to tie up your money for years at a time. That means you'll have the flexibility of pivoting to other investments if inflation goes higher.
• A safe investment: Your account should be FDIC or NCUA insured, so your money stays safe even if your bank or credit union fails. The FDIC protects up to $250,000 in individual deposit accounts, and the NCUA protects up to $250,000 per credit union member.
• Higher rates: Jumbo CDs offer some of the best rates among CDs and savings accounts. This means that with the higher deposit requirements, you can earn more money quickly.

Use the Bankrate tool below, to compare today's top CD offers:

Key considerations with a jumbo CD

A jumbo CD works like other CDs in that you must pledge to keep your money in it until its maturity date. If you decide to break it open early, you'll lose months of earned interest, which could result in you losing hundreds to thousands of dollars.

Another thing to keep in mind is that many banks auto-renew CDs. That means you should set a reminder on your phone's calendar a week before maturity to explore options.

The good news is you can always let the CD auto-renew. This is great too because the next time around rates might be higher. There's growing momentum for the Fed to raise rates to slow inflation's growth, and when this happens, savings rates rise.

How much can I earn with one?

One of the benefits of a jumbo CD is that while it requires a large deposit, you're also earning more in a short window.

If you have $100,000 you're earmarking for a short-term project, like a significant home improvement, here's how much you can earn with some top accounts:

• CreditOne Bank: $4,150 in earned interest for one year
• Finworth: $2,029.41 in earned interest for six months

Jumbo CDs are an excellent option for risk-averse savers. You'll earn a guaranteed rate of return and have quick access to more cash.

Remember that if you need your money before your term expires, banks charge penalties for closing your CD before the maturity date. Only buy a jumbo CD if you're confident you won't need the money before the term expires.

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Are you trying to decide between investing in CDs vs bonds? Both offer you a secure way to earn a return.

The returns will usually be modest relative to other investments, but both offer investment safety with steady returns.

Assessing risk, potential return and term of the investment will help you decide between a CD or a bond. Weighing the differences is essential to finding the right fit for you and your money.

Below is a breakdown of how each works, giving you a chance to see which one is the best fit for you.

What is a certificate of deposit (CD)?

CDs are a type of savings account you can open at a bank or credit union. They're insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA) up to $250,000 per account, reducing your risk to zero.

When you open a CD, you agree to leave the money on deposit for a set amount of time or incur a penalty for withdrawing funds early. In exchange, the bank pays you a fixed annual percentage yield (APY), making CDs a safe, predictable way to grow your money.

It also means if the Fed decides to cut rates in the future, you won't have to worry about your rate lowering since you locked it in.

Below, you can compare CD rates and terms quickly:

CDs vs bonds: When to choose a CD

Here are some reasons to consider opening a CD:

It can help you reliably save for the near future. Deciding how long to keep your money on deposit is crucial, because there are penalties for early withdrawal. A three- or five-year CD could help you save for an extended vacation or the down payment on a home. CDs with a shorter term can help you accumulate earnings to build an emergency fund or gain fiscal discipline by putting the money temporarily out of reach.

Popular when interest rates are high. A crucial difference between CDs and bonds lies in how CDs react to increased interest rates. When interest rates rise, the APY usually increases. That means that CD rates offered by banks go up when the interest rates climb.

You gain rate protection. Once you lock in a CD, the APY you receive is the same one you carry throughout your term. CDs come with fixed interest rates, meaning if the Fed cuts rates in the future, any current CDs won't be impacted.

Risk-averse. CDs might be a better option for the most risk-averse investors. They're ideal for reaching short-term savings goals because you can choose from a variety of term lengths. CDs are great for savings goals because you can earn more interest than a typical savings account without locking your money away for too long or risking losing it.

Terms vary by bank. Compare interest rates, early withdrawal penalties and the amount of time you're willing to lock your cash away, before opening a CD. No-penalty CDs can be useful when there is a possibility you might need the principal back sooner than a given CD term.

What is a bond, and what do you get when you buy one?

Bonds are debt obligations issued by governments, government agencies and corporations, used to raise capital or fund operating expenses.

When you buy a bond, you're lending money to the issuer, and the issuer promises to pay you periodic interest payments (or coupons) and to repay the face value of the bond (or par value) upon maturity.

When you buy a bond, you receive periodic interest payments known as coupons. The coupon payments, which might be made quarterly, twice yearly or annually, are expected to provide regular, predictable income to you.

Longer maturity terms make bonds a lower-maintenance investment. You can lock in a stream of income for up to 30 years and avoid having to seek re-investment at a potentially lower rate.

Bonds are not FDIC-insured and come with some risk. When buying corporate bonds, you can manage the risk by purchasing investment-grade bonds that have earned a high rating from the credit-rating agencies. The least risky are Treasury bonds and U.S. savings bonds that are backed by the full faith and credit of the U.S. government.

Government bonds can be purchased directly at TreasuryDirect.gov. You can buy Treasury bonds and savings bonds directly from the federal government without any fees. They can also be purchased through a brokerage.

When to choose bonds

Below are some reasons to consider a bond:

Popular when interest rates are low. A crucial difference between CDs and bonds lies in how they react to increased interest rates. When interest rates rise, bond prices decrease. That means that a bond will lose market value if interest rates rise. That is, if you sold the bond on the secondary market, it would go for less because other bonds would be available that pay a higher rate of return.

Higher risk tolerance. If you're more risk-tolerant and looking for greater returns, you might prefer to put your money in bonds. Most bonds pay a steady income, so they're useful if you're looking for a fixed income stream.

Diversification. Bonds can also be used to diversify your investment portfolio and help hedge your investments against the fluctuations in the stock market.

CDs vs bonds: Which is right for me?

CDs have minimal risk and more flexibility compared with bonds with respect to how long you need to put your money out of reach.

Bonds carry more risk. The issuer could default, and changes in interest rates could devalue your investment. But, government bonds are considered risk-free and receive favorable tax treatment.

Short-term investors should give CDs a close look. You can buy a CD with a three-month term if you're undecided or need the money back in your hands sooner rather than later.

Long-term investors might see bonds as a better option, especially when you're saving for education. U.S. savings bonds are easy to buy; the minimum investment is $25, and you might be able to avoid federal tax on the interest if you use them for qualified education expenses.

Bottom line on CDs vs bonds

CDs and bonds might offer smaller returns, but they carry little or no risk of principal loss. Both require you to "lock up" your money for a specified period to receive the maximum return and avoid possible penalties.

Important factors to consider are your risk tolerance, how the Fed handles rates in the future and how potential returns compare between CDs and bonds.

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Saving and investing are both key parts of a solid financial plan. Whether you’re putting money into the best savings account — be that the best CD rates, best high yield savings or best money market accounts — or you prefer to ride the waves of the stock market, there is no right or wrong about what to choose. 

Instead, the key is to understand your financial goals, your risk appetite and your time horizon, before making your choice, which could be to save, invest or both. 

Savings are most suited for people who want certainty and low risk, while investing is best for those who are comfortable with balancing potentially better returns (than on savings) with the risk of losing some of their capital. 

"For assets that are expected to be used in the near future (the next three years or so), having safety and liquidity is likely best. This could be a savings account, money market, U.S. Treasuries, CDs or something of that nature," Michael Powers, financial planner at Manuka Financial, told Kiplinger. "For assets that have a long-term expected time horizon, more risk through investing may be appropriate to try and earn a higher rate of return for potential growth and to keep pace with inflation."

What is a savings account and how to find the best deals 

A savings account is a pot of money you pay into that pays you interest, which typically comes your way monthly. 

If the savings rate is fixed, then you know what you will get back, though some accounts offer variable rates, which can move up or down, often in line with movement in the official Federal Reserve rate. 

To find the best CD rates, you can use our tool, in partnership with Bankrate. 

While the amount of interest you could earn varies depending on the type of account, your money is not at risk to decrease, like it is with an investment. As long as the bank you save with stays in business, your money is safe, and in the unlikely event it goes bust, most accounts protect your cash up to $250,000 via the Federal Deposit Insurance Corporation. 

In most cases, you can also get access to your cash when you want, though with CDs you may need to pay a penalty if you want it before the end of the term, which is usually anything from one to five years. 

While we’ve listed our tool to find the best CD rates above, they are far from the only type of savings account. High-yield accounts normally allow easy access to your money, and to find the best rates on those deals you can use our similar tool below.

Savings pros and cons 

 These are the key perks of putting your money in a savings account:

• They are almost always risk-free, as the underlying value cannot go down as long as your bank stays solvent. Even if it went bust you are usually protected up to $250,000 via the Federal Deposit Insurance Corporation
• They are fairly simple as you are told the interest you will get upfront and whether that rate is variable or not
• In many cases, you can take the money out when you want in case you need it for a sudden expense or if you’ve been saving up for something

 But these are some of the pitfalls of savings accounts:

• Returns are often lower than the best-performing investments
• There are sometimes penalties to access your cash before the end of whatever term you signed up for if your account has a ‘lock-in’ period.
• Some accounts have a minimum balance which, if the account falls below, causes the account holder to incur charges

What is investing? 

When you invest, you are often buying a share in a company (either in one firm or if you invest in a fund you’re buying shares in multiple firms) or a commodity such as gold, oil or even art. 

You hope that the value of that investment will go up so you make a profit when you sell the investment. You may even earn an additional income along the way via dividends, which are payments firms make to shareholders as a share of profits. 

However, there is a risk the value of your investments can go down, so they come with risk. In the worst cases, you could even lose all the money you invested. The flip side, though, is that the best performing investments tend to outperform savings over the long run. 

And speaking of the future, it is usually advisable to invest over the long term so you are able to ride out any bumps in the market. It can be a dangerous game to expect quick wins from your investments, though that doesn’t mean you won’t do well in the short term. 

You can invest via an account you set up yourself or via a 401(k) set up by your employer, which it may also contribute towards, assuming you meet eligibility requirements. 

Investing pros and cons

 These are the key perks of putting your money in an investment:

• If your investment performs well, it may well outperform the best savings accounts and inflation, though there are no guarantees 
• You may earn an income from your investment via dividends, even before selling it to realize any gains (hopefully)
• Many investments give you access to your money when you want (though not all do), but the risk of taking money out when your investment has dropped in value is that you’re not giving yourself the chance for it to go up again 
• With a 401(k), your employer may even pay into your investment, which is akin to a pay raise

 Here are the main problems with investing:

• Investing is inherently risky and there is a chance you could lose some or all of your money
• There are often fees to make trades or for a fund manager to manage your money 
• You are normally advised to invest for the long run, so they are not best for those who may need to access their money in the coming months
• Investing is more complex than savings and, as well as doing your own research, many people turn to a financial adviser to help them navigate the maze that is investing

If you need advice, you can use our tool below, powered by Bankrate, to help you find an adviser. 

Saving vs. investing: Which is best for you?

There is no right or wrong answer as to whether you should save or invest, and it is very much down to your attitude to risk, what access you need to your money and whether you understand the product in question. 

Certainly, anyone who cannot sleep at night for fear the value of their cash may go down or who may need their money at the drop of a hat would be best going down the savings route, rather than investing. 

Yet if you are prepared to take the risk, and are prepared to invest for the long term, then many investors have done much better in the stock market or buying commodities than they would have done by saving. 

Ultimately, only you can make the decision for yourself. 

If you have short-term savings goals but don't want to tie up your money in a longer CD, a no-penalty CD offers the best of both worlds. You'll earn a rate that helps you reach your goals while maintaining quick access to your funds.

Normally, a certificate of deposit is a "park the money and forget about it" type of savings vehicle. However, with a no-penalty CD, you can access your money when needed without paying fees.

Moreover, the Fed hasn't cut rates at its last three meetings. It means now is an excellent time to capitalize on higher APYs.

