In the past year, the Federal Reserve has implemented three consecutive rate cuts, resulting in a full percentage point decrease in the Fed rate. As a result, the yields on certificates of deposit (CDs) have also decreased. However, competitive annual percentage yields (APYs) of up to 4.75% are still available for terms of 10 months or longer, surpassing the national averages for traditional savings accounts by up to 10 times.
CDs remain a secure option for protecting your savings from declining rates, offering fixed APYs that remain constant throughout the term. This stability shields your funds from market fluctuations, allowing you to diversify your retirement portfolio or save for future financial goals with predictable returns.
If you’re not ready to commit to a long-term CD, consider creating a CD ladder to combine short-term gains with long-term stability. By spreading your deposit across multiple terms, you can generate staggered returns even as rates decrease over time.
It’s important not to delay, as while the Fed is expected to maintain current rates at the upcoming policy meeting, APYs are unlikely to increase further. Take advantage of the most competitive rates on FDIC-insured CDs, with quick signup processes and guaranteed savings extending into January 2026 or beyond.
For those seeking high-yield savings options, FDIC-insured digital banks and online accounts are currently offering APYs of up to 4.75%, with minimal or no minimum deposit requirements. Explore offerings from institutions like United Bank, Langley Federal Credit Union, and others to maximize your savings potential.
Remember, these online accounts are secure and backed by the FDIC or NCUA, ensuring protection for deposits up to $250,000. By utilizing CDs, you can earn stable returns while safeguarding your savings from rate fluctuations.
The FDIC, an independent government agency established by Congress, oversees the stability and public confidence in the U.S. financial system and provides insurance on consumer deposit accounts. Here are the national deposit rates for various account types based on a $10,000 minimum deposit, comparing January and February 2025:
– Savings: 0.41% in February (unchanged from January)
– Interest checking: 0.07% in February (unchanged from January)
– Money market: 0.64% in February (unchanged from January)
– 1-month CD: 0.22% in February (down 1 basis point)
– 3-month CD: 1.45% in February (down 2 basis points)
– 6-month CD: 1.63% in February (down 1 basis point)
– 12-month CD: 1.80% in February (down 2 basis points)
– 24-month CD: 1.45% in February (no change)
– 36-month CD: 1.31% in February (down 1 basis point)
– 48-month CD: 1.23% in February (down 1 basis point)
– 60-month CD: 1.31% in February (down 1 basis point)
CD rates are influenced by the Federal Reserve’s key interest rate, which impacts rates on various financial products. The Fed made significant rate adjustments in response to inflation concerns following the COVID-19 pandemic. It is anticipated that the Fed will maintain the current interest rate range of 4.25% to 4.50% after its upcoming policy meeting in March 2025.
According to ges, there is a 97% probability that the Federal Reserve will maintain its current interest rates. Economists are closely monitoring inflation and labor reports, speculating on when the Fed may make future rate cuts. Recent data shows inflation remaining somewhat stable, ranging between 2.5% and 4% since May 2023, after peaking at 9.1% in June 2022. The latest employment report, released on March 7 by the Bureau of Labor Services, indicates a slight increase in unemployment to 4.1% in February, with employers adding 151,000 jobs to payrolls. Despite falling slightly below expectations, this figure exceeds the revised numbers for January. The data does not yet reflect the impact of various policy changes, such as trade tensions, immigration plans, and potential federal workforce reductions, which have led to concerns among business leaders due to declining consumer confidence and economic uncertainty.
Attention now turns to this week’s inflation data for further insights into the economy’s health. Recent consumer price index figures showed a monthly increase of 0.5%, with annual inflation rising to 3%, driven by higher costs for food, fuel, and shelter. The producer price index also reported a rise in prices for goods and services. This persistent inflation trend is likely to delay any rate cuts by the Fed until later in the year.
Federal Reserve Chair Jerome Powell emphasized the overall strength of the US economy, noting that despite uncertainties, the country is in a favorable position. Powell suggested a patient approach in response to potential policy changes from the Trump administration.
The rate-setting panel led by Powell will announce its decision following the meeting on Wednesday, March 19, 2025, at 2 p.m. ET. For more details on the upcoming Federal Reserve meeting and how it may impact your finances, consider comparing certificate of deposit (CD) options based on factors like term length, rate of return, minimum deposit requirements, and the type of bank or financial institution offering the CD.
A high-yield savings account is available with no withdrawal penalties. Life can bring unexpected expenses, and sometimes you may need to access your funds before your certificate of deposit (CD) reaches maturity. Early withdrawal penalties are often calculated based on the number of months’ interest you would forfeit, such as 90 days for CDs with terms up to 24 months. Generally, the longer the CD term, the higher the penalty fee may be.
