The Best Savings and CD Rates Keep Getting Better, Thanks to the Fed’s Latest Rate Hike


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Just one week after the latest federal interest rate increase, the best savings and CD account rates are making big moves.

The Federal Reserve’s sixth consecutive rate hike pushed the federal rate range up to 3.75% – 4%. As the Fed works to tame runaway inflation, still-elevated prices and ongoing rate hikes have increased experts’ concerns about an economic downturn. It’s unclear if we’re on the brink of a recession, but the message is clear — now is the time to prepare for tough economic times ahead. 

“Take a look at how much are you saving, how much are you spending, getting a good handle on your expenses,” says Denise Downey, a certified financial planner and founder of Financial Trex, a financial planning firm. “Make sure you have at least three to six months of living expenses stocked away in a high-yield savings account.” 

On the positive side, savings and CD rates will continue to go up and offer more valuable returns on your emergency fund. Here’s the latest on the best savings and CD rates this week, and how the Fed’s 75 basis point increase plays a part in your savings: 

How NextAdvisor Analyzes CD and Savings Rates

We compare three different averages in our average CD and savings rate analysis. First, we review national deposit rates from the Federal Deposit Insurance Corporation (FDIC) and Bankrate’s national index of deposit accounts based on a weekly survey (like NextAdvisor, Bankrate is owned by Red Ventures). We also calculate the current average rate of each bank on our list of best CD rates and best savings rates — you can find more about how we choose the banks included in our lists on those pages.

The differences between national average savings rates and NextAdvisor’s analysis of interest rates is largely due to the much higher APYs that online banks pay.

National surveys from the FDIC and Bankrate include many different types of financial institutions, including large national banks that charge as little as 0.01% APY. Our lists, on the other hand, is made up of online or hybrid banks with fewer overhead costs, which allows them to pass on savings in the form of interest to customers.

The Best Savings Rates This Week 

We saw big jumps in savings rates last week and expect plenty more in the weeks to come. This week, a number of the banks we track raised rates, moving the average even closer to 3.00% APY.

Bankrate’s national survey of savings account rates remained the same at 0.16% this week, along with the Federal Deposit Insurance Corporation national index at 0.21%. It’s important to note that these also include traditional savings accounts that often lag far behind other deposit rates.

As for the high-yield savings accounts we track at NextAdvisor, those that did increase their rates increased the overall average from 2.73% to 2.89%. The top savings rates are now above 3.50% — UFB Direct has a whopping 3.83% APY and Bask Bank offers a sky-high 3.60% APY on its high-yield savings.

Here are a few of the highest savings rates this week: 

The Best CD Rates This Week 

CD rates took another big leap too this week after the most recent Fed meeting. 

According to Bankrate’s weekly national rate survey, the average one-year CD is up 0.06% to 1.11%, while three-year CDs moved up 0.03% to reach 1.00% and five-year CDs saw a 0.02% increase, to 1.02%.  

But rates that we track at NextAdvisor went up even more this week. One-year CDs jumped from 3.61% up to 3.81%, three-year CDs went up from 3.41% to 3.61%, and five-year CDs moved from 3.66% to 3.87%, inching closer to a 4% average.

These are the top rates among banks on our best CD rates list right now: 

1-Year 

  • CFG Bank: 4.35% APY 
  • Sallie Mae: 4.25% APY 
  • Synchrony Bank: 4.01% APY 

3-Year 

  • Sallie Mae: 4.50% APY 
  • CFG Bank: 4.35% APY 
  • Synchrony Bank: 4.26% APY 

5-Year 

  • Sallie Mae: 4.55% APY 
  • Synchrony Bank: 4.26% APY 
  • Bread Savings (formerly Comenity Direct): 4.25% APY 

What’s Next for Savings and CD Rates 

With another Fed meeting next month and banks still actively raising their rates, here’s what experts say you should expect from high-yield savings accounts and CDs through the rest of 2022. 

Savings 

Some experts believe high-yield savings APYs could get close to 4% this year

Already, multiple accounts offer 3.5% APY or even more. And some banks could push rates higher between now and December’s Federal Open Market Committee meeting, says Shannon Grey, certified financial planner and founder of InvestEdge Planning, a financial planning firm in San Diego, California. 

These liquid savings options are great for your emergency fund or any short-term savings you may need to access quickly. Plus, rising variable rates from the most competitive accounts will move alongside the Fed’s ongoing rate hikes.

CDs 

Just like savings accounts, rates will likely also continue to go up for all CD terms, but it’s best to compare rates before locking in any term.

“Banks are offering these really nice rates for you to lock in your money for a long time. So they might offer like a 12-, 24-, or even 36-month CD for rates that look really good,” says Downey. But what looks like a solid rate today could be much less competitive in a few months. “Be careful because remember that interest rates are going up.” 

As a result, it’s generally still best to stick to one-year CDs or shorter for now. 

Prioritizing Debt Payoff and Saving 

Even as savings accounts get better each week, rising interest rates on loans and debts can make it tough to decide: should you prioritize debt or put more money toward your emergency fund? 

“Holidays are coming up, and the numbers already show that credit card balances have increased,” says Moore. Currently, the average outstanding credit card balance is $5,221 according to Experian’s latest report

Rising interest rates mean variable interest on credit card debt, adjustable-rate mortgage loans, and more will only get more expensive in the near future. 

“The first thing people should do is take an inventory of their debts,” says Downey. “Then, it’s time to focus on making sure that we get our savings up and get our emergency funds in place.”

To give you peace of mind and an extra cushion of cash, you may also consider setting aside one month of expenses toward your emergency fund first, then pay off your high-interest debt as quickly as possible, Downey previously told NextAdvisor. After, refocus on your savings; experts recommend keeping at least three to six months worth of expenses in an emergency fund.

If your budget is keeping you from meeting your goals, you may also consider getting a side hustle to add additional (if temporary) income, and making sure you cut unnecessary expenses where possible. 

“Take a look at how much are you saving, how much are you spending, getting a good handle on your expenses,” says Downey. 

Best CD and Savings Rate FAQs 

Which bank is paying the highest CD rate right now?

As of now, Bask Bank has the highest 6-month CD with a 4.00% APY. It requires a $1,500 minimum deposit. BMO Harris has the highest 12-month CD with a 4.25% APY and requires $1,000 to open an account.

How often do interest rates on savings accounts change?

Savings account interest rates we track at NextAdvisor tend to rise frequently. In a rising rate environment like today, some banks may make small rate increases every couple of weeks, while others may make larger rate hikes after longer periods.

Are 10-year CDs worth it?

For the time being, experts recommend sticking to short-term CDs because rates are still rising. Locking in a long-term CD today means you may be stuck with a lower APY in a rising rate environment.

Additional Savings and CD Resources

Economic shifts will continue to impact your finances. Even though you cannot control the Fed’s rate rollercoaster, there are ways you can prepare now. These resources can help you better understand savings options right now:



Read More: The Best Savings and CD Rates Keep Getting Better, Thanks to the Fed’s Latest Rate Hike

2022-11-10 00:19:16

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