The Federal Reserve’s plan to raise interest rates in 2022 is mainly designed to slow inflation. But rate hikes can impact consumers in other ways — including pushing interest rates on savings accounts higher.
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That makes for welcome news to Americans who have been earning microscopic interest on their savings, money market and certificate of deposit (CD) accounts over the past couple of years because of historically low interest rates.
Normally it takes banks at least a few months to raise rates on savings accounts. This is especially true of big national banks, which have enough financial might that they don’t need to raise rates quickly to attract more deposits, The New York Times reported last week.
But that’s not the case at all banks. Some, including Synchrony Bank, are already raising interest rates on certain deposit accounts in anticipation of the Fed’s move.
As previously reported by GOBankingRates, Fed Chairman Jerome Powell said it will be “appropriate” to raise the target range for the federal funds rate at the central bank’s meeting later this month.
How Much Will Rates Rise?
The Fed hasn’t offered much in the way of specifics on what the rate hikes will look like. This has left economists and analysts playing a guessing game regarding how much the Fed will hike rates, and how often.
Last week, traders on the futures market bet that the central bank would implement six quarter-point hikes for the year, CNBC reported. Those predictions will likely change after Fed officials release their latest economic projections at the end of the Mar. 16 policy meeting.
In February — before Russia’s invasion of Ukraine further muddled the economic landscape — GOBankingRates reported on a couple of different hike rate-scenarios.
Goldman Sachs Group speculated that the Fed might hike rates seven times, with a 25 basis-point hike each time. HSBC economists predicted a 50 basis-point hike in March, with four additional 25 basis-point increases to follow through the rest of the year. Citi economists forecast a similar scenario. Nomura Holdings also said a half-point increase is likely for March.
Other analysts predict a smaller, one-quarter point rate hike in March.
“Twenty-five basis points….seems just about a lock,” Wells Fargo director of rates strategy Michael Schumacher told CNBC on Mar. 10.
As the AARP pointed out a couple of months ago, savings account customers shouldn’t expect a big windfall overnight. Rates are rising off of a very low base, so the gains many see in their savings, money market and CDs will be modest.
Synchrony Pushes Up CD Rates
One thing for certain is that rates will go up, and banks are already preparing for it. One of them is Synchrony Bank, which is offering some very robust annual percentage yields (APY) on its CDs — including a 13-month CD that pays an APY of 2.30%.
There is no minimum balance requirement to earn the 2.30% rate. Synchrony also offers a 15-day best-rate guarantee, which means if you open your CD and fund it within 15 calendar days, you’ll get the best rate available should the APY move even higher on the day you fund it.
Beating the Average … By a Lot
Synchrony markets itself as a leader in offering among the best rates around, and that’s no idle boast. The average CD rates in the U.S. for the week of March 9 ranged from 0.19% for a one-year CD to 0.37% for a five-year jumbo CD, according to Bankrate.
The 2.30% APY Synchrony offers for its 13-month CD, which went into effect March 8, isn’t even its highest on offer. That prize goes to the bank’s 60-month CD, which offers an APY of 3.25%. Here’s a look at CD rates Synchrony lists on its website:
| Term Length | Annual Percentage Yield (APY) |
| 3-month | 1.00% |
| 6-month | 1.50% |
| 9-month | 1.65% |
| 12-month | 2.30% |
| 13-month | 2.30% |
| 14-month | 2.30% |
| 15-month | 1.10% |
| 18-month | 2.50% |
| 24-month | 2.60% |
| 36-month | 2.80% |
| 48-month | 2.80% |
| 60-month | 3.25% |
Mind the Details
Like many banks, Synchrony might charge an early withdrawal penalty if you withdraw funds from the CD prior to its maturity date. The penalty is applied to the amount of principal withdrawn only. There’s no penalty on interest you withdraw early.
Here’s a look at the early-withdrawal penalties for different terms:
- Terms of 12 months or less: 90 days of simple interest at the current rate
- Terms of more than 12 months but less than 48 months: 180 days of simple interest at the current rate
- Terms of 48 months or more: 365 days of simple interest at the current rate
Another thing to keep in mind: After you initially fund your CD at Synchrony, you can make additional deposits to it during the 10-day grace period after the CD matures.
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Editorial Note: This content is not provided by Synchrony Bank. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by Synchrony Bank.