CD Rates Are Rising. Should You Move Your Savings?

# CD Rates Are Rising. Should You Move Your Savings?

Certificates of deposit are back in focus as rates climb higher than high-yield savings accounts in many cases. The shift creates a real decision point for savers sitting on cash.

Here's the current landscape. High-yield savings accounts currently pay between 4.5% and 5.35% annually at top-tier banks like Marcus by Goldman Sachs, American Express Bank, and Ally Bank. Meanwhile, one-year CDs now yield 5.25% to 5.50%, and longer-term CDs push even higher. A five-year CD at some institutions reaches 5.10% to 5.35%. These rates beat what you earn leaving money in even premium savings accounts.

The math works in CD favor for anyone with money they don't need to access immediately. Lock $10,000 into a one-year CD at 5.40% and you earn $540 in pure interest. The same $10,000 in a 5.0% high-yield savings account generates $500. Over multiple years or with larger balances, this gap compounds.

But there's a trade-off. CDs lock your money away. Break a one-year CD early and you typically forfeit three to six months of interest. Five-year CDs carry steeper penalties, sometimes running to one year of interest. High-yield savings accounts offer complete flexibility. You withdraw whenever you want with no penalty.

Savers should consider this ladder strategy. Split your emergency fund and other cash reserves across multiple CDs with staggered maturity dates. Put three months of expenses in a one-year CD at 5.40%. Place another three months in a two-year CD at 5.30%. Keep one month in a high-yield savings account for true emergencies. When the one-year CD matures, you have access to that money, and you can renew it or shift it to another term.

Current CD leaders include: - Ally Bank: 5.50% APY on one-year CDs, 5.10% on five-year - Marcus by Goldman Sachs: 5.35% on one-year, 4.85% on five-year - American Express Bank: 5.30% on one-year, 5.05% on five-year - Connexus Credit Union: 5.65% on one-year (for members)

These rates won't last forever. The Federal Reserve has signaled that interest rate cuts may come in 2024. When the Fed cuts rates, banks immediately lower CD rates offered on new products. Anyone waiting likely captures lower yields six months from now.

This timing matters. Locking in a 5.40% to 5.65% CD rate today beats waiting and accepting a potential 4.5% rate later. The difference on a $25,000 CD over one year amounts to $225 in lost earnings.

Move your savings to CDs if you have money designated for a specific goal within one to five years. This includes down payment funds, car purchase money, or home renovation budgets. Keep high-yield savings accounts for genuine emergency reserves you might access on short notice. Laddering CDs across different maturity dates gives you both the rate advantage and some liquidity without the penalty cost.