Is It Worth Getting a High-Yield Savings Account Before the Fed Meeting?
With inflation still high, the Fed may raise rates at this week's meeting. Here's how to position your cash to take advantage.
The Iranian War has escalated, bringing with it higher gas prices. On top of that, the AI boom has led tech companies to build data centers, driving up residential energy costs.
This perfect storm means the Fed might have to act to curb stubborn inflation. CME FedWatch projects a 91% probability the Fed raises rates this week.
If you're looking to shelter your cash from rising costs, here's why a high-yield savings account is a smart solution to consider now.
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Why it’s worth getting a high-yield savings account before the next Fed meeting
With inflation at 3.4%, if you don't have a savings account earning at least that, then you're losing money. Look for higher yields so inflation isn't eroding as much of your purchasing power.
Our top choice, Newtek Bank, offers a 4.20% APY with no account minimums. Best of all, the account doesn't come laden with fees to impede savings growth.
Along with Newtek, you can compare rates on high-yield accounts by using the tool below, powered by Bankrate:
Before opening a high-yield account, keep in mind the following:
- High-yield savings accounts have variable interest rates, which can work to your advantage if the Fed raises rates, since savings returns can also increase
- Find a bank offering FDIC or NCUA insurance (for credit union members), as it'll protect your deposits up to $250,000 per person
- Keep your money in a separate savings account so it's more difficult to access, reducing impulse purchases and allowing your savings to grow
- Set up automatic payments from your checking account to your high-yield account, so it makes saving money easier
- Having cash access to a high-yield savings account can be a challenge, so make sure to have an emergency fund with an account you can regularly withdraw cash from if needed
When to consider a CD account
Unlike high-yield savings accounts, CD accounts offer a fixed APY. This makes CDs a smart alternatve, if you timing is right.
Some banks have increased returns on CDs recently, and with many terms, you can earn a higher APY than you would with a high-yield savings account.
You can shop and find the best CD term for your needs, using this tool powered by Bankrate:
While opening a CD account can be a smart way to take advantage of high rates for as long as possible, there's one caveat: You'll need to make sure you don't make any withdrawals before the CD matures. Doing so will result in fees that can offset any interest earned (unless you have a no-penalty CD account).
Another thing to keep in mind is that many banks automatically renew CDs. Set a reminder on your phone a week before maturity, so you have time to explore more options.
Shield your purchasing power from inflation
With inflation remaining stubborn, the Fed might raise rates this week. For savers looking to earn more, moving your money to a high-yield savings account is a smart way to build an emergency fund and achieve your savings goals.
Also, if you have longer-term savings goals such as buying a car, a CD is a smart alternative because you'll earn higher returns than a HYSA.
One note: Once you reach your savings goals and paid off any high-interest credit card debt, you might want to consider investing any excess cash, where you could earn signficiantly higher returns than any savings account.
And if you need guidance, a reputable financial advisor can help. Use this Bankrate tool to find your match:
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