Best no-penalty CD rates

Here's a look at the best no-penalty CD. Note, I update these bi-weekly:

How does withdrawing funds from a no-penalty CD work?

With a no-penalty CD, you'll have to wait a week after funding the account before you can withdraw funds. While penalty-free withdrawal can be useful if you think you might need the cash at some point in the foreseeable future, keep in mind that it's not as easy as withdrawing from a traditional savings account.

You'll need to notify your bank before taking out funds. Additionally, many institutions require you to withdraw all cash from an account, not just a partial amount, if you decide to "break open" your CD.

In other instances, you might be able to withdraw a portion of your funds. But you'll only be able to do one withdrawal per month.

If you're concerned about having more regular access to your accounts, a high-yield savings account might be a better fit.

Opening a no-penalty CD account 

Like other CD accounts, no-penalty CDs offer higher APYs on deposits than traditional savings accounts. With a no-penalty CD, you'll lock in an APY when opening the account. If banks drop rates, your APY won't be affected.

Therefore, they're good savings options for individuals who want guaranteed returns on their savings but don't want to commit to a traditional CD account in case they need access to their cash before the CD maturity date.

Most of the time, no-penalty CDs have relatively short terms, typically under 14 months.

Use the tool below, powered by Bankrate, to quickly compare the rates of some of the top CD accounts available now:

On the other hand, since there are no penalties for withdrawing your cash early, you have the option to put your money in a new CD account if rates go up. Our savings calculator can help you determine how much interest you earn.

Before opening any savings account, it's vital to make sure your bank is federally insured. Banks offering FDIC-insurance protect up to $250,000 in individual deposit accounts and up to $250,000 for each person's share of joint accounts.

Deposits in federal credit unions offer similar insurance, thanks to the National Credit Union Administration (NCUA), protecting up to $250,000 per credit union member (whether in an individual or a joint account).

No-penalty CDs vs savings accounts 

Pros of no-penalty CDs:

• Accessibility: No-penalty CDs allow you to withdraw funds before the CD's maturity date. If an emergency were to arise, you wouldn't have to pay a hefty fee to take out your cash, which can give individuals peace of mind.
• Maximize earnings: Since no-penalty CDs allow you to take out cash for no fee, it's beneficial if banks raise rates. You'll be able to withdraw and place them in an account with a higher APY.
• Guaranteed returns: Because most CD accounts are FDIC-insured and offer higher APYs than traditional savings accounts, they offer fixed, predictable and safe returns on savings.

Cons of no-penalty CDs:

• Regular CD rates: Usually, no-penalty CDs don't offer APYs as high as those on a standard CD account. And if inflation continues to rise, it might make sense to consider options with higher returns and risk on the stock market to outpace it.
• No partial withdrawal: If you decide to "break open" your no-penalty CD, you'll likely have to withdraw your entire savings, not just a partial amount. With some accounts, you can withdraw only a portion of your deposit, but they'll limit how many transactions you can make.
• No additional deposits: Like standard CD accounts, in most cases, cash can only be deposited upon opening the non-penalty CD. No additional deposits can be made.

Bottom line on the best no-penalty CD rates

If you're unsure whether or not you'll need to access funds from your CD before its maturity date, a no-penalty CD can be a good option. With a no-penalty CD, you won't be charged an additional fee if you decide to withdraw your balance before the term is through.

While the rates won't outpace inflation currently, it's still a smart way to reach your savings goals. You'll earn a return that outpaces what many banks offer in savings accounts, and you'll be one step closer to achieving your goals.

Related Content

• Money Market Accounts vs No-Penalty CDs: Which Is the Best Way to Grow My Cash?
• Do You Have a CD Maturing Soon? Here's What to Do Next
• Gain a Fresh Perspective on Your Finances With These Budgeting Apps

As inflation rises, where you store your cash matters more than ever. This is why, if you're looking to allocate some of your money outside the market, a CD could be a smart solution.

With a CD, you deposit money for a specified term. That term can range from three months to five years. If you need to end the term early, your bank will charge an early termination fee.

CDs are an appealing option because they force you to commit to saving money. While returns won't outpace inflation, using them wisely can help you save for future goals and earn a healthy return.

What are the top-earning CD rates?

One of the benefits of CDs is that you can choose a term that aligns with your savings goal. Say you're saving for a down payment on a home in five years, then you could choose a five-year CD to help you meet it.

CDs also feature shorter terms. This is ideal if you're not looking to tie up your cash for long but want to earn a higher rate without fear of stock market slumps.

Moreover, for savers with larger deposits (think $50,000 or more), a jumbo CD can be a smart option. You'll earn APYs as high as 4.10%, with access to your money in six months to a year. That higher deposit can equate to you earning thousands effortlessly in a quick timeframe.

Here's a look at some of the top-earning CDs for each term:

Pros of using CDs

Here are a few of the many benefits gained when using them:

• You earn a guaranteed return
• They feature fixed rates, so if the Fed cuts rates, you won't have to worry about diminishing earnings
• Many accounts offer FDIC insurance
• They require discipline to reach your savings goals, since early termination penalties are high

CDs carry ample perks. If you would like to try one out, use this Bankrate tool to find personalized CD terms and rates for your needs:

What are some cons to consider before opening one?

CDs are not the most flexible savings options. Keep these things in mind before committing to one:

• Returns are lower historically than what you could earn in investments, and inflation is higher than any current CD APY
• They feature steep early termination fees of up to a year of earned interest for longer-term CDs
• You won't have access to your cash until your term expires

If you want to try one out but are concerned about not having access to your cash, an alternative is a no-penalty CD. These CDs offer all the benefits of a regular CD, but with the flexibility to withdraw your money when you need it.

Usually, you'll need to keep your cash in the account for the first week or month after opening it. Then, each bank has its own rules for withdrawing. Some allow you to do it all at once, while others limit you to one withdrawal each statement.

The other thing to keep in mind is that inflation is currently higher than any APY CDs offer. It means you should use them sparingly in the interim until prices go back down.

When should I use a CD instead of a high-yield savings account?

Your financial goals and cash flow will help you decide which works best for your needs. To demonstrate, if you have an emergency fund in a savings account and want to save for a vacation in one year, a one-year CD is a smart option.

Why? Because you already have money stored away in case of an emergency. This makes it less likely you'll need to break open the 1-year CD, so you can stay on pace to reach your goals.

However, if you require regular cash access, then a CD isn't the best fit. Instead, consider a high-yield savings account, as you'll have access to your cash when you need it, without worrying about early termination fees. Once you build an emergency fund, you can allocate future savings toward CDs.

How much can I earn with CDs?

It will depend on your initial deposit, term length and APY. If you have $100,000 you want to store in a jumbo CD with ECFU Financial for one year, you'll earn $4,100 effortlessly.

Meanwhile, if you deposit $5,000 into a one-year CD with Limelight Bank, you'll earn $205. While that number might not jump off the page, that's an extra $205 you'll earn for doing nothing aside from opening the account. And that momentum can carry you to achieve more goals.

Make sure to set a reminder on your phone a week before its maturity date to explore other options. And if you find none you like, you can let it ride.

With the inflation rate at 4.20%, if you're not storing your cash in an account earning at least this much, you're losing purchasing power.

This means CDs won't be a smart place to park your cash if you're looking to outpace inflation. However, CDs can still help you earn a healthy rate and keep you committed to your savings goals. As such, they are smart solutions for savers looking to shelter some of their money from market volatility and earmark it for future goals.

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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

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Having an effortless option to store your money and a guaranteed rate of return can give you peace of mind with rising everyday costs. With the best 5-year CD rates, you can earn a healthy rate.

The good news is that many rates are still high, allowing you to earn much more than you would with a savings account at a traditional bank. The more challenging news is that inflation is at 4.20%, meaning none of the CDs making this list will keep pace with inflation.

That said, a five-year CD can still be an integral part of your financial strategy, especially if you have longer-term savings goals. Here's a breakdown of the top rates and how much you can earn from one.

Top 5-year CD rates

Why open a 5-year CD?

A CD offers a significant advantage over a savings account: It comes with a fixed interest rate. That means when you sign up for an account, the rate you have remains through the term.

When the Fed cuts rates, it impacts savers with lower returns. The only way to maintain higher returns is by locking in a CD when the rates are higher, as they are now.

Pros and cons of a 5-year CD

Pros:

• CDs offer guaranteed returns on deposits
• Fixed rates on CDs mean that even if rates fall, the APY on your account will remain the same, as it's fixed
• Most CD accounts from banks and credit unions are federally insured for up to $250,000
• Since you can only withdraw funds when your CD account matures, you won't be tempted to spend your money elsewhere

Use the tool below — powered by Bankrate — to compare CD rates:

Cons:

• If you want to access your money before your term expires, the penalty fee might negate the interest you earn.
• Upon maturity, the purchasing power of the money earned from your CD might be less due to inflation.
• You could earn more money with other investment opportunities.

Use the tool below, powered by Bankrate, to compare financial services and find an option that fits your goals:

How much can I earn with a 5-year CD?

I'll use our top pick, Sallie Mae, for this example. It currently offers an APY of 4.15%. Here's how much you can earn with the following deposits over five years:

• $10,000: $2,254.52 in earned interest
• $25,000: $5,636.30 in earned interest
• $50,000: $11,272.61 in earned interest
• $100,000: $22,545.22 in earned interest

Now is the time to lock in a great return, while rates are still high. The Fed won't be cutting rates any time soon, giving savers more time to secure a higher APY.

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• Best 1-Year CD Accounts

CD rates benefited from a rising interest rate environment, while the Federal Reserve was raising the fed funds rate between 2022-2023. But as the rate hiking campaign appears to have ended (the Fed held interest rates steady in January, its fourth consecutive pause), the boon to CD rates could be waning soon. 

To combat inflation, the Federal Reserve raised interest rates 11 times since March 2022. And as interest rates kept rising, so did rates on high-yield savings accounts and CDs. 

As was expected, the Federal Reserve held interest rates steady for the fourth consecutive time at its January policy-setting meeting. This pause in rate hikes means the fed funds rate will remain at a target range of 5.25% to 5.5%. In December, the Federal Reserve saw three interest rate cuts in 2024, and lowered its median interest-rate projection for the end of 2024 to 4.6%. 

However, the Fed's latest statement pushed back on expectations that rate cuts will begin in March. In the official statement, the Federal Reserve states: "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."

According to LendingTree Senior Economist Jacob Channel, "The Fed is being very cautious as it navigates the potential for future rate cuts. While it doesn't want to leave rates high forever, it also doesn't want to cut them prematurely and risk inflation spiking again. Owing to this, we're likely going to see the Fed hold rates steady for a few more months while they wait to get an even clearer picture of how the economy is doing and where it's likely to be headed.  The more we see inflation growth continue to cool, the more comfortable the Fed will be with cutting rates." 

Following the Federal Reserve’s decision to hold rates steady, rates on CD accounts have started to fall. And if the Federal Reserve does indeed cut interest rates later this spring, savings rates will likely drop even further. For this reason, lock in CD rates while they're still high. 

Many CDS still offer high rates

If you research your options and shop around, you'll find that many CDs are still offering APY rates of over 5%. Often, in order to get the top rates on CDs you'll need to forgo your brick-and-mortar bank and instead opt for an online "challenger" bank. And sometimes, but not always, you may need a higher deposit ($1,000 minimum) to access these best CD rates. 

Check out our tool — in partnership with Bankrate — which lets you search for the best CD rates available now. 

What is a CD?

