Is It Still Worth Opening a High-Yield Savings Account After the Fed's Decision?
The Fed held interest rates steady in October. Here's why a high-yield savings account could still be a smart move for your money.
The Iranian War has escalated, driving up gas and diesel prices. On top of that, the AI boom has led tech companies to build data centers, driving up residential energy costs.
Meanwhile, the Federal Reserve held interest rates steady at its October meeting, following a quarter-point increase in September. With inflation remaining elevated, savers still have an opportunity to earn competitive returns on their cash.
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 3.7%, 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
When to consider a CD account
Unlike high-yield savings accounts, CD accounts offer a fixed APY. This makes CDs a smart alternative if your timing is right.
Some banks have recently raised their CD rates, and depending on the term, you may be able to lock in a higher APY than you'd earn with a high-yield savings account.
Use the tool below to compare today's top CD offers:
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 elevated and the Fed holding interest rates steady at its October meeting, savers still have an opportunity to earn competitive returns. Moving your money to a high-yield savings account can help protect your purchasing power while building an emergency fund or working toward other savings goals.
If you're saving for a longer-term goal, such as buying a car, a CD may be worth considering. CDs offer a fixed APY, allowing you to lock in a competitive rate even if interest rates decline.
Once you've reached your savings goals and paid off any high-interest credit card debt, consider investing any excess cash. While investing comes with greater risk, it also offers the potential for higher long-term returns than a 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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