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? Bread Savings™ (formerly Comenity Direct) is currently offering a 5.25% APY and Marcus by Goldman Sachs® now offers 5.10% APY on their 12-month CDs.
Bread Savings™ (formerly Comenity Direct) CDs
Annual Percentage Yield (APY)
From 4.15% to 5.35% APY
Terms
From 1 year to 5 years
Minimum balance
$1,500 minimum deposit
Monthly fee
None
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.
Terms apply.
Marcus by Goldman Sachs® CDs
Annual Percentage Yield (APY)
From 3.90% to 5.10% APY
Terms
From 6 months to 6 years
Minimum deposit
$500
Monthly fee
None
Early withdrawal penalty fee
If you withdraw the balance entire principal amount from your CD account prior to maturity, you'll be charged an early withdrawal penalty based on the term of your CD and the principal (except in the case of a No-Penalty CD). Here's how early withdrawal penalties are calculated:
Early Withdrawal Penalty = Interest Rate ÷ 365 (or 366) × Penalty Days × Original Principal Balance
Terms apply.
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
Annual Percentage Yield (APY)
From 0.25% to 5.15% APY
Terms
From 3 months to 60 months
Minimum balance
None
Monthly fee
None
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.
Terms apply.
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
Annual Percentage Yield (APY)
5.00%
Minimum balance
No minimum balance requirement after $100.00 to open the account
Monthly fee
None
Maximum transactions
None
Excessive transactions fee
None
Overdraft fees
N/A
Offer checking account?
Yes
Offer ATM card?
Yes
Terms apply.
UFB Secure Savings
Annual Percentage Yield (APY)
Up to 5.25% APY on any savings balance; add a UFB Freedom Checking and meet checking account qualifications to get an additional up to 0.20% APY on savings
Minimum balance
$0, no minimum deposit or balance needed for savings
Fees
No monthly maintenance or service fees
Overdraft fee
Overdraft fees may be charged, according to the terms; overdraft protection available
ATM access
Free ATM card with unlimited withdrawals
Maximum transactions
6 per month; terms apply
Terms apply.
Read our UFB Secure Savings review.
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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