A certificate of deposit, or CD, is a type of savings account that holds a fixed amount of money for a fixed period of time. Interest rates on CDs are typically higher than they are for regular savings accounts, and the rate that you sign up for stays the same rate for the whole term. Meaning, if rates drop for new CDs, you’ll still keep your rate. Keep in mind that if you decide to withdraw before the term is up, you’ll be stuck with pretty hefty exit fees that can offset any interest you've already earned.

CDs are good options when saving for a specific goal, but they're not great for savings that you’ll need immediate access to — so it's best to avoid putting your emergency fund in a CD. Typical term lengths for CDs range anywhere from three months to five years.

Determining what CD term you should plump for is easier if the money is going towards a particular savings goal. For example, if you plan on getting married in three years, then opening a 3-year CD makes sense. 

However, you may be looking to open a CD with no particular savings goal in mind, so you’ll have to decide whether to get a short-term or long-term CD. To do so, you should consider interest rates, early withdrawal penalties and the amount of time you’re willing to commit. Typically, longer-term CDs have higher interest rates than short-term CDs, but you’ll have to wait longer to access those funds or risk incurring a fee.

Why open a CD

CDs are a great option if you’re looking for a guaranteed rate of return on your savings. They’re geared toward earning interest on money that’s already been saved, often for a future purchase, like a down payment on a vehicle or home. With a CD, you’re making an up-front payment, rather than contributing monthly, so it's not a useful tool for those looking to save gradually. Therefore, if you’re planning to make continuous deposits into a savings account, a traditional or high yield savings account would be a better option for you. 

Pros of CDs

• Safe, no-risk, investments
• There's a guaranteed rate of return 
• Offer higher interest rates on deposits than traditional savings accounts 
• Usually have no monthly fees

Cons of CDs

• Money cannot be easily accessed, without facing early withdrawal penalties. 
• You’ll pay taxes on interest accumulated in the CD. 
• Fixed interest rates on CDs mean that if rates rise, you won’t be able to take advantage of these higher interest rates. 
• Lower returns than if investing in stocks or mutual funds (but always remember the value of your investment can go down as well as up).

Some of the best CD rates available now

Andrews Federal Credit Union

APY: 5.75% (Limited-time only)

Minimum deposit: $1,000

Term: 6 months

Total Direct Bank

APY: 5.51% / 5.50% 

Minimum deposit: $25,000

Term: 3 months / 12 months

Newtek Bank

APY: 5.55% 

Minimum deposit: $2,500

Term: 6 months

BMO Alto

APY: 5.50%

Minimum deposit: $0

Term: 6 months

USAlliance Financial

APY: 5.40%

Minimum Deposit: $500

Term: 12 months

Bask Bank

APY: 5.40%

Minimum Deposit: $1,000

Term: 12 months

Pelican State Credit Union

APY: 5.27%

Minimum Deposit: $500

Term: 24 months

Transportation Federal Credit Union

APY: 5.00%

Minimum Balance: $1,000

Term: 36 months

Credit Human

APY: 4.60%

Minimum Balance: $500

Term: 48 months

First Internet Bank

APY: 4.61%

Minimum Balance: $1,000

Term: 60 months

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Many people scoff at the idea of seeking out the best savings accounts, as we have gotten used to them paying miserly returns. Millions of people across the globe leave their emergency funds or spare money in current accounts paying no interest or in old savings accounts that pay close to nothing. 

However, I want to fly the flag for the growing army of switchers in so many countries who are now seeking out the best rates, as right now it can make a big difference. 

While I cannot tell you whether to save or invest, as that’s a personal choice based on a number of factors, what I will say is that if you are a cautious investor, then I would certainly be considering guaranteed returns of about or over 5%, which you can find on the the best CDs, best high yield savings accounts or best money market accounts. 

Before we go on, check out our tools in partnership with Bankrate below, which lets you compare CD accounts and savings accounts.

Of course, the ability to make good money switching only applies if you have penalty-free access to your cash. 

Can you make thousands switching your savings?

At 5% returns, for every $1,000 you have, you are earning about $50 per year, which is not to be sniffed at when you look at recent averages. If you have $100,000, that’s another $5,000 per year, which could pay for a vacation or an upgrade to your home. 

I have recently moved my savings around to take advantage of higher rates and I would encourage others to do the same as otherwise you are throwing money away. Switching can take as little as a few minutes and if that can earn you hundreds — or even thousands — more per year, I’d say that’s a few minutes well spent. 

While I’ve been playing the savings merry-go-round for the past decade even in a low-interest rate environment, I accept I am an exception given I am a personal finance journalist, so this is my bread and butter, and not everyone would have taken the time to do so for far smaller gains than today. 

In fact, I wouldn’t have written this sort of article a year ago with so much gusto when rates were so much lower, which reduced the incentive to switch and made savings look less attractive versus the best investments. Having done this sort of job for close to 20 years, this is the most exciting time I can remember for the savings market as we are coming out of the doldrums and into the light. 

Yes, I really did put “savings” and “excitement” in the same sentence, because for us personal finance nerds it is an exciting time. 

Could savings rates go even higher?

There is a chance rates could improve even further although the Federal Reserve's rate-hiking campaign to combat inflation seems to be on pause. At its most recent meeting in March, the central bank opted to keep the fed funds rate, a key overnight bank lending rate, unchanged at a target range of 5.25% to 5.5%. 

While there have been 11 interest rate hikes since March 2022, this is the fifth pause in a row, leaving the Fed funds rate at its highest level in 22 years. In its accompanying statement, the Federal Reserve signaled that while its rate-hiking campaign is on pause for now, it stated that "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." The Federal Open Market Committee (FOMC) noted that the Committee was still strongly committed to returning inflation to its 2 percent objective. 

While a Fed rate pause doesn’t guarantee a taper in savings rate increases, banks tend to at least roughly follow the Fed’s trajectory, so you’d expect the rate increases to be smaller or stall.

Of course, you can’t control what the Fed does, nor what is happening in the wider economy, but you can control how hard your money is working for you to some extent, so I say it’s time to become a savvy saver. 

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If you're looking for a safe place to store cash for short-term goals, certificates of deposit are worth considering. They offer guaranteed returns and FDIC insurance at most banks, making them a stable option for savings you won’t need right away.

Right now, 1-year CD rates can reach up to 4.15% APY, which allows your cash to grow at a higher rate than a traditional savings account.

A 1-year CD can be a good fit if you have a specific savings goal and know you won't need the money for the next 12 months. I'll show you the top options to consider, along with alternatives for savers who need more flexibility.

Here are some of the top 1-year CD rates

Why open a 1-year CD?

A 1-year CD is ideal for saving money for short-term goals. I've used them in the past and found them to be successful in helping me achieve my goals.

Why? There are several reasons. One, I don't like losing money. CDs force you to keep your money in them unless you want to lose months of earned interest.

The second reason is that you gain quick access to your cash. This is useful if inflation climbs, as you can pivot to investments that will earn you more.

In the meantime, use the tool below, powered by Bankrate, to help you find some of the best 1-year CD rates quickly:

The difference depends on whether you open an account with a bank (overseen by the FDIC) or credit union (regulated by NCUA). If your bank or credit union faces any financial trouble or closes, your deposits will be insured up to $250,000 per account (and up to $250,000 per person in a joint account).

You can even use the FDIC BankFind tool to check whether a bank is federally insured.

Opening a CD is also a great option if you're looking for a guaranteed rate of return on your savings. While CDs offer comparatively lower returns compared with higher-risk investment options, such as stocks or ETFs, they're a good choice if you value a fixed, predictable and safe return on your money.

Pros and cons of 1-year CDs

Before deciding whether a 1-year CD is the right fit for your savings strategy, it’s helpful to weigh the advantages and drawbacks.

Pros:

• CDs offer a risk-free way to save with guaranteed returns on your deposit
• Fixed rates on CDs mean that even if interest rates fall, the APY on your account will remain the same
• Most CD accounts from banks and credit unions are federally insured for up to $250,000
• Since you should only withdraw funds when your CD account matures, you won't be tempted to spend your money elsewhere

Cons:

• Accessing funds from a CD account isn't as easy as with a savings account. If you need to withdraw funds from a CD account before the maturity date, you'll be charged a fee, which will likely offset any interest earned
• Money can't be added to a CD once it has been opened
• Fixed rates on CDs mean that if rates increase, you'll miss out on potential earnings
• CDs have a lower earnings potential compared with stocks or mutual funds

What's the best uses for a 1-year CD?

These CDs can help you reach your short-term goals, such as:

• Paying for a home improvement project
• Reallocating money to less risky investments as you move closer to retirement
• Saving for a home down payment
• Earmarking money for a vacation

While CDs won't help you earn as much as investments traditionally do, they still make sense in some instances. Having a fixed savings vehicle can help you stay on course to achieve your goals without having to contend with market risk.

Do 1-year CDs outpace inflation?

Unfortunately, they don't. That said, with returns as high as 4.15% APY, it still makes sense to use them for short-term savings goals.

On top of this, the Federal Reserve might consider raising rates if inflation remains sticky. This affects savers positively since banks usually increase APYs when this happens.

Another option is to make sure you have enough to cover living expenses for at least six months, then devote the rest of your money to paying off high-interest debt and investments.

Even with the volatility the market provides, you can earn much higher returns historically if you don't mind the risk. If you need help getting started, a financial adviser is a smart option. They can help you lock down some goals and tailor solutions to match your risk profile.

Use the tool below, powered by Bankrate, to find a reputable financial professional today:

When a 1-year CD makes sense

Short-term CDs give you the best of both worlds: You'll earn a healthy rate of return, and you have the flexibility to take advantage of better investment opportunities soon.

While one-year CDs won't keep pace with inflation, they can still be an integral part of reaching savings goals. And if inflation continues to remain sticky, you can always pivot to investing, where returns could be higher than inflation.

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The best 3-year CDs are a smart option for savers looking to achieve longer-term saving goals.

Whether you're planning a dream vacation, a down payment on a second home or want money earmarked for something down the road, CDs give you a risk-free way to reach your goals.

The only thing to keep in mind is that current returns don't outpace inflation. So, make sure CDs are part of a layered strategy that also includes investments. In turn, you can minimize inflation's impact.

How to find the best 3-year CD rates

Currently, 3-year CDs help you earn a higher return than a traditional savings account. This can help you build more wealth rather than keeping your money sitting in an account earning pennies.

However, CDs work best when you can park the money and forget about it. If you need to withdraw before your term expires, your bank or credit union will close the CD and assess a fee.

These fees can offset the interest you earn, so only lock in longer-term CDs if you're confident you won't need the money before the maturity date.

In the meantime, here are the best three-year CD rates I found:

How do CDs work?

With a CD account, your cash is locked away for a fixed period, typically one to five years, unless you’re prepared to pay a fee to withdraw it early.

Because of early withdrawal fees, CDs aren’t a good place to park cash you plan to spend in the coming months, nor do they make good emergency funds.

However, they're good options if you’re trying to save for a future purchase or event and want to grow your cash without accessing it.

You’re guaranteed a fixed return on your cash so that the rate won’t fluctuate based on market conditions. This is both a good thing, as you get certainty, but also a possible problem, in case rates elsewhere shoot up, and you can't benefit.

As with other savings accounts, they're a good option for those who value risk-free returns, as you aren’t riding the waves of the stock market. In addition, most CD accounts are FDIC or NCUA insured, depending on whether they’re opened through a bank or credit union, so your cash is safe, even if your bank or credit union closes.

FDIC insurance protects up to $250,000 per account ($250,000 per person in a joint account), while NCUA insurance protects up to $250,000 per credit union member.

