The Federal Reserve met this week and issued its third rate cut of 2025. The Fed cut the federal funds rate by 25 basis points.
Why? The job numbers have not been ideal, though; September had 119,000 jobs added, the highest in five months. Even with these additions, unemployment rose for the third consecutive month and now stands at 4.4%. One way to stimulate job growth is to cut rates, as they can reduce borrowing costs for companies.
When rate cuts happen, they also impact savers by way of lower APYs. I'll break down whether high-yield savings accounts are still a viable option, with declining APYs, and how much you can earn with one.
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Are high-yield savings accounts worth it when rate cuts happen?
Yes, a high-yield savings account remains a smart choice. While rates have dipped somewhat, with these accounts, you can earn up to a 4.35% APY with no account fees or minimum balance requirements.
This makes them smart options for short-term savings goals. If you're planning a vacation in a few months, securing a higher rate now ensures you can meet it quickly.
Furthermore, a high-yield savings account is a wise way to build your emergency savings quickly. You can set automatic transfers to pull from your checking to your savings to achieve this.
Here are our top picks:
Account | APY | Min. opening deposit |
|---|---|---|
4.35% | $0 | |
4.10% | $100 | |
4.05% | $0 | |
4.02% | $500 | |
4.00% | $0 | |
4.00% | $1,000 | |
4.00% | $5,000 |
There are other considerations with a high-yield savings account. Chief among them is that they come with variable interest rates. If the Fed decides to cut rates again this year, your savings rates can drop, too.
When will rates drop? I've been reviewing APYs on CDs and high-yield savings accounts, and can tell you it varies by banks. While some have dipped rates slightly, others have not, giving you some time to maximize returns with higher rates.
You can use this Bankrate tool to find some of the best rates quickly:
How much can I earn with a high-yield savings account?
It depends on how long you plan to hold the money in the account and how much you want to deposit. Using our top choice, Newtek Bank, here's how much you can earn in a year with its current 4.35% APR:
- $5,000: You'll earn $222.29
- $10,000: You'll gain $444.57
- $25,000: You'll earn $1,111.43
- $50,000: You'll gain $2,222.86
Is it the best option for your savings needs? If you need quick access to your cash for a short-term purchase, then yes, a high-yield savings account will be the best fit for you.
However, if you have emergency savings fully funded and don't mind tying up your money for a short time, then the best CD rates offer you better protection from Fed policies because they come with fixed interest rates. Once you lock in a rate, you'll keep it throughout your term, even if the Fed decides to cut rates again.
Just remember that CDs require you tie up your money for the term you selected. So, if you don't want to restrict access to your cash, it's difficult to beat the flexibility a high-yield savings account offers.
The bottom line on high-yield savings accounts
The Fed cut rates for the third time this year. While that will lower the APYs you can earn, our top picks offer you returns that'll help you outpace inflation and reach your savings goals.
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