If you have money in savings, it may be a great time to shift some of those funds into a certificate of deposit (CD). That’s because the Federal Reserve has pushed interest rates to 16-year highs, but may soon be easing off the gas. If it does, today’s record rates on savings and money market accounts will start to decline, but a top CD rate you lock today will be guaranteed for months or years to come.
Key Takeaways
- CDs are paying their highest rates in at least 16 years, thanks to the Federal Reserve’s aggressive fight against inflation. It’s currently unknown if the Fed will raise the federal funds rate again this year—which would push CD rates a bit higher, if it happens.
- Since CDs are already paying record rates, and any impact from the Fed would only nudge them marginally higher, it could be a good time to lock in one of today’s guaranteed rates.
- Savings and money market accounts are also paying exceptionally high rates, but once the Fed’s rate begins declining, savings and money market rates drop. A CD’s rate, in contrast, is locked in until the end of its term.
CDs Are Already Paying Record Rates
In an effort to combat high post-pandemic inflation, the Federal Reserve has been aggressively hiking the federal funds rate since March 2022. With 11 increases across 12 meetings, the Fed has raised its benchmark rate a cumulative 5.25%, which has taken it beyond its 2006–2007 peak and to its highest level since 2001.
As a result, rates on certificates of deposit (CDs) have skyrocketed. Depending on the term, you can now earn three-and-a-half to seven times more with one of today’s CDs than you could in early 2022. Though the top nationwide rate is currently 5.75% APY, there are close to 30 options in our daily ranking of the best nationwide CDs that pay 5.50% APY or better. And dozens more pay rates above 5.00%.
Why It’s Always Smart to Shop Around for the Best CD Rates
| Account Type | Today’s Top Nationally Available Rate | National Average Across All FDIC Banks |
|---|---|---|
| 3-month CD | 5.35% APY | 1.11% APY |
| 6-month CD | 5.75% APY | 1.30% APY |
| 1-year CD | 5.60% APY | 1.72% APY |
| 2-year CD | 5.30% APY | 1.47% APY |
| 3-year CD | 5.13% APY | 1.37% APY |
| 4-year CD | 4.85% APY | 1.30% APY |
| 5-year CD | 4.77% APY | 1.37% APY |
Should I Wait for an Even Higher Rate?
It’s certainly possible CD rates could inch a little higher. The Federal Reserve has not indicated yet—because it hasn’t yet decided—whether it will implement another rate hike this year. Its next meeting will conclude Sept. 20 with an announcement that it’s either holding rates steady or bumping them a smidge higher. It’s not possible to know at this time what decision they will make.
Regardless of what they decide in September, there will still be two more Fed rate meetings in 2023, one in early November and one in mid-December. Because the central bank makes each of its rate decisions one-by-one and based on the latest economic data, any given meeting could result in a hike, a hold, or a decrease.
Still, financial markets always attempt to predict the Fed’s moves, and right now, markets are placing less than 10% odds on a September rate hike. After that, they place the probability at a third or less for an increase in November or December.
Though the future will remain unclear for a bit, a few things are fairly certain. First, any increase the Fed opts to make will almost certainly be for a minimal 0.25%, as it has eased off the throttle compared to 2022’s fast-and-furious hikes. Second, members of the Fed have said in recent public comments that they do not see the committee lowering rates until at least 2024.
For the CD shopper, this means it’s possible rates could still climb higher. But if the Fed holds rates steady in September, we could also see rates begin to soften. It’s also worth considering that any increase in CD rates at this point is likely to be minor, as the majority of the CD rate climb has already taken place. Sure, you may be able to earn another quarter percentage point. But on a CD already paying more than 5.00%, that’s a minimal boost—and it’s perhaps not worth the gamble of possibly missing out if rates decline before you lock in.
The Downside of High-Yield Savings Accounts
With the best high-yield savings accounts and best money market accounts also paying record rates right now, it could be tempting to just keep your savings in one of these liquid accounts. After all, the top rates on these accounts are not much below the best short-term CD rates. But remember: savings and money market accounts pay a variable rate, which means it can change at any time and without warning.
Once the Fed signals that it’s no longer likely to raise rates—and ultimately begins to lower its benchmark rate—the rates on savings and money market accounts will start dropping. And while new CDs offered at that time will also have lower rates, any CD you locked up before the rate decreases will continue to deliver its record APY until the end of its term.
Rate Collection Methodology Disclosure
Every business day, Investopedia tracks the rates of almost 100 banks and credit unions that offer savings accounts to customers nationwide, using that data to determine 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 savings 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 high-yield savings accounts, read our full methodology.