Pros of 3-year CDs:

• CDs offer guaranteed returns on deposits
• Fixed rates on CDs mean that even if rates fall, the APY on your account will remain the same
• Most CD accounts from banks and credit unions are federally insured for up to $250,000
• Since you can only withdraw funds when your CD account matures, you won't be tempted to spend your money elsewhere

Things to consider with 3-year CDs

• No liquidity: Accessing funds from a CD account isn't as easy as with a savings account. If you need to withdraw funds from a CD before the maturity date, you'll be charged a fee, which will likely offset any interest earned
• Money can't be added to a CD once it's been opened, in most cases
• CDs have a lower earnings potential compared with stocks or mutual funds
• Fixed rates on CDs also mean that if rates increase, you'll miss potential earnings
• Current rates are not high enough to outpace inflation, and high-yield savings accounts could offer better rates of return

Use the tool below to explore some of today's top savings offers, powered by Bankrate:

Which CD term is right for me? 

CDs are excellent savings vehicles if you want to put your money away and forget about it. However, with a wide range of terms, it's vital to strike a balance between setting aside money for future goals and keeping some cash on hand to cover unexpected expenses.

Your savings goal can influence the term you choose. If you want a shorter option but also gives you access to your cash fast, a 1- or 2-year CD might be a wise choice.

Meanwhile, if you have larger savings goals, such as helping a child with a down payment on a home or taking that dream retirement vacation, then a longer term ensures you lock in a higher rate now.

The bad news is that inflation increased to the point where no matter which three-year CD you choose, you'll lose some purchasing power since it won't outpace inflation.

That said, they still provide value. If you have a savings goal you want to achieve in a few years, I would still recommend one as part of a broader strategy that includes investing. This can reduce inflation's impact while helping you crush your savings goals.

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Using our savings calculator can help you quickly determine how much your money will grow over time. If you invested either $1,000, $5,000 or even $10,000 in a high-earning account several years ago, you could be several thousand dollars richer today.

Whether you’ve just opened one of the best CD accounts or opted for a high-yield savings account with an impressive APY, a savings calculator can easily show you just how much cash you’ll have after a specified period of time, depending on your account APY and any regular monthly contributions you make.

Savings rates have dipped following the Federal Reserve's cutting rates at each of its last three meetings. However, many APYs remain high enough to outpace inflation, making them wise options to consider.

Savings calculator

You can use our savings calculator below to determine how much you'll save depending on several factors — APY, time period, initial deposit and monthly contributions.

To use the calculator, start by inputting the amount of cash you're starting with, or the initial deposit. From there, add in the amount you plan on contributing to the account as a monthly deposit.

After this, you'll then be able to choose from a number of savings accounts with varying APYs. Select a period of time over which your investment will grow, and our calculator will do the work for you, calculating your potential savings.

1. If you saved $1,000 over five years, you'd have...

Keep in mind that savings rates might continue to drop later this year, so you'll want to lock in a great rate sooner rather than later. Here is how much you can earn if you invested $1,000 for five years:

2. If you boost your $1,000 savings pot by $50 each month, you'd have...

If you make regular monthly contributions, you can see the interest stack up, it's the beauty of compounding. Contributing just an extra $50 a month can make a big difference after several years.

If you were to invest $1,000 in one of the top-earning high-yield savings accounts and then save an additional $50 every month for five years (an additional $3,000 in total), here's how much you'd have at the end (not considering rate fluctuations.

3. If you saved $5,000 over five years, you'd have...

Of course, if you increased the amount you saved from $1,000 to $5,000, you'd earn significantly more in interest after five years:

4. If you saved $11,000 over five years...

If you were to save an additional $100 each month ($6,000 in additional contributions) over five years, here's how much you'd have at the end (not taking into account any fluctuations in rates and inflation:

How much should you save each month?

How much you should save each month depends on your specific financial situation, but a general rule of thumb is to set aside three to six months’ salary or living expenses in an emergency fund.

Another general rule that can help you prioritize savings is the 60-30-10 budget rule, in which you devote 60% of your monthly income toward necessities, 30% toward wants, and 10% towards savings or paying down debts.

If you need help with budgeting, budgeting apps are excellent tools to use. They compile all your financial accounts in one place to help you see where your money is going, and to ensure you're on course to reach your savings goals.

How to choose a savings account 

Choosing a savings account depends on your personal financial goals. Here's what to consider.

Certificate of Deposit (CD): A certificate of deposit, or CD, is a type of savings account that holds a fixed amount of money for a fixed period of time. Typical term lengths for CDs range anywhere from three months to five years, so it’s not somewhere you’d store cash you need easy access to. Instead, it’s a good place to save cash you’re holding onto for a particular savings goal. For example, you may plan on purchasing a vehicle or making a down payment on a home in two years and are looking for a no-risk way to grow these savings.

Use this Bankrate tool to find a CD term that works for your finances:

Savings account: On the other hand, savings accounts are better suited for cash you’ll want easy access to, like emergency fund savings. If you want to maximize these savings, consider opening a high-yield account. High-yieldsavings accounts are the same as traditional savings accounts, but they pay a higher-than-average APY on deposits.

Money market account: Money market accounts give you quicker access to your cash while still allowing you to earn a healthy return on your investment. Some of these accounts come with check-writing privileges, giving you the opportunity to have access to cash when you need it.

Balance and deposit requirements: Some accounts have minimum balance and/or deposit requirements. If you fail to meet these, you could incur a fee.

Safety: Ensure your savings account is FDIC or NCUA-insured to keep your savings safe.

Compare some of the best savings accounts below.

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Savings accounts are an easy way to set aside money and develop financial discipline. Once upon a time, passbook savings accounts were the norm. Those days are long gone and your options now may seem endless, if not a little confusing. 

Rates on high-yield savings accounts and CDs rose as the Federal Reserve hiked interest rates through 2022-2023. But since the Federal Reserve began pausing interest rates hikes (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.

Here's a look at the different types of savings accounts and how they work. It’s up to you to decide what your savings goals are and which account will get you there the quickest. Use our savings calculator to see how much interest you could earn when you decide to save. 

Types of savings accounts

Traditional savings account

The OG of savings accounts. These accounts can be opened at your brick-and-mortar bank or credit union. Interest rates offered by these accounts are typically low. Unique to traditional accounts — you can visit a branch if you need help or want to deposit cash. 

Important to remember:

• You may be limited to up to six transactions per month before you are charged a fee, not including ATM withdrawals or in-person withdrawals 
• Traditional savings accounts offer a small amount of interest compared to other types of accounts 
• Monthly maintenance fees may cancel out interest earnings

Online savings account

Do you use the internet to manage many of your day-to-day activities? Or maybe you want to reduce the amount of free time you spend running errands? An online savings account may fit into your lifestyle better than a brick-and-mortar bank. There are many types of online savings accounts to choose from. 

Important to remember:

• Online banks have lower overhead costs, which allows them to offer you lower fees and better interest rates 
• You can review your bank statements, pay bills and transfer funds at any time 
• You can't deposit cash unless the bank is linked to ATMs that accept cash 

Specialty savings account

Specialty savings accounts are accounts you might use to save for a vacation or holiday gifts. Although you do earn some interest, the main reason most people open these accounts is to set aside money and have a lump sum available to spend at the end of the year or when the vacation or other event comes up. 

Important to remember:

• You save by depositing a specified amount at regular intervals, usually weekly, and earn interest on your savings
• A club account holds your money until a specified withdrawal date
• You may incur penalties for early withdrawals

High-yield savings account

A high-yield savings account is a savings account with a variable interest rate typically higher than retail brick-and-mortar banks. High-yield savings accounts pay a higher than average annual percentage yield or APY on deposits. The interest on these accounts is compounded daily and posted to accounts monthly. 

Important to remember:

• High-yield savings accounts are great options for emergency funds and short-term savings goals, such as a vacation or big ticket purchase
• You'll be able to accumulate more cash in a shorter period of time because the rate of return on these accounts is better than traditional savings accounts
• You can usually access and withdraw funds from your high-yield account up to six times a month without incurring penalties

Cash management account (CMA)

Cash management accounts are designed for people with large cash holdings they want to keep safe but easily accessible. They are available online from non-bank financial service providers.

When you deposit or withdraw money, your custodian directs funds or removes funds from the different accounts as needed so all your money remains insured.

CMAs protect your money by dividing your deposit into multiple accounts at different banks. For example, if you deposit $1 million into a cash management account, the brokerage might put sums of $200,000 in accounts at five different banks. Distributing the cash among the five banks enables all of your $1 million to be protected by FDIC insurance. 

Important to remember:

• CMAs offer a way to streamline cash management, combining the features of an interest-earning savings account with a traditional checking account 
• Accounts usually offer debit cards, check writing privileges, money transfers, bill payments, and overdraft programs  
• Some cash management accounts reimburse ATM fees, leaving you free to use any convenient ATM

Certificate of deposit (CD)

A certificate of deposit (CD) is a type of savings account that holds a fixed amount of money for a fixed period of time, which can be anywhere from three months to five years. In exchange, CDs pay higher interest rates than standard savings accounts, though you won’t be able to access your cash at will. 

Important to remember:

• CDs offer you a risk-free investment option that earns a fixed, predictable rate of return on your savings 
• You will likely incur a fee if you withdraw your money before the CD’s maturity date
• Typically, the longer the CD term, the higher the APY, but this can vary by institution and interest rate volatility

Find the highest yielding accounts for 1-year CDs, 3-year CDs and 5-year CDs  by using the below tool — powered by Bankrate — to compare CD rates. 

Money market deposit account (MMDA)

A money market deposit account (MMDA) is a type of savings account offered by banks and credit unions. The money you deposit earns interest at a variable rate, though the APY tends to be higher than a traditional savings account. The rate depends on the financial institution and the size of the balance in your account. MMDAs may come with a debit card or checks that you can use to withdraw money. 

Important to remember:

• MMDAs are good for storing short-term cash for your emergency fund and for large and infrequent expenses, such as college tuition or tax payments
• The number of allowed withdrawals can vary from bank to bank. However, you can usually make unlimited withdrawals and payments by using an ATM or by making the withdrawal in person
• Be careful when withdrawing funds as many MMDAs have a minimum balance requirement and sometimes impose monthly maintenance fees if you don't maintain the minimum balance

Health savings account (HSA)

Health savings accounts (HSAs) can be a powerful tool to help you save for future medical expenses. They offer multiple tax benefits you can take advantage of to lower medical expenses. But you have to be comfortable paying out-of-pocket for services and prescriptions that previously only cost you a co-pay.

Eligibility is limited to people with high-deductible health insurance policies. How high of a deductible? A minimum amount is set by the IRS and adjusted for inflation annually. For 2024, your policy must have a minimum annual deductible of $1,600 for individuals (up from $1,500 in 2023) and $3,200 for families (up from $3,000 in 2023.) The maximum annual deductible and out-of-pocket expenses cannot exceed $8,500 ( up from $7,500 in 2023) and $16,100 (up from $15,000 in 2023) respectively.

As long as your policy meets that threshold, you can open an account. You may contribute up to $4,150 (up from $3,850 in 2023) if you have a self-only policy, or $8,300 (up from $7,750 in 2023) for family coverage. In 2024, catch-up contribution limits for taxpayers 55 and older remain unchanged at $1,000. 

Important to remember:

• HSA funds can only be used to pay qualifying medical expenses and penalties will apply if the funds are used for non-qualifying expenses 
• Even if you don’t itemize your deductions, you can claim a tax deduction for contributions you, or someone other than your employer, make to your HSA 
• The contributions remain in your account until you use them 

529 College savings accounts

529 plans are an easy way to get started saving for college. One of the benefits of 529 plans is the tax-free earnings that grow over time. The longer your money is invested, the more time it has to grow and the greater your tax benefits.

Many states offer tax benefits for contributions to 529 plans. You may only be eligible for these benefits if you invest in a 529 plan sponsored by the state where you reside. Earnings in a 529 account are not subject to federal income tax, and in many cases, state income tax, if withdrawals are used for qualified higher education expenses or tuition for elementary or secondary schools.

