From CBS News · Matt Richardson · · 1m 50s
CD or high-yield savings after Fed rate hike
The Fed's first rate increase since 2023 changes the math for where savers should park their money.
In brief
The Fed's first rate increase since 2023 changes the math for where savers should park their money. High-yield savings accounts beat CDs if rates keep rising, but CDs offer guaranteed returns if you want predictability. Originally reported by CBS News.
Fed raises rates for first time since 2023
The Federal Reserve hiked its benchmark rate to 3.75 to 4.00 percent on Wednesday, reversing course after cutting rates in September 2024 and September 2025. This could be the start of a series of hikes if inflation doesn't cool.
CDs lock in fixed rates now
Certificates of deposit offer interest rates that won't change, no matter what the Fed does next. That means the rate you lock in today stays the same for the entire term.
High-yield savings adjust automatically
High-yield savings accounts have variable rates that rise and fall with the market. If the Fed keeps hiking, your rate goes up automatically on your next statement.
High-yield likely wins if rates keep rising
If the Fed continues hiking through 2026 and into 2027, a high-yield savings account will probably earn more than a CD you lock in today. The variable rate keeps climbing while your CD rate stays frozen.
CDs offer certainty and peace of mind
A CD's fixed rate guarantees your return and lets you relax knowing exactly what you'll earn. That predictability appeals to savers who don't want to worry about rate changes.
Consider splitting between both accounts
Opening both a CD and a high-yield savings account lets you lock in a guaranteed return while staying positioned to earn more if rates rise further. It's a middle-ground strategy.
No one-size-fits-all answer
Choose a high-yield savings account if you're confident rates will keep rising. Choose a CD if you want guaranteed returns and peace of mind. Your choice depends on your comfort with uncertainty.
What it means
High-yield savings accounts beat CDs if rates keep rising, but CDs offer guaranteed returns if you want predictability.
