For the first time since July, the Federal Reserve will meet this week to determine the future of interest rate policy in the United States. And with inflation sticky, many expect the central bank to issue its first interest rate hike since 2023. With a 94.5% likelihood that the benchmark interest rate will be hiked by 25 basis points, according to the CME Group’s FedWatch tool, both borrowers and savers will want to consider making some strategic moves now. And for savers, in particular, keeping your money stored in a traditional savings account with a meager average interest rate under 0.40% simply isn’t an option right now.
Instead, they should consider pivoting to a high-yield savings account. And, if they do so this week, they may be able to take advantage of a rising interest rate climate as banks move to adjust their offers upward in response to a higher Fed rate. But that’s not the only reason why a high-yield savings account could be worth opening this week. Below, we’ll break down three others that savers should understand now.
See how much interest you could be earning with a high-yield savings account here.
Here’s why a high-yield savings account is worth opening this week
A high-yield savings account can be a smart place to park your money in most economies, but it’s particularly advantageous right now. Here’s why:
It’s one of the best accounts to take advantage of a rising interest rate environment
High-yield savings accounts have variable interest rates that will adjust upward or downward based on market conditions. But with a Fed rate hike looming and the potential for it to be one of many versus a single outlier, savers should look to take advantage by opening a high-yield savings account now.
Not only will rates and returns increase alongside a rising interest rate environment, but they could do so before the Fed even formally raises rates, as many banks won’t wait for that formality to adjust their offers to savers. Consider shopping around online now, then, to see how high a rate you may be able to secure timed to this week’s Fed meeting.
Shop for the top high-yield savings accounts online today.
Interest rates (and returns) are already high
Interest rates on the top high-yield savings accounts are already competitive, with many hovering at or above 4% right now. Depending on your opening deposit, that could equate to a return worth hundreds or even thousands of dollars over the next year – not even counting for rate hikes still ahead.
In other words, a high-yield savings account has already been a lucrative place to keep your money, especially in recent years as inflation grew and the Fed raised rates. Now, it’s poised to become more profitable than it already was.
You’ll be able to pivot as needed in case conditions change rapidly again
High-yield savings accounts, unlike certificates of deposit (CDs), won’t require you to lock your money away to earn a competitive rate. Instead, you’ll maintain access to make deposits and withdrawals as you’re already accustomed to.
This flexibility is key in today’s unpredictable economy, and it’s something that should be leveraged appropriately. Should economic conditions change and your financial situation need to be modified, you’ll be able to pivot as needed in a way that some other accounts won’t permit without charging you an early withdrawal fee.
The bottom line
A high-yield savings account has served as a smart, strategic and profitable tool for savers in the interest rate landscape of recent years, and it’s positioned to become more advantageous this week and later this fall if interest rates are raised once again. That said, be sure to take the time to shop around for accounts and rates before making any transfers. Online banks, in particular, tend to offer more competitive terms than banks with in-person locations, so it may be worth starting your search there. And with online marketplaces listing all of the information you’ll need in one location, this process can start immediately.
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