Note that a well-funded 529 plan may impede a college applicant from receiving financial aid. A recent policy change now allows for a grandparent loophole to maximize 529 savings. Another change allows students to invest leftover 529 plan funds into an IRA.

Before you start exploring 529 plans and their rules — you need to get familiar with some jargon. The person who opens a 529 plan account is called the account holder or the saver. The person the account is opened for is called the beneficiary or the student, and the account holder can also be the beneficiary.

There are two types of 529 plans: 

Prepaid tuition plans let a parent purchase units or credits at participating colleges and universities (usually public and in-state) for future tuition and mandatory fees at current prices for the student/beneficiary. Prepaid tuition plans usually cannot be used to pay for future room and board at colleges and universities. Such plans also cannot be used to prepay for tuition for elementary and secondary schools.

Education savings plans let you open an investment account to save for your beneficiary’s future qualified higher education expenses — tuition, mandatory fees and room and board. Withdrawals from education savings plan accounts can generally be used at any college or university, including sometimes at non-U.S. colleges and universities.

All education savings plans are sponsored by state governments, but only a few have residency requirements for the saver and/or beneficiary. This means you are not locked into using the 529 plan where you live. You can shop around. 

State governments do not guarantee investments in education savings plans. FDIC protection is not automatic and varies with education savings plan investments.

Important to remember:

• Education savings plans can also be used to pay up to $10,000 per year per beneficiary for tuition at any public, private or religious elementary or secondary school. There is no annual limit on how much you can withdraw for qualified college expenses
• Distributions will be subject to state and federal income taxes and an additional 10% federal tax penalty on earnings if withdrawals are used for non-qualified higher education expenses or tuition for elementary or secondary schools 
• 529 plan distributions of up to $10,000 can be used to repay qualified student loans of the beneficiary 

Individual retirement accounts (IRAs)

Is it ever too early to save for retirement? Opening and funding an IRA is a great start and especially useful if you are self-employed or if your employer doesn’t offer a retirement plan. You can open an account with a bank or brokerage. The best place to open an account is at financial institutions with investment options that match your investment profile. The type of investments your account holds will determine if your account qualifies for FDIC protection. 

Traditional and Roth IRAs

A traditional IRA is a way to save for retirement that gives you tax advantages. You can claim a tax deduction for your contributions and pay taxes on the account earnings when you take a distribution. Roth IRAs don’t provide tax relief upfront.  You contribute after-tax dollars to your Roth IRA and your distributions are fully tax-free at the federal level. 

For 2024, the total yearly contributions limits for traditional IRAs and Roth IRAs can't be more than $7,000 (up from $6,500 in 2023)  or $8,000 if you're age 50 or older (up from $7,500 in  2023) or less if your taxable compensation for the year exceeds modified adjusted gross income (MAGI) limits. Your deduction could be further reduced if you or your spouse are covered by a retirement plan at work. 

Important to remember:

• To contribute to an IRA, you must have earned income, such as wages, salaries, commissions, tips, bonuses, or net income from self-employment 
• If you’re married and don’t work but your spouse does, then he or she can contribute to a spousal IRA for you
• Kids can jump-start their retirement savings by opening and contributing to an IRA, as long as they have a job

The bottom line

When choosing a savings account, it’s important to remember that you don’t have to pick just one. Depending on what you want to achieve financially, you may decide to open a traditional savings account, CD account, money market account and/or a specialty account. To find the best account for your needs, consider your financial goals, timeline and tolerance to risk. 

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With inflation rising, one smart way to shield against its impact is with the right savings account. The question is, which one do you choose?

Two of the smarter options are CDs and money market accounts. Each of these solutions offers generous returns, but they're tailored for specific savings purchases.

Money market accounts are akin to a hybrid checking account in that you can make regular purchases using a debit card. Meanwhile, a CD is a smart way to store your cash and let it grow until its maturity date. I'll break down how each one works so you can decide the best fit for you.

What are certificates of deposit (CDs)?

A certificate of deposit (CD) is a type of savings account that holds a set amount of money for a fixed time period. Term lengths can be six months to five years. The rates on CD accounts are much higher than those found on traditional savings accounts, with many now offering an APY of around 4%.

Savings rates on CD accounts are locked in once you open the account, which is why many experts are suggesting that you take advantage of savings rates while they’re still high. However, when you put your cash in a CD account, you won’t be able to access this money until the account matures, or you’ll risk incurring a fee that can offset any interest earned.

When to open a CD: If you’re saving for a particular goal, like a future purchase, putting your cash in a CD can help. For example, if you plan on purchasing a vehicle in three years, opening a three-year CD can help you maximize your savings until you’re ready to make that purchase, while also helping you resist the temptation to spend that cash.

Before signing up for a CD, here are some things to consider:

• If you need to withdraw cash, it will close the CD and charge you a fee
• CDs won't earn you as much as investments historically can
• For long-term CDs, inflation might negate some of your earnings

What are money market accounts?

A money market account (MMA) is an interest-bearing account at a bank or credit union. MMAs differ from traditional savings accounts as they allow check-writing privileges and sometimes come with a debit card that can be used to access money at an ATM. Plus, they usually have much higher interest rates than traditional savings accounts.

Basically, they can be thought of as a blend of traditional checking and savings accounts. Like high-yield savings accounts, rates on money market accounts are variable, fluctuating with market conditions.

When to open a money market account: Money market accounts are good options for individuals who need to keep their savings easily accessible. Therefore, they're good choices when saving for a short-term goal or putting cash away in an emergency fund. However, make sure you'll be able to meet any minimum balance requirements so you're not stuck with any fees.

These accounts offer high savings rates, but make it easy for you to withdraw cash if needed — at no additional fee. Check-writing privileges and ATM access also make withdrawing funds more convenient than other savings accounts that require you to transfer the money into a checking account first.

Consider these things before opening an MMA:

• Many accounts come with minimum balance requirements
• They have variable interest rates, so if the Federal Reserve cuts rates in the future, it could impact your earnings
• Some banks offer these accounts with transaction limits; pay close attention to the terms before opening

Which savings account works best for you?

Money market accounts and CDs vary in a few key ways. Mainly, money market accounts offer a level of liquidity that CDs don’t. In an MMA, your money is accessible, while in a CD, your cash isn’t accessible until the term account matures.

Another way these accounts differ is that the savings rates on MMAs are variable, meaning they can go up or down depending on the market, which is beneficial if rates go up, but means less earnings if rates go down. On the other hand, since CDs offer a fixed rate, if rates go down, your earnings won’t be affected.

Therefore, take a look at your priorities and cash flow to determine the best fit for your needs.

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Saving money is an important component of a strong financial plan. Putting money away makes it easier to prepare for emergency expenses and achieve short-term financial goals, but how do you know where to save cash?  

Before you get started, determine if you'll need the funds you plan to save: Avoid investing money you'll need to access in the event of an emergency or that you plan to use in the next year or two. For cash you are able to put aside, you want to ensure you keep it in the best place. Here are some of the best options to consider as you decide where to save your money.

Savings account

Savings accounts are among the most basic deposit accounts with a bank or credit union. Consider establishing your savings and checking accounts at the same institution for easy money transfers between the two. You can access both accounts through the same card at the ATM. 

You can also add a savings account to an existing debit card that comes with another direct deposit account. If you need cash, you can access your funds through a transfer to your linked checking account or with an ATM card. 

Savings accounts typically offer interest on your deposits, but if you go with a traditional bank, you might not earn much. High-yield savings accounts, on the other hand, may offer interest upward of 10 times the average rate. These rates are typically reserved for savings accounts with online banks as well as at some credit unions and traditional banks.

Savings accounts generally don't charge monthly maintenance fees, but some may unless you maintain a minimum balance set by the financial institution.

Keep in mind, too, that savings accounts typically only allow you to withdraw funds six times per month. If you exceed that threshold, you may be charged an excessive withdrawal fee. 

Money market account

A money market account acts as a hybrid between a checking and savings account. Like a checking account, you can access your money with a debit card, paper checks, an ATM card and bank transfers. And like a savings account, you'll typically earn interest on your deposits. In some cases, money market interest rates can be better than what you'd find in a high-yield savings account. 

This option may be better than a traditional savings account if you want easier access to your money in case of an emergency, but money market accounts are more likely to charge a monthly service fee if you can't meet balance requirements. They also often require higher minimum deposits. In some cases, you might not earn interest at all unless you have enough money in the account.

Certificate of deposit

If you have some money you don't need access to for several months or even years, a certificate of deposit (CD) could be a good fit. A CD is a type of savings account offered by banks and credit unions. You generally agree to keep your money in the CD without taking a withdrawal for a specified length of time. 

"It makes sense to put cash in a CD over a savings or money market account when one wants to commit to leaving the money in the account for a longer period of time and earning a higher return," says Michael Collins, founder and CEO of Wincap Financial and adjunct professor at Endicott College.

In exchange for higher interest rates on CDs, you'll need to lock up your funds for the account's term. For example, if you choose an 18-month term and try to withdraw money before the account matures, you'll be slapped with an early withdrawal penalty.

Unlike savings and money market accounts, CD rates are fixed once you open your account, so your rate won't change for the duration of your CD term. (CDs also typically come with a fixed savings interest rate, which is money you earn from the bank in exchange for leaving your money in the account.) There are no monthly maintenance fees for a CD, but you may need to meet a minimum deposit requirement to open an account.

Deciding where to save your money

Think about your financial goals and needs when it comes to where you want to save your cash. Research and compare several savings, money market and CD accounts to determine which one would be the best fit for you. 

Whatever you do, avoid taking on too much risk with your short-term cash needs. "Investment accounts typically involve the risk of loss of principal and entail certain lock-up periods, both of which can be problematic if the money is needed in a hurry," says Collins. "It's best to stick to low-risk savings vehicles for emergency funds."

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Putting your money away in a savings account is back in fashion as the Federal Reserve has been steadily raising interest rates since March 2022, and one of the most attractive options is a CD account. Though a big question many have is whether to go for a 1-year vs. a 5-year CD account. 

"One-year CDs can be good for a number of reasons — short-term savings, CD ladders, savings for a known spend in a year," Marco Rimassa, CFP at CFE Financial, told Kiplinger. "Five-year CDs are a bit more specialized as an investing tool because there is some risk of locking into a rate that doesn't adjust with interest rate changes over this time. They can be good as part of a CD ladder, but they are also good to fix payouts for those looking for 'fixed' income, such as retirees or more conservative investors." 

Read on for more on the differences between the two. 

Why are CD accounts attractive right now?

Savings accounts tend to be hugely influenced by the direction of interest rates. Since the Federal Reserve has been steadily lifting rates, savings rates have risen as well. 

In fact, many who would have automatically invested their money in the stock market in the past will have noticed savings are becoming a good alternative way to grow their wealth. They are virtually risk-free, so are great for those who are more cautious or want to avoid market volatility. 

Gone are the days of only a few months ago where the top-paying accounts came with miserly returns. You can now get more than 5% on your hard-earned dollars. 

CDs, or certificates of deposit, are one of a number of forms of savings accounts, along with the best high yield savings or best money market accounts. To find the best CD rates, you can use our tool below, powered by Bankrate.

What is a CD account? 

A CD account is a simple savings account where the rate paid is fixed for the term, which is usually between one and five years. 

Your money is locked away unless you are prepared to pay a fee to withdraw it early, so CDs are not suitable for someone who needs access to their cash in the shorter term or who is not 100% sure they can lock the money away for the full duration. 

1-year vs. 5-year CD accounts — which are best? 

Both 1-year and 5-year CDs are popular choices, although you can also get 3-year CDs or CDs for less than a year. The longer the term, the higher the rate tends to be, though given you tend to pay penalties for taking your money out early, it may be a false economy to go too long. 

