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The Federal Reserve looks like it’s done raising rates. The central bank announced during its last meeting of 2023 that it would hold its benchmark rate steady, even indicating it would reverse course in the near future, hinting at rate cuts in 2024.
“This suggests that interest rates have peaked at their current levels,” Ian Eberle, a financial advisor at Fort Pitt Capital Group, tells CNBC Select. “So long as inflation continues to cool, the Fed’s next move will likely be to begin lowering rates sometime next year.”
What would this mean for you? Well, if the Fed were to lower rates, this could in turn make borrowing money less expensive for everyday consumers, but also lower how much they earn on their savings.
With savings accounts offering record-high returns today over 5%, now’s the time to take advantage before those rates go down. And with a CD specifically, savers can lock in today’s high rate despite any future cuts from the Fed.
Compare offers to find the best savings account
How CDs work
Unlike traditional or high-yield savings accounts, which have variable APYs, most CDs lock your money into a fixed interest rate the day you open the account. That’s why if you suspect that interest rates will soon drop, it can be a good idea to put money in a CD to preserve the high APY you would earn.
CDs have specified term lengths, ranging from three months to five years. You typically can’t access your money (without paying a penalty) until the CD term ends, also known as the maturity date. At maturity, you can get your money back, in addition to the interest you’ve earned.
Here are the top CDs to put your cash in now
The top CDs on the market right now offer APYs above 5% for 12-month terms. For context, in 2021, when rates were around their lowest, the national average 12-month CD had an APY of just 0.15%. For a $5,000 deposit, this is the difference between earning $250 in interest over a year versus earning only $7.50 over that same time frame.
“We have not seen CD yields this strong since 2007, and, if the Fed begins cutting rates next year, we will not see a rate environment this attractive for the foreseeable future,” Eberle adds.
Looking for a CD with a high yield? Both Bread Savings™ (formerly Comenity Direct) and Marcus by Goldman Sachs® are currently offering 5.50% APY on their 12-month CDs.
Bread Savings™ (formerly Comenity Direct) CDs
Bread Savings™ (formerly Comenity Direct) is a product of Comenity Capital Bank, a Member FDIC.
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Annual Percentage Yield (APY)
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Terms
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Minimum balance
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Monthly fee
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Early withdrawal penalty fee
Early withdrawal penalty applies. For terms shorter than 1 year, the penalty is 90 days simple interest. For terms 12 months to 3 years, the penalty is 180 days simple interest. For terms 4 years and up, the penalty is 365 days simple interest.
Marcus by Goldman Sachs® CDs
Marcus by Goldman Sachs® is a brand of Goldman Sachs Bank USA, a Member FDIC.
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Annual Percentage Yield (APY)
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Terms
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Minimum balance
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Monthly fee
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Early withdrawal penalty fee
You are not permitted to withdraw a portion of your principal at any time prior to maturity. If you withdraw the entire principal amount from your CD account prior to maturity, you will be charged an early withdrawal penalty based on the term of your CD account and the principal, except in the case of a No-Penalty CD. Less than 1 year = 90 days interest on the original principal balance at the interest rate in effect for the CD; 1 year to 5 years = 180 days interest on the original principal balance at the interest rate in effect for the CD; more than 5 years = 270 days interest on the original principal balance at the interest rate in effect for the CD.
And, if a year seems like too much time to lock up some savings, Synchrony Bank’s 9-month CD currently offers 5.30% APY.
Synchrony Bank CDs
Synchrony Bank is a Member FDIC.
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Annual Percentage Yield (APY)
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Terms
From 3 months to 60 months
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Minimum balance
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Monthly fee
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Early withdrawal penalty fee
There may be an early withdrawal penalty if you withdraw funds from the principal prior to the CD maturity date (the last day of the CD term). The penalty is applied to the amount of principal withdrawn (there’s no penalty on interest). For the No-Penalty CD, early withdrawals are not permitted within the first 6 days after account funding. Following that, only withdrawal of the entire balance is allowed.
APYs are subject to change at any time without notice. Offers apply to personal accounts only. Fees may reduce earnings. For CD accounts, a penalty may be imposed for early withdrawals. After maturity, if your CD rolls over, you will earn the offered rate of interest for your CD type in effect at that time.
When to opt for a high-yield savings account instead
Though FDIC-insured CDs are one of the safest places to put your money, being unable to touch your funds before the CD term ends might make some people uncomfortable if they’re strapped for cash.
In this case, a high-yield savings account could be the better place to put your money. You’ll have access to your funds whenever you need them penalty-free (though some banks limit withdrawals or transfers to six each month). High-yield savings accounts are also offering APYs around 5%, some even 6% with restrictions, but these rates are variable and can go up or down at any time. So, if the Fed does end up cutting rates in the new year, your high-yield savings account rate will likely also go down.
Some of the top high-yield savings accounts on the market right now include LendingClub® Bank High-Yield Savings Account and UFB Secure Savings Account. Both of these accounts offer above-average APYs, zero monthly fees and complimentary ATM cards for easy access to your cash.
LendingClub High-Yield Savings
LendingClub Bank, N.A., Member FDIC
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Annual Percentage Yield (APY)
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Minimum balance
No minimum balance requirement after $100.00 to open the account
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Monthly fee
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Maximum transactions
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Excessive transactions fee
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Overdraft fees
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Offer checking account?
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Offer ATM card?
UFB Secure Savings
UFB Secure Savings is offered by Axos Bank, a Member FDIC.
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Annual Percentage Yield (APY)
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Minimum balance
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Monthly fee
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Maximum transactions
No max number of transactions; max transfer amounts may apply
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Excessive transactions fee
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Overdraft fee
Overdraft fees may be charged, according to the terms, but a specific amount is not specified; overdraft protection service available
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Offer checking account?
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Offer ATM card?
Bottom line
While we don’t yet officially know when, and by how much, interest rates could drop in 2024, it’s safe to say we’ve reached peak savings rates today and now is the time to lock one in with a CD.
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At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every savings article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of banking products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.
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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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