Why you should open a high-yield savings account after your CD matures
Do you have a certificate of deposit (CD) that will be maturing soon? With a CD, you deposit money into your account and agree not to touch it for the account's entire term in exchange for a strong return. But, when your CD matures, your money becomes liquid again, making it possible to make new moves with your freed up cash. But what should you do with that newly accessible money?
If you have a CD that's maturing anytime soon, one move you can make with your money is to deposit it into a high-yield savings account.
Unlike CDs, high-yield savings accounts don't typically require you to lock your money up for a predetermined period of time. However, like CDs, these accounts offer impressive returns, especially in today's interest rate environment. But, that's not the only reason you should deposit your money into a high-yield savings account when your CD matures.
Get more out of your savings with a high-yield savings account.
Why you should open a high-yield savings account after your CD matures
CDs come with several benefits - which is why they're such a popular financial product. However, in today's economic climate, it may be better to deposit your funds into a high-yield savings account than open a new CD when yours matures. Here's why:
Interest rates could rise
Interest rates are high at the moment. That's largely thanks to the fact that the federal funds rate, the Federal Reserve's benchmark rate, is currently frozen at a 23-year high. But, that rate could go even higher.
The Federal Reserve pushed its federal funds rate up several times as a result of high inflation. And, while higher interest rates have tampered inflation - bringing it down from 2022 highs - the downward pressure on price growth hasn't been enough to line up with the Fed's goal of 2% annually.
But, the most recent inflation reading showed that prices had grown 3.4% year over year in April - a far cry from the Fed's target. If inflation doesn't cool significantly soon, it could lead to more rate hikes. But, that may be a good thing if you have your money in a high-yield savings account. That's because these accounts typically come with variable interest rates. So, a higher federal funds rate could result in higher returns on your savings.
Enjoy higher rates with a high-yield savings account today.
You may need access to your savings
A CD is a great way to earn a meaningful return on your savings if you know you're not going to need your money through the account's term. However, that may not be the case right now. As inflation persists, prices continue to grow at uncomfortable rates. And as prices grow, you may need a financial cushion. If you lock your money up in a new CD, you may be penalized for accessing it when you need it. But, you'll have easy access to your money when you need it if you opt for a high-yield savings account instead.
You'll lose buying power with a regular savings account
Traditional savings accounts are paying an average 0.45% annual return. That's significantly lower than the current 3.4% inflation rate. So, if you have money in a traditional savings account, that money could be losing buying power. But, you could expand your buying power by taking advantage of a high-yield savings account. Some of the top-paying high-yield savings accounts offer interest rates ranging from 4.25% to 5.25%. So, you could turn a loss of buying power into a gain by opting for a high-yield savings account instead of its traditional counterpart.
Don't lose buying power. Open a high-yield savings account now.
The bottom line
If you have a CD that's set to mature soon, be ready to open a high-yield savings account when it does. The high yields on these accounts mean you may be able to grow your savings dollars without locking your funds up. And, the variable rates high-yield savings accounts come with may give you a way to take advantage of any rate hikes ahead. Compare leading high-yield savings accounts today to get more out of your savings.