When making the choice, you are trading access for the rate. Say you plan to buy a car in three years, and will use the money in a CD account to do so; in that case, there is little point in opening a 5-year CD account. 

Our savings calculator tool can help you work out how much you’ll earn in interest from a CD account. 

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If you're looking for a place to store and grow your savings, you have multiple options. Two popular choices are certificates of deposit and high-yield savings accounts.

Both offer you rates that outpace inflation. That's important too, given that the price of everyday goods will rise due to increased energy costs. Outside of that, they do have distinct differences you'll want to keep in mind when choosing which one works best for your needs.

With these things in mind, we'll take a look at the features of each and what to consider before signing up. That way, you find the right one to grow your savings.

When to choose a CD 

A certificate of deposit (CD) is a type of savings account that holds a set amount of money for a fixed period, ranging anywhere from 3 months to 5 years. Unlike high-yield savings accounts, you won't be able to withdraw cash from a CD before its maturity date. Doing so will result in fees that can offset any interest earned (unless you have a no-penalty CD account).

Furthermore, CD rates are higher than those on traditional savings accounts at brick-and-mortar banks, and in many cases, some of the best CD rates on the market offer an APY of 4% or higher.

Another notable aspect of CDs is that interest rates are locked in when opening a CD account, meaning if the Federal Reserve decides to cut interest rates later this year, it won't impact your term if you sign up now.

Use this Bankrate tool to find a CD term that works for you:

Because your money is locked away for a fixed period, CD accounts aren't a good option for cash you may need quick access to, like in an emergency fund. Meanwhile, CD accounts are good for saving for a particular goal, such as a future purchase, like a new car, or an event, like a wedding.

For example, if you know you’re going to buy a car in three years, opening a three-year CD can help build your savings with minimal effort and resist the temptation to spend your cash.

CDs offer a fixed, predictable rate of return on your savings. Our savings calculator tool can help you determine just how much you’ll earn in compound interest once your CD reaches maturity.

When to choose a high-yield savings account

A high-yield savings account functions in the same way as a traditional savings account, but with one main difference: High-yield savings accounts pay a higher-than-average APY on deposits.

In fact, many of the best high-yield savings accounts offer well over 4%. However, unlike CDs, rates on high-yield savings accounts are not fixed, meaning if the Fed cuts rates again in the future, your savings rate will drop as well.

As with CDs, be sure to review any fees or balance requirements before opening an account.

You can shop around and find the right account quickly, using this Bankrate tool:

There’s no term length associated with a high-yield savings account, as cash is readily accessible. Unlike CDs, you won’t be charged a fee for withdrawing your cash, unless you use an out-of-network ATM.

Because of this, high-yield savings accounts are better suited towards savers who want quick access to their money, should an emergency arise.

They are also convenient for savers looking to add regular deposits. You can set up automatic transfers from your checking account to your savings to meet future goals.

Bottom line on CDs vs. high-yield savings accounts

Both options help you grow your money and outpace inflation. CDs work best if you can put aside a portion of your money and don't touch it. They're also wise choices for savers looking to lock in high rates regardless of future Fed policy.

Meanwhile, high-yield savings accounts are better for people who want to earn a high rate of return, but also need quick access to their cash. In either case, make sure to shop around to find the best rates, and pay close attention to any fees associated with the account.

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What is APY? Simply put, annual percentage yield (APY) is the amount of interest earned on a savings account in one year. It takes into account compounding interest — when both your principal balance and any garnered interest earn interest. Since simple interest only pays on the principal, accounts with a high APY can help you accumulate more cash on deposits.

And the longer you keep money in an account with a high APY, the more you'll earn, which is why long-term CDs are particularly attractive right now. Currently, both high-yield savings accounts and CD accounts are offering healthy APYs, in many cases around 4%.

Here's what you need to know about APY and how to score the best rates available.

How APY and compound interest work in your savings account

Opening an account with compound interest can be an easy way to maximize your savings. If you open a savings account with compound interest, you’ll earn interest on your savings (the principal balance) as well as on any interest you've accrued over the months. Depending on the account, interest can be "compounded" daily, monthly, quarterly or annually.

For example, if you put $2,000 into an account that pays 3% annual interest, you’ll earn $60 in interest after a year if it compounded annually. If it compounded daily, like many savings accounts typically do, you'd earn slightly more — $60.91 by the end of the year — because interest payments are being added to your balance over the year and you're now earning interest on those earnings as well.

Try our savings calculator to determine how much you'll save over time.

Use the tool below, powered by Bankrate, to find the top high-yield savings accounts available right now:

Opening a top-earning account to make APY work for you

APY is the biggest factor to consider when deciding where to deposit your savings. Both high-yield savings accounts and CDs usually offer higher APYs than traditional savings accounts, making them attractive savings vehicles for individuals looking for a fixed, predictable rate of return on their savings.

To score the highest rates possible, you'll need to compare several other factors besides APY between accounts, including minimum opening deposits and monthly fees. If you're opening a CD account, you'll need to carefully choose a maturity date that works for you financially.

Here's an example of how much you'd earn over time, depending on changes in your account's APY.

If you invested $1,000 five years ago, here's how much you would have today at different APYs (assuming your interest compounded daily):

As you can see, even a half-percentage point difference can result in a noticeable decrease in earnings on your cash.

Use the Bankrate tool below to compare rates across Certificate of Deposit (CD) accounts today:

Variable vs. fixed APY

The APY of an account can either be fixed or variable.

Variable APYs fluctuate with the market and are usually associated with savings and checking accounts. On the other hand, savings rates on accounts with fixed APYs won't fluctuate.

CD accounts have fixed APYs, so rates remain the same until the CD matures, which can happen in as little as three months or as long as five years, depending on the terms you choose.

The advantage of a variable APY is that it can increase when the federal funds rate rises. But that also means it will dip lower when rates drop. With a fixed APY, you know exactly how much your savings will earn over the fixed rate time period.

In reality, you usually want a mix of both. For savings you need access to, like an emergency fund, keep the cash in a HYSA with a variable APY. Your earnings will fluctuate, but you'll have immediate access to your funds whenever you need it.

For longer-term savings, like next year's vacation or saving up for a down payment, a CD account with a fixed APY allows you to lock in a rate today and know exactly how much you'll have the day that account matures.

APY vs. APR

APY and APR are sort of like two sides of a coin. As mentioned earlier, APY is the interest rate you earn on deposits. It compounds as your balance grows.

APR, or annual percentage rate, on the other hand, refers to the money you borrow rather than the money you save. It's the sum of the interest and any other fees you pay to borrow money.

APY example

You can calculate how much you'd earn in a savings account based on its APY by using the following formula:

APY = (1 + r/n)ⁿ – 1, where r= interest rate and n= the number of times the interest is compounded per year.

So, if you deposited $100 for one year at 5% interest compounded quarterly, the APY would be (1 + .05/4) * 4 - 1 = .05095 = 5.095%.

At the end of the year, you’d have $105.09.

Or, for an easier way to calculate how much you’ll earn, try our savings calculator.

Related Content

• What Is a High-Yield Savings Account?
• Do You Have a CD Maturing Soon? Here's What to Do Next
• What is FDIC Insurance? Plus Other Agencies that Protect Your Money
• Why Treasury Bills Are a Good Bet

The Federal Reserve is in a tricky spot these days as the central bank's rate-setting committee gathers for its next meeting.

On the one hand, economic growth remains solid and inflation remains above the Fed's long-term target. Price pressures could resurface as a result of President Donald Trump's tariff policies.

On the other, the jobs outlook is weakening, and too many folks are priced out of the housing market. Meanwhile, economists, strategists and investors are increasingly concerned about the central bank's independence going forward.

December's CPI report showed that consumer inflation held steady at 2.7%, relieving pressure on the Federal Open Market Committee (FOMC), the Fed's rate-setting panel, to raise rates. We should see further cooling ahead thanks to easier comparisons.

"The 12-month inflation rate for all prices will drop in January through March, but mostly because of strong price increases a year ago raised the base for the year-over-year calculation," writes Kiplinger economist David Payne.

Sluggish hiring, meanwhile, leaves the possibility of future rate cuts on the table.

These twin pulls make the Fed likely to leave the short-term federal funds rate unchanged at its next meeting, experts says.

"Firmer economic growth may be translating into some welcome improvement in labor markets, which should be sufficient to sideline the FOMC at month's end," writes Sal Guatieri, senior economist at BMO Capital Markets. "At the same time, the peak-tariff effect on inflation could be in the rearview mirror, opening the door for more rate cuts this year."

When you consider the Fed's dual mandate against the backdrop of sticky inflation and a softening labor market, it makes sense that folks are obsessed with tracking when the next Fed meeting is coming up.

Lower interest rates today equal higher returns for equities tomorrow.

The next Fed meeting: What to expect

As you can see from the FOMC meeting calendar below, the committee meets eight times a year, or about once every six weeks. The FOMC is required to meet at least four times a year and might convene additional meetings if necessary. The convention of meeting eight times per year dates to the market stresses of 1981.

FOMC meetings last two days and conclude with the committee releasing its policy decision at 2 pm Eastern Standard Time. The Fed chief then holds a press conference at 2:30 pm. (Pro tip: As closely scrutinized as the Fed statement might be, market participants are usually even more keen on what the Fed chair has to say in the press conference.)

As for the next Fed meeting, it will begin on Tuesday, January 27, and conclude with a policy statement on Wednesday, January 28, at 2 pm EST.

As of January 20, interest rate traders assigned a 97% probability to the FOMC leaving the fed funds rate unchanged at a target range of 3.50% to 3.75%, according to CME FedWatch.

That's up from 78% a month ago. The odds of a quarter-point cut stood at 3%, down from 22% last month.

The schedule of upcoming Fed meetings is listed below, courtesy of the FOMC.

Related Content

• When Is the Next Jobs Report?
• When Is the Next CPI Report?
• Kiplinger's Economic Calendar
• Kiplinger Economic Forecasts

Brokered certificates of deposits take these safe-but-stodgy investments and give them a turbo boost — they're a key way to take advantage of rising interest rates.

You buy brokered CDs through a brokerage firm. Brokered CDs typically provide above-average yields when compared with CDs offered through banks. For example, a one-year brokered CD at Fidelity yields 3.45%. A top-yielding one-year CD from a bank pays 2.80%, on average, according to DepositAccounts.com, a rate comparison site. 

Another pro: You’re not subject to early-withdrawal penalties. Brokerage firms that do this sort of packaging usually maintain an active secondary market for their CDs, meaning you can sell them back (by withdrawing your money) before they mature. Bank CDs have early-withdrawal penalties that range from three months’ to a year’s interest. 

However, having the flexibility to sell comes with potential drawbacks. First, your proceeds from selling a CD before it matures can vary with changes in interest rates. If rates have risen, you won’t get back as much as you paid for the CD. (On the other hand, if rates have fallen, you should get more.) CDs in the secondary market act in many respects like short-term bonds: When rates rise, the values of existing bonds fall; when rates fall, bond values rise. Another pitfall is that some of these CDs may be callable, meaning that if interest rates fall, the brokerage firm may redeem or sell your CD before maturity. In that case, you’ll miss out on future interest. 

You can buy brokered CDs at investment firms such as Charles Schwab, Fidelity and TD Ameritrade. Ask about the minimum requirement to purchase CDs, as well as possible fees. TD Ameritrade, for example, has a minimum requirement of $1,000, with a mark-up or mark-down price included in your price quote when buying or selling new issues. Also make sure your CD is insured by the Federal Deposit Insurance Corp. Brokerage firms typically partner with FDIC-insured banks, but not always.

