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Key Takeaways
- Interest rates for certificates of deposit (CDs) reached a peak not seen in 20+ years last fall, thanks to the Federal Reserve’s aggressive fight against inflation.
- Though rates have dipped slightly since then, you still have dozens of options that let you lock in a rate between 4.50% and 5.75% for 3 months to 5 years.
- It’s very possible CD rates will decline a lot more this year if the Fed opts to lower its benchmark rate in 2024.
- Opening a CD now means one of today’s stellar rates will be yours to keep for months or years into the future.
- In contrast, savings account rates will fall along with any Fed rate cuts.
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The Best CD Rates Are Still Exceptionally High
What you can earn on a savings account, money market account, or certificate of deposit is directly linked to what the Federal Reserve does with the federal funds rate. And in 2022 and 2023, decades-high inflation pushed the Fed to dramatically hike this benchmark rate by a total of 5.25%—raising it to its highest level since 2001. As a result, the rates you could earn on your cash in the bank also skyrocketed, offering the best savings and CD returns we’d seen in 20-plus years.
CD rates have backed down a bit this winter. That’s because the Fed’s last rate hike occurred in July 2023, and since then, the central bank has taken its foot off the gas as inflation has cooled. After its September, November, and December meetings, the Federal Reserve announced rate holds instead of further increases.
After the July hike, CD rates continued to climb for a bit—into November for some CD terms. That took the top nationwide rates to peaks ranging from 5.25% to 6.50% in the fall. But while those record rates are now in the rearview, what you can earn in any CD term is still remarkable—with top rates ranging from 4.82% to 5.75% APY and dozens of options paying 5.50% or more.
Fed Moves Could Push CD Rates Lower This Year
At the Fed’s Dec. 13 meeting, additional data was released on the committee members’ projections for the federal funds rate over the next three years. Called the “dot plot,” this report showed that almost 80% of Fed committee members predicted at that time that the federal funds rate would be reduced two to four times in 2024. The median forecast was three cuts this year totaling 0.75%.
Any reduction in the federal funds rate will directly impact what banks and credit unions pay on high-yield savings accounts, money market accounts, and CDs. So if these rate reductions come to pass, the rates offered on deposit accounts will also start dropping.
Still, the Fed’s projections are just best guesses at a certain point in time. In fact, data that’s been released since the Fed’s dot plot—showing robust job numbers and a slightly higher-than-expected inflation reading—could give the Fed pause on its rate cuts, potentially deferring those reductions further into the future.
The Fed’s next rate announcement will be made tomorrow. While it’s overwhelmingly expected it will announce yet another rate hold, financial markets will be closely analyzing the Fed’s language for any signals about when they may begin to lower rates.
Moving Cash from Savings to a CD is Smart Right Now
With numerous options available in every CD term to earn at least 4.50% in the long terms, and up to 5.75% in the shorter terms, it’s still an excellent time to move some of your savings into a CD. While it’s very likely savings account rates will begin dropping sometime this year, any money you lock into a CD will deliver its guaranteed rate until the CD’s term ends.
This means you could gift your future self with a rate over 5% that lasts well into 2026, or even 2027. Or you could enjoy a rate in the upper 4% range for the next four to five years—that could secure your rate until 2029.
If current projections about the Fed lowering rates over the next two to three years come to fruition, interest rates on the best high-yield savings accounts could drop from the 5% range to perhaps the 2% or 3% range. And if that happens, you’ll be happy for a CD that’s still delivering 4–5%.
How We Find the Best Savings and CD Rates
Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account’s minimum initial deposit must not exceed $25,000.
Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don’t meet other eligibility criteria (e.g., you don’t live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.