Hot Summer Savings Move: Open a CD While Interest Rates Are High
Smart savers know that CDs can pay big.
My savings account has been sorely disappointing me lately. No matter how many times I check my balance, it feels like opening the fridge for the fifth time, hoping something new will appear. Fortunately, the solution is simple: I just need to shop around.
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With the Federal Reserve holding interest rates steady at this week’s meeting, annual percentage yields on certificates of deposit should remain high for a while. That means if I move my cash to a CD this summer, I can get a chunk of interest back on my balance. And unlike my fridge, which needs regular restocking, a CD promises steady growth without having to do a thing.
Read more: Here’s the Secret I Learned About Opening a CD at Just the Right Time
Low risk, guaranteed returns? Yes, please!
CDs aren’t exciting, and they won’t make you rich overnight. But boring and predictable can be a good thing, especially in today’s economy, when people are scared to invest and nervous to spend. Stock market swings, tariff fallout and stupidly high prices are making savers run to safety.
When you lock up your savings into a CD for a set term and leave it untouched, your earnings are guaranteed. Your annual percentage yield won’t drop even if overall interest rates drop. It’s a quiet, easy way to get a little extra cash, kind of like discovering a $10 bill in your jeans pocket every month.
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Watch this: These Are the Safest Places to Keep Your Money Right Now
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Some CDs offer 4.5% APYs
The Fed left its benchmark interest rate the same at this week’s meeting on June 18 and will likely do the same on July 30. Experts say the central bank will keep borrowing rates high for a couple of months, with most saying a rate cut won’t come until its Sept. 17 meeting.
After the Fed hiked its benchmark interest rate several times between 2022 and 2023, many banks raised the rates they were offering for savings accounts and CDs to attract more customers and boost their cash flow. Once the Fed started cutting rates last year, banks started lowering their APYs so they wouldn’t have to pay as much interest to customers.
Bottom line? If you have extra money, move it somewhere safe so it can actually grow.
High-yield savings accounts also earn big
If you think you’ll need access to your money, a high-yield savings account could be a better fit. Most CDs impose a penalty if you pull out your funds before the maturity date, but a HYSA is more flexible, allowing you to add deposits and withdraw funds as needed.
Some APYs on high-yield savings accounts are also in the 4% range, making them a better option over traditional savings accounts. But, unlike a CD, HYSAs don’t lock in your interest rate, so your returns are variable and less predictable.
More on CDs
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