If you're looking for a flexible way to save, but still want to take advantage of high interest rates, building a CD ladder could help. Although interest rates on CD accounts have been softening, many accounts still offer rates around 4%.

With a CD ladder, you can lock in these higher interest rates while they last and still access your cash at regular intervals.

Here's a breakdown of how they work and how much you can earn with this savings approach.

What is a CD ladder? 

With a CD, you agree to keep your money in an account for a certain period in exchange for a guaranteed interest rate. Terms range from three months to five years or more.

The longer the term, the higher the rate. But you may not want to lock your money up for years. One way to stay flexible is with a CD ladder.

A CD ladder is a savings strategy where you spread your cash between several CD accounts with staggered maturity dates. This lets you take advantage of higher rates on longer-term CDs, while keeping a portion of your funds accessible at short-term intervals.

CD ladders offer a flexible way to save your cash, as you'll be able to access your money at regular intervals. Plus, opening a CD ladder eases the pressure of guessing whether CD rates will rise or fall.

You can easily compare the best CD rates using our Bankrate-powered tool below:

Building a CD ladder

To build a CD ladder, spread your cash among CDs of varying maturities — say, one, two, three, four and five years. Some of your savings will earn higher rates than long-term CDs offer.

When your first CD matures, you can cash out or reinvest the cash in a new 5-year CD to continue building your ladder. Then, when subsequent CDs mature, you'll continue to reinvest those funds into new CDs to maintain the ladder. Plus, if rates continue to rise, you'll be able to reinvest the money at a higher yield.

You'll earn more if you ladder using CDs at more than one institution, but you'll have to weigh the extra time you'll spend setting up multiple accounts.

Here's an example of how a CD ladder would work. Typically, a CD ladder splits your cash into five "rungs," meaning you'll open five CDs, one year to five years.

Let's say you have $20,000 to invest. One way you could spread your cash is by splitting it equally.

• $4,000 in a one-year CD
• $4,000 in a two-year CD
• $4,000 in a three-year CD
• $4,000 in a four-year CD
• $4,000 in a five-year CD

When each CD matures, you'll invest your cash, plus any earned interest, into another 5-year CD. This leaves you with five 5-year CDs, one maturing each year.

Advantages of a CD ladder

• Consistent cash flow: Since each CD matures at a regular interval, you have consistent access to your cash.
• Interest rates: As each CD matures, you have an opportunity to reinvest your cash and take advantage of any rise in interest rates.
• Flexibility: You can save in CDs at different financial institutions, letting you score the best interest rates available. Plus, you can choose whether to reinvest your cash once your CDs mature.

Disadvantages of a CD ladder

• Active management: Since you'll be opening multiple CDs, potentially at different banks or credit unions, it'll take some work to manage your accounts. If you forget to move funds from one CD to another once it matures, the CD could roll over into the same term that just ended.
• Inflation: Although rates are high, they are still outpaced by inflation. You could earn more from more aggressive investments, like stocks or bonds.

Are CD ladders a smart approach among rising inflation?

The Iran war has spiked crude oil prices by at least 20%. With diesel prices at $5 per gallon in most areas of the country, prices on everyday goods will rise.

Thankfully, many CDs still offer APYs that'll outpace inflation. Moreover, Fed Chair Jerome Powell recently said he sees inflation expectations as grounded, per CNBC, and the Fed is unlikely to make any changes to the federal funds rate in the meantime.

It means now is the time to strike while returns are higher, as they're a risk-free way to stay ahead of inflation's impact.

Bottom line on CD ladders

While a CD ladder strategy works for some people, it won't work for every saver. It all comes down to how you feel most comfortable saving, and how readily you need to access your account deposits.

Factors to consider:

• You can't change or remove rungs once you put your money down. If something happens where you need your money before the CD term is up, you may have to pay penalties for cashing out early. If you need even more flexibility and access than a CD ladder can provide, a high-yield or money market account might be more your speed.
• CDs are typically FDIC insured, meaning your cash will be covered up to $250,000 at any given bank. And since you lock in your interest rates, a change in the economy or outlook from the Fed won't affect your future savings.

Related Content

• Do You Have a CD Maturing Soon? Here's What to Do Next
• Best No-Penalty CD Rates
• CD vs. High-Yield Savings Account: Which is Better?

The bond world can seem set in its ways, but once in a while an innovative product comes along to upend the notion. In this case, we’re talking about target-maturity bond exchange-traded funds, currently offered by Invesco and iShares. The ETFs invest in bonds in a particular sector—corporate debt or municipals, say—with all of the bonds maturing in a specific year. How the ETFs work takes some explaining, and they’re not right for everyone. But they offer investors some unique benefits.

Though not well known to many investors, these ETFs are not exactly new. The earliest of these types of funds, an iShares series of target-maturity muni bond ETFs, arrived in 2010. But target-date bond ETFs are growing in popularity, especially among investors who are nearing retirement or already retired.

There’s a lot to like, starting with the fact that, like individual bonds that you buy and hold to maturity, these ETFs “mature.” Come December of their target year, the funds close and return all of the capital to shareholders. “It’s like buying and holding to maturity a single bond, except that it’s a fund that holds hundreds of bonds,” says Karen Schenone, head of fixed-income strategy for iShares.

That’s chiefly what makes these funds easy to incorporate into a bond ladder, an old-school technique to boost yields and reduce interest rate risk without locking up all of your money for the long term. You spread your investments across bonds with staggered maturities—the “rungs” of the ladder—and as portions of your portfolio mature at regular intervals, you reinvest the proceeds in another rung further up the maturity line (or spend the cash or invest it elsewhere).

We’ll walk you through the basics of laddering, how these ETFs work and how to use them in your portfolio. (Returns and data are through November 6.)

The upside of laddering

Fans of bond laddering can sound like a late-night commercial. (It slices, it dices—and so much more!) That’s because laddering addresses multiple goals: It provides a steady stream of income, it smooths out interest rate risk in a bond portfolio, and it can offer risk-averse investors some stability.

Bond prices and interest rates tend to move in opposite directions. When interest rates rise, bond prices fall, and vice versa. That doesn’t hurt you if you buy and hold your bonds to maturity. And in a rising interest rate environment, laddering allows you to reinvest the proceeds of a maturing rung into bonds that pay higher yields.

When rates are falling, laddering gives you flexibility because only a portion of the bond portfolio matures at one time. You can then decide whether to fund another rung in the ladder or put the money in an asset class that’s more attractive. “You’re not forced to make a big bet on the direction of interest rates,” says Jason Bloom, head of global ETF strategy at Invesco.

A bond ladder can also confer some peace of mind. “If the market is taking a crazy tumble, we know that we’ll have this cash washing ashore” when a target-maturity bond ETF matures, says Jonathan Harrison, a certified financial planner in Overland Park, Kan.

How they work

Target-maturity funds from Invesco are called BulletShares; iShares dubs its ETFs iBonds. BulletShares and iBonds ETFs focus on specific sectors: municipal bonds, investment-grade corporate debt (bonds with credit ratings that range between triple-A and triple-B) or high-yield corporate IOUs (bonds rated between double-B and triple-C). BulletShares also has a target-maturity series built around emerging-markets debt, and iBonds offers a series focused on Treasuries.

The target-maturity ETFs are issued in one-year intervals and typically go out as far as 10 years. The nearer the fund’s target year, the lower the yield. The 2021 iBonds investment-grade corporate debt ETF, for instance, currently yields 0.36%. The 2030 fund yields 1.92%.

Jared Hoole, a certified financial planner in Burlington, Mass., uses target-maturity ETFs to churn out predictable cash flows for his clients’ annual living expenses. Says Hoole: “I build a 10-year bond ladder, matching up each year with their annual income needs.” For a retiree who will need $100,000 for living expenses in 2022, for instance, Hoole invests that amount in a high-quality corporate bond target-maturity ETF that matures at the end of 2021 so that the money (plus return) is ready when needed. And so on.

On top of delivering a diversified bundle of bonds, these funds are cheap. Annual expense ratios for the corporate bond ETFs from BulletShares and iBonds are just 0.10%. And there’s no commission to trade the ETFs at most brokerage firms. Finally, although the funds are index-based, they come with some professional oversight. Bond experts regularly monitor the portfolios to make sure each holding meets the fund’s desired creditworthiness and maturity profile. For example, if an issuer of a bond held in one of the high-quality corporate ETFs slips to a junk rating, the bond has to exit the portfolio.

The ETFs also pay a small monthly distribution (in addition to the return of your investment plus returns on that capital when the fund matures). The monthly payouts can fluctuate, in part because of any adjustments made to the portfolio from month to month. The iShares iBonds Dec 2024 Term Corporate ETF (symbol IBDP), for instance, paid $0.065 per share in April 2020 but in November 2020, the distribution was $0.051.

Using them wisely

If laddering with target-maturity ETFs sounds like a strategy you want to try, first settle on the bond sector you want to invest in—Treasuries, investment-grade corporate bonds or munis, for example—then spread your money in progressively dated ETFs up the ladder rungs.

Use online tools to help you visualize and plan. Both iShares and Invesco have tools that help you structure a ladder (using their respective target-maturity ETFs, of course). You set the time frame, choose the funds and decide how much money to put in each ladder rung as a percentage of the portfolio.

Say you want to build a five-year, $100,000 portfolio with Invesco BulletShares investment-grade corporate ETFs. You can put $20,000 in each of the five funds with target years between 2021 and 2025. According to the BulletShares tool, such a portfolio would currently yield 0.70% overall.

We back-tested the ladder and found that this portfolio would have returned 4.8% over the past 12 months. That falls short of the 9.1% gain in the Bloomberg Barclays US Corporate Bond index. But over that stretch, the ladder portfolio suffered only about half of the benchmark’s volatility.

Given how low interest rates are these days, a shorter ladder may be better than a longer one. Harrison, the Overland Park financial planner, prefers to build ladders that go out only four years. So this year, for example, his clients will hold equal investments in ETFs maturing in 2021, 2022, 2023 and 2024. Interest rates are likely to stay zero-bound for some time, but a shorter time frame allows investors to be “nimble” if rates rise, he says.

Amy Goan, a certified planner in Issaquah, Wash., builds even shorter ladders of two years for some of her clients. “They don’t have to worry about the stock market crashing, because they have this money set aside to cover living expenses,” says Goan. And it allows her to be more aggressive with the rest of their portfolio. “Most of my clients need some growth,” she says.

Finally, it’s a good idea to balance a target-maturity ETF ladder with other fixed-income funds. For his older clients who are near retirement or already retired, Harrison splits bond port­folios between a ladder and a blend of actively managed bond funds and bond index funds that invest in the total bond market, high-yield debt and inflation-protected securities.

Fed up with the piddling interest you're earning on bank deposits? You may want to take a look at brokered certificates of deposit.

Brokered CDs are issued by banks and sold through brokerage firms such as Fidelity and Vanguard. Some brokered CDs are currently offering yields roughly 0.3 to 0.5 percentage point above what you’d earn on CDs of the same maturity purchased directly from a bank—without a lot more risk.

"Here's an opportunity to stay safe and earn extra return," says Allan Roth, founder of Wealth Logic, an investment advisory firm in Colorado Springs, Colo.

Like direct CDs, brokered CDs are covered by federal deposit insurance. But they're not completely risk-free. If you need your money before the CD matures, you'll have to sell it in the secondary market, and if interest rates climb, the market value of your CD will fall.

Brokered CDs don't always offer higher yields than direct CDs, but longer-term brokered CDs have become more competitive in the past few years, says Ken Tumin, editor of DepositAccounts.com. And in the past six months or so, he says, some shorter-term brokered CDs have also started offering more generous yields. As interest rates rise, "banks might try to hold off on raising direct CD rates," Tumin says, but because brokered CDs are traded in a secondary market, they "tend to respond quicker" to interest rate changes.

