Is It Worth Getting a High-Yield Savings Account Before the Fed Meeting?

With a rate cut likely to occur at the Fed's September meeting, we examine whether a high-yield savings account is worth a closer look.

The Federal Reserve meets on September 16-17, with many economists projecting the first rate cut of the year happening at this meeting.

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.

From just $107.88 $24.99 for Kiplinger Personal Finance

Be a smarter, better informed investor.

CLICK FOR FREE ISSUE
https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-200-80.png

Sign up for Kiplinger’s Free Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

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.

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).

You can compare CD rates by using our tool below. Before opening one, however, ensure you choose a maturity date that makes sense for you financially.

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 at its next meeting, 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.

Related Content

Erin Bendig
Personal Finance Writer

Erin pairs personal experience with research and is passionate about sharing personal finance advice with others. Previously, she was a freelancer focusing on the credit card side of finance, but has branched out since then to cover other aspects of personal finance. Erin is well-versed in traditional media with reporting, interviewing and research, as well as using graphic design and video and audio storytelling to share with her readers.


With contributions from