Savings account interest rates may stop rising. Here's what to do now.
Just one day ahead of its next announcement, more signs are pointing to the Federal Reserve pausing interest rate hikes this month. The Fed has already raised rates 10 times since March 2022 so a pause would be welcome news.
Though higher interest rates have made borrowing costs much more expensive, one group has benefited: savers. Today, some of the top high-yield savings account rates earn more than 4.5% APY, and short-term CD accounts are topping out at more than 5% APY.
But if the Fed decides to pause rates, it could end the rapid increases we've seen on these high-yield accounts. "We are most likely nearing the peak of rates on savings accounts," Gregory Crofton, CFP, founder of Adap Tax Financial recently told CBS News.
However, even if rates stop rising, that doesn't mean they will soon go down, or that you can no longer benefit from great earnings on your savings balance. There are still ways to maximize savings today.
Start by seeing how much more you can earn with the best savings accounts available here now.
How to maximize savings if rates stop rising
Do these things to keep getting the most from your savings even if rates stay the same.
Make sure you're getting the best rate right now
Savings account interest rates will remain high if the Fed pauses rates. That means you can still get a big boost on your savings balance from interest.
Check your bank account now to see what you're earning, says Taylor Jessee, CFP, founder of Impact Financial. "If it's not at least 3%, move your savings elsewhere."
Not only do many high-yield savings accounts from online banks today offer upwards of 4% APY, but some earn 4.5% APY and a few are even closer to 5%. "Given how easy it is to open a bank account and move money online, there's hardly any reason to let your money sit in a savings account that's not paying a decent interest rate," Jessee says.
These accounts carry variable interest rates, so they may go down when the Fed eventually does lower rates. But opening an account that fits your goals and starting to save as much as you can now can help you benefit as long as possible. Compare today's best savings rates to see how much you can earn now.
Consider locking in a CD
Though high-yield savings accounts may have been ideal for savers as rates rose, CDs could become even more appealing if rates drop or remain the same.
Because certificates of deposit (CDs) carry fixed interest rates, you can lock in a great APY today, and earn that amount through the entire CD term. To make the most from rates going forward, it could make sense to keep your emergency fund in a high-yield savings account, while directing all savings you don't need to immediately access to a top-earning CD.
Contrary to what CDs have offered in the past, today's highest rates are most common with short-term CDs (around one year or less). These accounts can help you earn upwards of 5% to 5.25% APY. But don't discount longer terms, either. You may earn a slightly lower rate of around 4.25% APY, but you can lock in that rate for five years or even longer in some cases.
Some experts say that CDs could soon reach a peak — and if the Fed pauses rates this month, banks may be unlikely to increase them further. So, as long as you can afford to lock away your money for the entire term length, securing a great CD rate today could be one of the best ways to keep up your earnings even if rates stagnate.
The bottom line
A potential rate pause from the Federal Reserve could result in savings rates no longer rising at the rapid clip savers have enjoyed over the past year. But it's still a great time to save. You can make sure you're still getting the best value for your money by securing a great savings account rate for your emergency fund — and then lock in a peak CD rate for other savings, that you can earn through the entire CD term.
Looking to get more from your savings today? Compare top rates right now here.
