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The best rates on CDs and savings accounts right now, and why the Fed rate hike could make them even higher

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Now is a good time to save money, especially if you keep it in the right place.

The Federal Reserve just increased its target rate range for the federal funds to 3.00% – 3.25%, the highest level in more than a decade. That means better interest rates on the best high yield savings accounts and best cds.

These account rates are related – but not directly linked to – federal interest rates set by the Federal Reserve. This year, the Fed has made a series of rate hikes in an attempt to reverse runaway inflation rates. And given the latest rate hike, experts expect interest rates to only go up.

“Obviously the rates will go up at the next meeting, Chris Chen, a certified financial planner at Insight Financial Strategists in Newton, MA, told us ahead of this week’s announcement. In fact, the Fed raised rates by 75 basis points in its fifth rate hike this year. “The question is, will it be enough to tame inflation?”

Higher interest rates mean more expensive debt, from mortgage rates on credit card interest. But for savers, higher rates can put a few dollars more in your pocket thanks to earnings on your savings.

Here’s a look at this week’s best savings and CD rates and the experts’ predictions for future price movements:

How NextAdvisor analyzes CD and savings rates

We compare three different averages in our analysis of the average CD and savings rate. First we look at the national deposit rate of 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 with: best cd rates and best savings rate — you can find out more about how we choose the banks included in our lists on those pages.

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

National surveys from the FDIC and Bankrate cover many different types of financial institutions, including major national banks that charge as little as 0.01% APY. Our lists, on the other hand, consist of: online or hybrid banks with less overhead, allowing them to pass on savings in the form of interest to customers.

Best CD rates right now

Average CD rates up quite a bit this week. Based on Bankrate’s weekly survey, median CD rates for one-year terms were up 0.11%, while three- and five-year terms were up 0.08%. Of the rates we track at NextAdvisor, the one-year CDs average is 2.77%, three-year CDs offer an average of 2.96%, and five-year CDs are 3.24%.

But experts warn against falling for the higher rates of long-running CDs today. “Don’t lock on CDs for more than two years,” says Joanne Burke, certified financial planner and founder of Birth Street Financial Advisors. Even if you’re building one CD ladderwhich can help you keep up with rising rates than a single CD, two-year terms should be the longest, she says.

Here are some of this week’s best CD rates, by term:

1 year

  • CFG Bank: 3.05% APY
  • Bread Saving: 3.00% APY
  • Sallie Mae: 2.85% APY

3 years

  • Bread saving: 3.55% APY
  • CFG Bank: 3.50% APY
  • Sallie Mae: 3.15% APY

5 years

  • Bread Saving: 3.65% APY
  • CFG Bank: 3.60% APY
  • Synchrony Bank: 3.50% APY

Best savings rates at the moment

Interest rates savings account went a little slower this week. The averages remained the same among the national indices, but the high-yield savings rate averages we track at NextAdvisor rose slightly, from 2.00% APY to 2.03% APY on average.

Ahead of the Fed’s next rate hike, now is a good time to competitive high-yield savings account with a variable interest rate that will rise alongside federal rates. Here are this week’s best interest rates:

  • UFB Direct: 2.61% APY
  • Prime Alliance Bank: 2.26% APY
  • TAB Bank: 2.16% APY
  • Loan club bank: 2.15% APY
  • Bread saving: 2.15%

What you need to know when rates go up

Interest rates are rising as part of the Fed’s plan to reduce the runaway inflation rates we have experienced this year. And experts say we still have a long way to go until inflation catches up.

In the short term, Chen says, inflation could cause many Americans “tremendous pain” when it comes to prices.

“It will be difficult for the consumer”, echoes Shannon Gray, certified financial planner and founder of InvestEdge Planning, a financial planning firm in San Diego, CA. She forecasts another 75 basis point hike, which would raise interest rates by the same margin as the last rate hike in July. Although “they could go even higher if they really want to be aggressive,” Gray says.

Should you open a CD or high-yield savings account now?

The experts we spoke to now agree on their advice for savers: don’t lock your money in a long-term CD account; maintain liquidity.

“The problem and the advantage of CDs is that you hold the speed,” Chen says. “If you don’t need the money in the next five years, please don’t put it in a 3.25% CD when you have 8% inflation. Go for the high efficiency instead [savings] bills.”

Based on this week’s rates, you can earn over 2% APY from high-yield savings accounts“which is well below inflation, but better than zero,” Chen says.

High-yield savings accounts offer greater liquidity and flexibility in an emergency and their variable rates can help you continue to benefit from rising savings interest.

“If the Fed changes its language about fighting inflation, we’re talking a little bit more about getting into the intermediary” [CD] terms and the longer terms,” says Gray. “[Until then] structure yourself to be really flexible in case those interest rates keep going up as it gives you the ability to lock in higher rates.

Frequently asked questions about CDs and savings rates

What is the best CD rate?

You can now even find CD rates on 1-year installments over 3% APY. Remember, it’s best to stick with shorter-term CDs as rates continue to rise.

What is the best savings rate?

The best savings account rates are around 2.15% -2.20% APY, although a few banks offer even higher. As the Fed continues to raise interest rates, variable APYs on high-yield savings accounts are likely to increase.

How long will CD and savings rates rise?

As long as the Fed continues to raise interest rates, experts predict that interest rates on CDs and savings accounts will also rise.

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