When shopping for brokered CDs, skip the ones that are callable. They may offer slightly higher yields, but they allow the bank to terminate the CD early, meaning you may not enjoy that yield for very long.

Also be wary of CDs with unusually high yields, and work with a brokerage firm you trust. The Financial Industry Regulatory Authority warned last year that some firms were using high-yield CD offers as bait to lure seniors into meetings with salespeople, who would then pitch a high-commission product, such as an equity-indexed annuity.

You can buy brokered CDs as new issues, which are typically sold at par, or in the secondary market, where they may trade at a premium or discount to par. Roth, who started adding brokered CDs to client portfolios about two years ago, says he has been finding the best deals in the secondary market.

Looking at noncallable secondary-market CDs offered by Fidelity in mid May, a Capital One CD maturing in May 2022 offered a yield of 2.53%, compared with 2.35% for the top-yielding five-year direct CD listed on Bankrate.com. A Synchrony Bank brokered CD maturing in April 2027 was yielding 2.88%, while 10-year direct CDs offered top yields of about 2.35% and the 10-year U.S. Treasury yielded 2.41%. (Note, however, that Treasury interest, unlike CD interest, is exempt from state and local income tax.)

Rein in Risk of Rising Rates

Buy only brokered CDs that you intend to hold to maturity. Unlike direct CDs, brokered CDs have no early-withdrawal penalty, and in a pinch, you can sell them on the secondary market. But if rates have climbed, you'll likely receive less than what you paid for it.

To mitigate the risk of rising rates, Roth uses brokered CDs in conjunction with direct CDs that have mild early-withdrawal penalties, such as six months' worth of interest or less. If rates rise, he can break the direct CDs and reinvest at a higher rate.

For savers who are spreading cash among multiple banks to stay below the Federal Deposit Insurance Corp. limit of $250,000 for each type of account you hold at each bank, brokered CDs can make life simpler. You can hold brokered CDs issued by many different banks in one brokerage account. But FDIC coverage on secondary-market brokered CDs has one wrinkle: It only applies to the par value. So if you buy a brokered CD at a premium, that premium amount won’t be FDIC-insured.

If you're not spending the interest from your brokered CDs, you should regularly reinvest it. Unlike direct CDs, brokered CDs don't offer the option of adding the interest back into the principal, so you'll want to redeploy that cash to keep it from building up in a low-yielding brokerage sweep account.

Even with the Fed swinging into action, savings rates remain minuscule, averaging just 0.16%. Yet some banks offer you much more—as much as 4%—if you follow certain rules.

Earnings for All

• Municipal Bonds: 1%-3%
• Investment-Grade Bonds: 3%-5%
• Real-Estate Investment Trusts: 2%-6%
• Foreign Bonds: 3%-6%
• Preferred Stocks: 4%-7%
• Closed-End Funds: 5%-11%
• High-Yield Bonds: 6%-8%
• Master Limited Partnerships: 5%-11%

Online-only banks usually pay more than branch-based institutions. For example, Incredible Bank, which exists only in the virtual world, pays 1.2% on savings deposits from $2,500 to $250,000. But there’s a catch: Depositors who exceed six withdrawals or other types of transactions per month start to rack up fees.

For a 4.6% yield on up to $20,000, consider opening a rewards checking account at Consumers Credit Union, based in Gurnee, Ill. Rules include spending at least $1,000 a month on a CCU credit card, conducting 12 or more debit card transactions each month, and doing some banking online. Anyone can join the credit union for a one-time fee of $5.

Rates on most CDs can’t beat high-yield checking accounts. But CDs can make sense if you “ladder them up,” says Greg McBride, chief financial analyst at Bankrate.com. Take, say, $10,000 and split it into five $2,000 chunks, buying CDs maturing in one, two, three, four and five years. As each certificate matures, buy another five-year CD with the proceeds. If interest rates increase, you can take advantage of higher yields. “The landscape for savers won’t improve dramatically in the near term,” says McBride, but rates could be higher in a year or two. One good option now: a five-year CD from First Internet Bank of Indiana, yielding 2.1%. To find more deals, go to www.depositaccounts.com or www.bankrate.com. (Returns are as of March 31.)

Next: Municipal Bonds to Earn 1% - 3%

CDs have a lot to offer the safety- and yield-minded saver. Virtually the only catch is that if you need the money before the CD matures, you'll pay a penalty that could eliminate the advantage you thought you were getting from the higher rate. For that reason, CDs are good for people looking for maximum yields, but who will not need their cash unexpectedly.

You'll get a higher-than-passbook rate of interest in return for your commitment to leave the money deposited for a specified time, commonly from a minimum of a month or so to a maximum of five years. The longer you commit your money -- and, in some cases, the more money you commit -- the more you earn.

The interest rate is usually fixed but can vary based on market conditions, such as the rise or fall of the prime rate. Minimum deposits are often $500 to $1,000, though the best rates may require higher minimums.

How to shop for CDs

By spending just a half-hour or so shopping for the best rates, you can probably earn an extra one to two percentage points on your next certificate of deposit. With a $25,000 CD, that's an extra $250 to $500 earned in one year and from $1,275 to $2,600 over five years.

Buy from a bank. Start by calling local banks and thrifts to compare rates. For each CD maturity, ask for the;

• Annual percentage rate (or APR, which reflects the compounding of interest).
  
• Minimum deposit amount.
  
• The penalty for early withdrawal.
  
• How you'll be notified when the CD matures.

You should also make sure deposits are insured by the Federal Deposit Insurance Corp. FDIC insures deposits of up to $100,000 per person, per type of account (such as savings, CD and IRA) per bank. For example, you could have a $100,000 CD in your name, keep $50,000 in a demand deposit in a joint account in your and your spouse's names and be fully insured up to $150,000. (For details, visit the FDIC's Web site.)

Next, broaden your search. Going national could reward you with a yield of up to two percentage points more. If a deposit is insured by the FDIC, you're as safe with a CD offered by a bank 2,000 miles away as one around the corner. Bankrate.com tracks the most generous CD yields offered by banks and thrifts around the country. (Search the latest rates or research the bank, thrift or credit union for stability.)

Buy from a Broker. A brokerage firm can generally offer you an above-average yield on a federally insured CD. Because issuing banks pay a fee to brokers who parcel out their CDs this way, the customer usually doesn't have to pay a commission. And because brokerage firms that do this sort of packaging usually maintain an active secondary market for their CDs, you can often sell them back before maturity without paying the penalty a bank or s&l would charge for early withdrawal. But the privilege of cashing in your CD early with no penalty may come at a price.

If interest rates rise between the day you purchase the CD and the day you cash it in early, you won't get back as much as you paid for it. (On the other hand, if rates have fallen, you should get more.) This is because a CD in the secondary market is in many respects a short-term bond, and the usual relationship between bond values and market rates will be at work: When interest rates rise, the value of outstanding bonds falls; when rates fall, bond values rise.

Skip the Gimmicks

Some banks and s&l's have devised yield-boosting gimmicks to attract new money. The "bump-up" CD and market-indexed CD are popular ones.

Bump-ups generally start you at a lower rate but promise to raise it if interest rates rise during the term of your CD. However, they are usually crafted to favor the bank and you'd typically be better off if you lock in at the higher rate. Market-indexed CDs are tied to the performance of the overall stock market and essentially expose you to market risks without delivering all the potential rewards. You'd be better off putting your cash into regular CDs and your long-term savings into a stock-index mutual fund.

With a certificate of deposit (CD), you'll earn a guaranteed rate of return on your hard-earned cash, helping you grow your savings, risk-free. Putting your money in a CD can help you earn hundreds of dollars in interest, with zero effort on your part.

If you put just $500 in a five-year CD with one of the highest APYs on the market, do you know how much you'll earn? It might be more than you'd think, considering all you had to do was "set it and forget it."

Our article covers how a CD works and how much you can save by depositing $500 into one.

How a CD works

A certificate of deposit, or CD, is a type of savings account that holds money for a fixed period of time, typically ranging anywhere from three months to five years. It makes them a smart savings option if you already have an emergency fund and want to save for other short-term savings goals.

They also have fixed interest rates. If the Fed continues to cut rates in the future, which could be a very likely outcome, if you lock in a rate soon, you won't have to worry about diminishing returns. Just make sure you can commit to the term, or you run the risk of incurring early-termination fees.

You can find the right CD term for you using this Bankrate tool:

If you put $500 in a CD for 5 years, here's how much money you'd have

How much money will you earn with a CD? If you put $500 into a 5-year CD, here's how much you'd earn, based on some of the best rates available today:

• SchoolsFirst Federal Credit Union: $108.33
• Marcus by Goldman Sachs: $105.41
• Credit Human: $102.50.

By saving in any one of the above CD accounts, you'll earn over $100 by the time your CD matures — all you have to do is open the account and wait.

Try our savings calculator to see how much you’ll earn depending on different deposit amounts and maturity dates.

Before opening a CD, compare interest rates, early withdrawal penalties and whether there are any other fees associated with the account. Some accounts have minimum deposit and balance requirements that, if not met, could result in a charge.

Also, look for any rollover provisions. In some cases, the certificate will automatically be rolled over if you don't notify the institution within a specified number of days before the certificate's maturity.

How a CD helps you reach short-term savings goals

Because your cash is locked away for a fixed period, avoid putting your emergency fund, or any other savings you may need to access, into a CD account. Instead, CDs are smart options for exact savings goals, like future purchases or events.

For example, if you're planning on buying a car in three years, then keeping your cash in a three-year CD makes sense, as it will help you maximize your savings until that time comes. You'll have less of a temptation to spend this cash, as you'll have to wait until the account's maturity to withdraw funds or incur a fee.

If you don't have a particular savings goal in mind, you'll need to consider when you'll need access to your cash and plan accordingly. Or, you can opt for a no-penalty CD account, letting you avoid early withdrawal fees altogether, but usually at the cost of a lower APY.

"The first question to ask is the expected time horizon. If you'll likely need the cash in 2 years, a 5-year CD is not the best option if there is a penalty for early withdrawal," Michael Powers, financial planner at Manuka Financial, told Kiplinger.

"If you have a 5-year time horizon and expect interest rates to increase," he continued, "you may want to stick with a shorter-term CD (or even better, a no-penalty CD) and then if rates do increase, you will (hopefully) be able to reinvest in a new CD that pays a higher rate."

If you're looking for a risk-free investment option and want to earn a fixed, predictable rate of return on your savings, saving your cash in a CD account is one way to do so.

CDs are one of the safest ways to save your cash, as most are FDIC or NCUA insured. This means that your deposits will be protected (up to $250,000 per account) even if your bank is faced with financial trouble or closes.

Employ CD ladders for cash flexibility

You can reduce the risks of a long-term commitment — and take advantage of long-term rates — by building a CD ladder. This is where you stagger, or ladder, maturities so that some are always coming due shortly. When your first CD matures, you can either cash out or reinvest this cash into a new CD account to continue building your ladder.

For example, if you have $2,000 to put in CDs, consider putting $500 each in a three-month, six-month, one-year, and two-year certificate. When the three-month CD matures, roll it over into a six-month certificate.

Do the same when the first six-month CD matures, and continue rolling over so that you'll always have a certificate within three months of maturity.

Bottom line on CD earnings potential

If you're looking for a fixed, predictable rate of return on your savings, a CD account can be a good option, especially when rates are still high. With some of the top-earning 5-year CD rates today, you can earn over $100 in interest on a $500 deposit with no effort on your part.

If you think a CD account is the right fit for your savings goals, you'll want to lock in rates sooner, as the Fed cut rates at each of its last three meetings and might issue at least one more rate cut this year.

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