When is it advisable to break a CD? Insights from an expert on the implications of early withdrawals and breaking even.
Advantages of a CD:
1. Guaranteed returns: Earn a fixed interest rate over the term of your CD, which becomes available to you when the CD matures.
2. Higher rates compared to traditional accounts: Many banks offer CDs with rates that exceed those of standard savings or money market accounts. Digital and online banks typically provide the most competitive rates.
3. Various CD terms available: Choose from CD terms ranging from three months to five years or more to align with your financial objectives. Short-term CDs can offer higher rates than regular bank accounts, while longer terms may match the rates of top-tier high-yield savings accounts.
Disadvantages of a CD:
1. Early withdrawal penalties: Accessing your funds before the CD term ends may result in penalties equivalent to several months’ worth of interest, ranging from three to six months depending on the specific account and term.
2. Not the highest investment returns: While CDs provide a secure way to earn interest, other investment options like stocks, bonds, and mutual funds could yield greater returns in the long run. By committing to a CD, you could potentially miss out on increasing average interest rates.
3. Inability to add additional funds: Once your CD is locked in, you cannot deposit more money until the CD matures. At that point, you can transfer your funds to another account or renew the CD.
Alternative options to consider aside from CDs:
1. High-yield savings account: Offers variable rates of 5% APY or higher without penalties for withdrawals, allowing your savings to grow rapidly.
2. Money market account: Similar to a high-yield savings account, an MMA can offer superior rates compared to standard savings accounts while granting easy access to your funds.
3. Higher-risk investments: Stocks, index funds, and mutual funds obtained through brokerage accounts present the potential for greater returns than CDs, although they also involve higher risks.
To stay informed about CDs, ensuring the security and growth of your funds, explore our comprehensive guides tailored to your financial needs and budget. Be prepared for your CD’s maturity date by monitoring notifications from your bank and setting your own reminders to avoid missing important deadlines. Further details on your post-maturity options can be found in our extensive resources.
When your CD reaches maturity, banks profit by charging higher interest rates on loans than what they pay on customer deposits. This difference, known as a spread, is how banks make money. Unlike a regular savings account that allows flexible access to your funds without penalties, a CD requires you to keep your deposit locked in for a specified period, returning your initial amount plus interest when the account matures. This lock-in period, along with penalties discouraging early withdrawals, allows banks to effectively plan how to generate profits from your deposit. Online-only banks like Lending Club or SoFi are secure options, as they are either FDIC-insured chartered banks or partner with established banks to offer protected deposit accounts up to $250,000. Compound interest is the concept of earning interest not only on your initial deposit but also on the interest accumulated over time, helping your savings grow steadily. An account’s APY indicates the total interest earned on your deposit over one year, including compound interest. A jumbo CD requires a minimum deposit of $100,000, offering a fixed interest rate and term similar to regular CDs. While they previously provided higher interest rates, this may not always be the case due to current high interest rates set by the Fed. A no-penalty CD, also known as a liquid CD, allows you to withdraw funds before maturity without incurring penalties, although the interest rates may be lower than traditional CDs. Consider high-yield savings accounts that might offer comparable or higher rates in the current market. A CD ladder is a savings strategy that involves spreading your funds across multiple CDs to take advantage of high rates while still having access to some of your investment at regular intervals. Build a CD ladder to lock in top rates while enjoying rolling returns.
Today’s top rates have disappeared. What exactly is a brokered CD? It’s a type of certificate of deposit that you purchase through a brokerage firm instead of directly from a bank or credit union. Similar to traditional CDs, you select a term length that comes with a fixed interest rate. However, unlike standard CDs, brokered CDs can be acquired through your investment account either new or from other investors. Discover more about brokered CDs and important factors to consider before investing in one.
Distinguishing between saving and investing comes down to the accessibility of your funds and the level of risk involved. Saving involves keeping your money in secure accounts with minimal risk of losing your initial investment. On the other hand, investing entails purchasing assets such as stocks, bonds, or mutual funds that have the potential for higher returns. Delve deeper into the differences between saving and investing in our comprehensive guide to tailor the best strategy for growing your nest egg.
Please note: The annual percentage yields presented were accurate as of Monday, March 10, 2025, at 8:10 a.m. ET. APYs and promotional rates for certain products may vary by region and are subject to change.
References:
– National Rates and Rate Caps, FDIC. Accessed on February 19, 2025.
– Consumer Price Index Summary, U.S. Bureau of Labor and Statistics. Accessed on February 13, 2025.
– Producer Price Index News Release Summary, U.S. Bureau of Labor and Statistics. Accessed on February 14, 2025.
– Employment Situation Summary, U.S. Bureau of Labor and Statistics. Accessed on March 10, 2025.
– CME FedWatch Tool, CME Group. Accessed on March 10, 2025.
