Sean Jackson
The Federal Reserve meets on October 28-29, with many economists projecting another quarter-point rate cut.
When the Fed cuts rates, it impacts savers by way of lower APYs. However, it can take weeks to months for banks to lower rates, and even with a minor reduction, high-yield savings accounts will still earn a rate surpassing inflation.
With this in mind, here's why we still recommend a HYSA in the interim. We also present another risk-free savings option that'll help you maximize returns.
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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 the tool below, powered by Bankrate:
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.
If you're concerned about earning a lower rate of return, then it's wise to consider this over a high-yield savings account.
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).
The bottom line on high-yield savings accounts
Taking advantage of today’s high-yield savings and CD account rates can help you maximize your earnings. The Fed will likely cut rates when it meets soon, impacting how much you'll earn on savings.
However, even if you stick with a high-yield savings account, you'll still earn a rate outpacing inflation. And with CDs, you still have time to lock in the highest rate now, before they change.
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