Something that hasn’t occurred since July 2023 could be just days away – an interest rate hike courtesy of the Federal Reserve. After the central bank cut rates three times in the final four months of 2024 and repeated the pattern again toward the end of 2025, it’s now positioned to reverse course and issue an interest rate hike, instead. While economic data releases before the Fed finishes its next meeting on September 16 could reverse this trend, right now the chances of a rate hike sit at just over 50%, according to the CME Group’s FedWatch tool.
While a rate hike will cause further financial harm for borrowers already contending with higher costs due to inflation, it could be a boost for savers as they position themselves to earn a bigger return on their money. They won’t be able to do so with a traditional savings account, which comes with an average rate under 0.40% right now. But they can easily do so with a certificate of deposit (CD) or high-yield savings account, both of which have offered savers credible ways to earn 4% or more on their money in recent years.
Heading further in September, then, which account type will be better to actually open? While the answer to this question will vary among savers, there are some items to consider that can better inform next steps (or lack thereof).
Start by seeing how much interest you could be earning with a CD account now.
Is a CD or a high-yield savings account better to open this September?
CDs and high-yield savings accounts offer viable homes for your money both this September and the months and, potentially, years that follow. Here’s how to better determine which makes the most financial sense for you:
Why a CD account could be better to open this September
CDs currently have higher interest rates than the top high-yield savings accounts (depending on the term). So if you’re singularly focused on securing the highest rate around now, a CD will be better. But that’s not the only reason why you may prefer it to a high-yield savings account in today’s economic landscape.
The CD interest rate is also fixed, meaning that you’re guaranteed to earn a predictable return no matter what happens to the rate climate in the interim. A high-yield savings account, by contrast, has a variable rate that will be responsive to changing market conditions. Opening a CD now, however, will allow you to adopt a “set it and forget itƒ” approach to your funds in a way that you won’t be able to enjoy with accounts whose returns rise or fall based on the economy.
Just be sure of your ability to maintain a CD, no matter the deposit or term, through to its maturity date as an early withdrawal fee will be issued if you attempt to regain access to your money early. And that could negate your earned interest and bring you right back to where you started your savings journey.
Learn more about your current CD account options here.
Why a high-yield savings account could be better to open this September
Sure, a high-yield savings account has a slightly lower interest rate than the top CDs do now. And, yes, that account is variable. But it could easily become the more profitable one if the Fed proceeds with a new rate-hike campaign. The CD account rate, meanwhile, will be frozen at the same level you opened it with. So, if you want to be positioned to take advantage of higher interest rates ahead, a high-yield savings account could be better to open this September.
Similarly, if you want (or need) to maintain access to your funds in today’s uneven economic terrain, a high-yield savings account will allow it, without fees, in a way that the CD account won’t. If you want to find the most profitable account, however, you’ll likely need to use an online bank as they often offer better rates and returns than banks with in-person branches (though this caveat frequently applies to CDs, too).
The bottom line
Both CDs and high-yield savings accounts have unique pros and cons that can be particularly timely this September, with an interest rate hike looming. Examine each account type carefully to better decide on which one aligns with your savings goals and strategy, both now and in the months ahead. But don’t dismiss the advantages of splitting your funds between both account types, too. While this could be an unconventional approach in a different economy, that’s far from where most savers find themselves now. So, thinking outside of traditional limits could actually result in the most protection and biggest returns on your money.
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