Sean Jackson
With many high-yield savings accounts (HYSA) offering APYs of 4% and above, now is a great time to make the most of your savings through compound interest. If you haven’t opened one yet, it’s worth considering — especially ahead of the next Federal Reserve meeting.
After three rate cuts ended 2024, the Federal Reserve didn't cut rates at their meeting in January. And it's likely they also won't cut rates when they meet again this week.
Because of the likelihood of the Fed holding rates steady for now, it means you can earn a higher rate of return on high-yield savings and CD accounts.
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Why it’s worth getting a high-yield savings account before the next Fed meeting
While opening a high-yield savings account before the next Fed meeting won’t lock in current rates, as the APY on these accounts fluctuates with the market, it’s still worth it to open one.
If you were to save $10,000 in an account with a 4% APY, you’d earn $400 in interest after just one year of savings, with no effort on your part. With an APY of 0.61%? You'd earn just $61 in interest. That’s a $339 difference, and all you have to do is take five minutes to open a high-yield account, which is super simple.
And remember, with the power of compounding, the earlier you start investing, the better your returns will be.
You’ll open it the same way you’d open a traditional account, except you may have to forgo your brick-and-mortar bank for an online bank or credit union, as these are where high-yield accounts with the best rates are typically offered.
Compare rates on high-yield accounts by using our tool below:
When to consider a CD account
Unlike high-yield savings accounts, CD accounts offer a fixed APY. This means that if rates go down after you've opened a CD, your earnings won't be affected.
While opening a CD account can be a smart way to take advantage of high rates for as long as possible, there's one caveat: You'll need to make sure you don't make any withdrawals before the CD matures. Doing so will result in fees that can offset any interest earned (unless you have a no-penalty CD account).
You can compare CD rates by using our tool below. Before opening one, however, make sure you choose a maturity date that makes sense for you financially.
The bottom line
Taking advantage of today’s high-yield savings and CD account rates can help you maximize your earnings. Although the Fed is expected to hold rates steady at its upcoming meeting, the possibility of future cuts could lead to lower returns on savings accounts.
By acting now, you can secure a competitive rate and make the most of your savings before any shifts in monetary policy impact future returns.
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