CD match, raise, or 9% APY! Promos heat up before Fed rate cut. Hurry to get the best rate (2024)

FAQs

Will CD rates go up when the Fed raises interest rates? ›

Just like mortgage rates, savings rates and credit card interest rates, CD rates correlate strongly with the federal funds rate. When the Federal Reserve increases its benchmark rate, interest rates across the economy, including CD rates, increase. Similarly, decreases in the federal funds rate cause CD rates to fall.

CD rate forecast: 2024

The Fed kept its rate the same after its fifth meeting of 2024 on July 30-31. Projections suggest that we'll see no rate increases in 2024, and that the Fed will likely drop its rate for the first time this year in September, according to the CME FedWatch Tool on July 31.

A bump-up CD can be opened at a traditional bank, an online bank or credit union. When you deposit money into this kind of CD, the bank assigns you an initial APY. As the CD's maturity term progresses, you can ask the bank to increase your APY if rates rise.

Waiting to open a CD could mean missing out on some stellar rates. Acting now means you may be able to lock in high rates on both short-term and long-term CDs, and you can score some serious interest just by opting to deposit a larger lump sum into your CD.

But all told, it's pretty fair to assume that there will still be opportunities to lock in a CD at close to 5% at the start of 2025. And there's a good chance you'll be able to open a CD at a rate of 4% or more for a good part of the year.

Inflation has cooled, but the Fed has signaled it wants more positive data before pulling the trigger. In June, the consumer price index fell to 3%, the lowest it's been in over three years. At that point, the Fed projected the fed funds rate would be cut to 5.1% by the end of 2024.

At present, markets are pricing in one further rate cut in 2024. If forecasts are correct, this could mean base rate will fall to 4.75 per cent by the end of 2024.

1. Early withdrawal penalty. One major drawback of a CD is that account holders can't easily access their money if an unanticipated need arises. They typically have to pay a penalty for early withdrawals, which can eat up interest and can even result in the loss of principal.

Which bank gives 7% interest on savings accounts? ›

As of August 2024, there are no banks are offering 7% interest rates on savings accounts. If you can find a savings account with a 7% APY, you'll earn about 15X more than the national savings rate. It's much more common to find a high-yield savings account with rates between 4% and 5% right now.

The highest certificates of deposit (CDs) rates today are offered by Merchants Bank of Indiana (5.92%), First Federal of Lakewood (5.61%), Maries County Bank (5.51%) and Shoreham Bank (5.50%). You can see the full list of the highest-paying CDs here.

While longer-term CDs may tie up your funds for years, a 6-month CD allows you to access your money relatively quickly. If you suddenly need your $5,000 for an emergency or a more lucrative investment opportunity arises, you won't have to wait years to access your funds without incurring hefty penalties.

If you're looking to maximize your savings when rates are rising, a bump-up CD can be a good option to consider. Unlike traditional CDs, this type of savings account lets you request a bump to your APY while the CD is still maturing and earn higher returns as a result.

And when the Fed raises its target rate, banks typically follow suit and increase their interest rates—including those on CDs. That's because when the Fed's target rate goes up, the cost of borrowing from other banks increases.

While longer-term CDs may tie up your funds for years, a 6-month CD allows you to access your money relatively quickly. If you suddenly need your $5,000 for an emergency or a more lucrative investment opportunity arises, you won't have to wait years to access your funds without incurring hefty penalties.

Since savers don't know which way rates will move next, advisers often recommend a CD ladder. This means buying a series of CDs with progressively later maturity dates. Laddering ensures that some portion of your savings matures each year and can be spent or moved into other investments as rates change.

Good news for savers: interest rates on high-yield savings accounts and CDs are beating inflation. For years, those who wanted to keep their cash safe and accessible were in a predicament. Savings accounts and CDs, even the best of them, paid interest rates below the rate of inflation.

When the Fed increases the federal funds rate, it typically pushes interest rates higher overall, which makes it more expensive for businesses and individuals to borrow. The higher rates also promote saving.