CD Rates Are Rising. Should You Move Your Savings?
You might be missing out on hundreds of extra dollars by not making this move now.
Are you maximizing your hard-earned money? If you've been looking at your bank statements and want to earn a little more, now is a smart time to re-evaluate your savings approach.
Why now? Inflation has remained sticky, giving the Federal Reserve less room to cut interest rates.
Instead, I've found that while high-yield savings accounts have been stagnant, CDs have seen higher rates in the past few weeks. I'll explain when you should make the pivot and how much money you're missing by not doing so.
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Is it time to switch to CDs?
I review savings accounts weekly and have found that the best CD rates have been increasing in the past few weeks. The highest CD rates are now outpacing many of the best high-yield savings account (HYSA) rates.
Now, CDs won't be the smartest approach for everyone. If you're still growing your emergency fund or need access to your cash, a high-yield savings account is the smarter move. I recommend the one from Newtek Bank, as it offers 4.20% with no account fees or minimums.
That said, if you're comfortable with your cash flow and emergency fund, use this Bankrate tool to find the best rate for your savings goals:
As you'll see, CD rates are significantly higher than they were even three to four months ago. Locking one in now guarantees you a return and annual percentage yield (APY) that currently outpaces inflation in many cases.
However, choosing the right CD term can feel like a gamble; here's how to clarify your options.
Which CD term is right for me?
CDs are inflexible savings vehicles. Once you lock one in, you must keep the money in the account until the term expires. If you need to break it open, you'll generally face an early withdrawal penalty, which can reduce your earnings and, in some cases, your principal.
That's why being intentional with your savings goals can point you to the right term. If you're concerned about inflation rising again and don't want it to erode some of your future purchasing power, a short-term CD might be worth considering, such as a six-month or one-year CD.
This achieves several objectives:
- You won't have your money tied up for long.
- You'll have the flexibility to pivot to other savings or investment solutions as economic conditions clarify.
- If the Fed decides to hike rates in the future, you'll be in a prime position to capitalize.
Such a move could help you earn hundreds of dollars more in the interim with the higher APY. Here's a comparison of what you would earn with a $100,000 HYSA vs a $100,000 jumbo CD:
Account Type |
APY |
Term |
Estimated Earnings |
High-Yield Savings Account (Newtek Bank) |
4.20% |
1 Year |
$4,289.20 |
Jumbo CD (CreditOne Bank) |
4.55% |
13 Months |
$4,938.38 |
Alternatively, if you're approaching retirement and want to move some of your cash to safer investments without chasing APYs, a long-term CD can still be a smart move. You'll earn a guaranteed return, with APYs as high as 4.40%.
That can give you peace of mind and assurance that your money is safe from market dips. CDs at federally insured banks and credit unions are also protected by FDIC or NCUA insurance, generally up to $250,000 per depositor, per institution and ownership category.
If you have a large sum of money to move (think $100,000 or more), a jumbo CD might be worth considering. You'll earn a rate as high as 4.55%, with maturity windows of around one year.
Before signing up for any CD, consider the tax situation.
Factor in the tax implications of a CD
As part of your savings strategy, keep in mind that interest earned on a CD is generally taxable as ordinary income. With CDs that mature in more than one year, you might have to report a portion of the interest as it accrues each year, even if you don't receive the money until the CD matures.
As you calculate your potential return, consider your current tax bracket or consult a tax professional about how CD interest could affect your overall tax liability.
Overall, with some of the best CD rates moving higher, now is a good time to take a fresh look at your savings strategy. High-yield savings accounts remain a smart choice if you're building an emergency fund or need easy access to your cash.
However, if your emergency fund is established and you have money you won't need for a set period, locking in a CD rate might be worth considering. Think about your savings goals and when you'll need the money to determine the right term for you. That way, you can take advantage of a competitive rate without giving up access to money you might need sooner.
Not sure how CDs fit into your broader savings strategy?
A financial professional can help you weigh your options and decide how to put your cash to work based on your goals, timeline and need for flexibility. Use the tool below to connect with a vetted financial professional today:
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