The top rates for high-yield savings accounts have surged to more than seven times what you could earn at the start of 2022. They’ve been boosted by a 14-month rate hike campaign by the Federal Reserve.
But the Fed’s latest move last week was minor, and more importantly, wording in the Fed’s announcement suggested for the first time in this campaign that the central bank could soon pause its increases. That could spell the beginning of the end for the current heyday we’ve been enjoying on savings account rates.
- The leader in our daily ranking of the best nationally available savings accounts has held at 5.02% APY for the past six weeks, after briefly touching a peak of 5.05% APY in mid-March.
- The Fed raised its rate the federal funds rate 0.25% last Wednesday—its tenth rate hike since its inflation-busting campaign began in March 2022—but indicated it may not make more increases this year. In fact, a rate decrease is possible.
- It’s very likely that the peak for savings account rates is on the near horizon, and that rates will begin to drop off in the coming weeks or months.
- If you can manage without a portion of your savings for awhile, it’s an excellent time to shift some your cash into a top-paying CD and lock in a great rate for months or years into the future.
Savings Account Rates Have Reached Record Highs
Interest rates for high-yield savings accounts are heavily influenced by the federal funds rate, which is set by the Federal Reserve. With inflation soaring in 2022, punctuated by a 40-year high inflation reading in June 2022, the Federal Reserve has been on a mission to raise rates significantly and quickly. It implemented seven consecutive rate hikes in 2022—four of them for a massive 0.75%—and then three 0.25% additional increases so far this year.
The federal funds rate is now at its highest level since 2007.
Because the interest paid by banks and credit unions on money held in the bank are directly influenced by the Federal Reserve’s rate moves, high-yield savings accounts have been taken along for the ride. Through January and February 2022, the most you could earn on any nationwide savings account was 0.70% APY.
But since the Fed announced its first hike in March 2022, the top savings rate has climbed dramatically, reaching as high as 5.05% in March this year. Today and for the last six weeks, the top rate in our daily ranking of the best savings accounts has held at 5.02% APY.
|Today’s Top 5 Savings Account Rates on Nationally Available Accounts|
|Institution||Today’s Rate||Minimum Ongoing Balance|
|CFG Bank||5.02% APY||$1,000|
|Newtek Bank||5.00% APY||Any amount|
|Vio Bank||4.85% APY||$100|
|First Foundation Bank||4.85% APY||$1,000|
Of course, the average or typical savings account will pay much less than the nation-leading high-yield accounts, with today’s average reading just 0.39%. This is low because many of the nation’s largest banks pay almost nothing on savings accounts, while figuring heavily into the FDIC average due to their massive size.
Still, the current reading is the highest average since the FDIC began publishing this data in 2009, and is more than six times the national average of 0.06% we saw before the Fed’s rate hikes.
Will Savings Account Rates Go Up This Year?
It’s possible that today’s top savings account rate of 5.02% APY won’t be the highest we’ll see. Some financial institutions could still raise their savings rates in response to last week’s quarter-point increase by the Fed. Or another rate increase by the Federal Reserve could, in theory, bump savings account rates higher. But there are three reasons this may not come to fruition this time around.
- Banks likely increased savings rates before last week’s Fed move, but won’t after: Banks and credit unions often don’t wait until a rate hike is officially announced. If they feel reasonably confident in market predictions that the Fed is going to make another increase, many will determine their rates in advance of the actual Fed announcement. You can notice this in the graph below, where many Fed hikes are preceded by a run-up in the top rate.
- Small federal funds rate bumps don’t pack much punch: Another factor is the size of the recent increase. Quarter-point increases are the smallest increment the Fed implements, and they often only trigger minor movement among banks and credit unions, especially coming after much more dramatic increases. For instance, after 4.25% in 2022 hikes, you can see in the chart that the smaller 0.25% increases in 2023 are generally followed by rate plateaus, not improvements.
- Future Fed rate increases seem less likely than before: Last week, the Fed signaled that it may or may not make further rate increases this year. This marks a notable departure from previous statements in which the Fed indicated its work of raising rates was not done. If banks and credit unions feel the Fed will now hold rates steady, so too will many of them.
In other words, you might get lucky and see savings account rates edge a bit higher as a result of the latest Fed increase. But the fed funds futures market’s overwhelming majority opinion is currently that the Fed’s rate-hike campaign is over. More than 80% of traders predict the Fed will hold on rates at its June meeting, meaning it’s very possible we are already at the peak for savings account rates.
Could Savings Account Rates Go Down This Year?
Rate decreases this year are also fair to expect. Market probabilities of future Fed moves vary widely over time, based on up-to-the-minute economic and financial news.
But at the time of this writing, about a third of futures traders predict the Fed will drop the fed funds rate at its July meeting, with a stronger majority forecasting a decrease by September. If a Fed rate decrease is announced, savings account rates will certainly begin to fall.
Each Federal Reserve decision is made independently and based on the freshest data it has available. Unexpected developments in economic news can have unforeseen effects. So it’s best to take predictions of Fed rate moves with a large grain of salt, especially when the next decision is still many weeks ahead.
Prolong Your High Yields with a Top-Paying CD
Since it seems likely you won’t be able to enjoy today’s record savings account rates much longer, a smart strategy is to siphon off a portion of your savings that you can manage without for some time and deposit it in a certificate of deposit. With a CD, you can lock up one of today’s exceptional yields from our daily ranking of the best CD rates, and it will be guaranteed for the duration of your CD.
The most common terms run from 3 months up to five years. So if, for instance, you know you can live without some of your money for a year, consider shifting it into a 12-month CD, where you’ll enjoy today’s rate for a full year to come.
For both savings accounts and CDs, rate announcements from banks and credit unions come without any warning. The bank where you have a savings account can drop your interest rate any day that it wants. And when hunting for a top-paying CD, you may see an excellent rate today that has evaporated tomorrow. So it’s best to decide to move on a top rate, and not fret about finding the perfect peak rate.
Rate Collection Methodology Disclosure
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.