Why You Should Lock In Current High Interest Rates on Your CD and Savings Accounts
Written by
Vance Cariaga
Edited by
Nicholas Morine
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With interest rates at their highest point in years, bank customers have flocked into certificates of deposit, high-yield savings and other accounts to get big returns on their money. But a recent slowdown in rate hikes by the Federal Reserve could translate into lower savings account rates in 2024, which means you should consider locking in rates before they head south again.
The best CD rates this month are at 5.5% and above for terms of 24 months and less. But even certain long-term CDs of 36 to 60 months are paying annual percentage yields at or around 5% — something that would have seemed unimaginable only a few years ago.
You’ll also find APYs of 5% or higher on the best high-yield savings accounts, CNN reported. Some banks are even offering rates above 5% on standard savings accounts.
How Long Will Savings Opportunities Last?
The wild card is how long this feast will last — and the Fed holds that card. Should the central bank lower rates, or even hold them steady, you can expect banks to do the same very quickly.
Many financial experts expect the central bank to end its policy of aggressive rate hikes that went into effect a couple of years ago as a way of taming inflation. There were even signs that the Fed might start cutting rates, though this month’s strong jobs report lowered the likelihood that cuts are on the table.
“Stock and bond markets had been rallying last year on the assumption that the Fed was done raising rates and in fact would be cutting them sooner rather than later and this [jobs] report throws cold water on those assumptions,” Chris Zaccarelli, chief investment officer at Charlotte-based Independent Advisor Alliance, wrote in email comments shared with GOBankingRates.
But even if the Fed doesn’t cut rates, it likely won’t keep raising them, either. As a result, most professional investors believe banks are likely to start reducing savings rates — or at least hold them steady — in 2024, The Wall Street Journal reported in late November.
“Rates will likely top out where they are today,” Jason Steeno, president of CoreCap Investments in Southfield, Michigan, told the WSJ.
Now May Be the Time To Buy In on CDs and High-Interest Savings
What this means is that now is an ideal time to latch on to today’s sky-high CD and savings rates rather than gamble that they’ll keep inching higher in the weeks and months to come.
“This is a good time to lock in rates while they are still high,” Ken Tumin, founder of LendingTree subsidiary DepositAccounts.com, told The New York Times.
If you want to lock in rates on a CD or savings account, be sure to shop around to find the best ones. You’ll usually find the highest rates at online banks because they don’t face the same operating costs as traditional brick-and-mortar banks, meaning they have more wiggle room to pay high rates without cutting into their margins.
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