The Best Savings and CD Rates Top 4%. They Could Go Even Higher After This Week’s Fed Rate Hike

Photo to accompany a story about the best CD and savings account rates for the week of December 12, 2022
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The Federal Reserve’s last rate decision of the year could have an impact on your savings. 

The Fed increased its target federal funds target rate to 4.25% – 4.50% this week, in the seventh consecutive rate hike of 2022, designed to tame runaway inflation.

With signs beginning to point to the Fed’s moves succeeding against inflation, the new year could bring slower rate increases or even a standstill in rate hikes. Fed Chair Jerome Powell signaled in a press conference following the announcement that more moderate rate hikes are still to come, though the Fed’s focus may be shifting to just how long today’s high rates will last. 

“I hope that we’re preparing for a softer landing,” says Courtney Ranstrom, CFP, and partner for Trailhead Planners, a financial planning firm in Portland, Oregon.

While savings and CD rates will get better after today’s rate hike, that could mean slower rate increases or banks holding today’s high rates in the weeks and months to come.

Here’s more about today’s savings and CD rates and what to know now: 

How NextAdvisor Analyzes CD and Savings Rates

We compare three different averages in our average CD and savings rate analysis. First, we review national deposit rates from the Federal Deposit Insurance Corporation (FDIC) and Bankrate’s national index of deposit accounts based on a weekly survey (like NextAdvisor, Bankrate is owned by Red Ventures). We also calculate the current average rate of each bank on our list of best CD rates and best savings rates — you can find more about how we choose the banks included in our lists on those pages.

The differences between national average savings rates and NextAdvisor’s analysis of interest rates is largely due to the much higher APYs that online banks pay.

National surveys from the FDIC and Bankrate include many different types of financial institutions, including large national banks that charge as little as 0.01% APY. Our lists, on the other hand, is made up of online or hybrid banks with fewer overhead costs, which allows them to pass on savings in the form of interest to customers.

The Best Savings Rates This Week

Savings rates didn’t move much this week but there were a few increases. A few banks on our list even moved above 4.00% APY, marking the first among our top high-yield savings accounts to pass the threshold. 

Both Bankrate and FDIC national surveys stayed the same this week. Bankrate’s current average savings rate is at 0.19%, while the FDIC is at 0.24% APY. The national averages also include traditional savings accounts, which have lower interest rates — some as low as 0.01%. 

However, the average high-yield savings accounts we track at NextAdvisor are much higher. The average among these accounts moved up slightly.

Average Savings Rate
Last week3.27% APY
This week3.37% APY

Here are some of the best high-yield savings account rates this week: 

The Best CD Rates This Week

CD rates increased slightly this week, following experts’ recent predictions that rates will continue to rise, if not significantly. 

Bankrate’s weekly national rate survey shows that one-, three-, and five-year CD averages all increased by 0.02%. One-year CDs went up slightly from 1.22% to 1.24%. Three-year CDs moved from 1.02% to 1.04%, and five-year CDs 1.07% to 1.09%. 

CD rates that we track at NextAdvisor remained the same this week across all terms.

1-year Term3-year Term5-year Term
Last week4.20% APY3.78% APY4.05% APY
This week4.20% APY3.78% APY4.05% APY

Here are the best CD rates by term this week: 

1-Year 

  • CFG Bank: 4.75% APY
  • Live Oak Bank: 4.50% APY
  • Bread Savings: 4.50% APY

3-Year 

  • CFG Bank: 4.60% APY
  • Bread Savings: 4.50% APY
  • Sallie Mae: 4.50% APY

5-Year 

  • Bread Savings: 4.75% APY
  • CFG Bank: 4.60% APY
  • Sallie Mae: 4.55% APY

What This Week’s Fed Decision Means for Savings Rates 

Like we’ve seen throughout 2022, savings account and CD rates tend to go up as the Fed raises rates. After another Fed rate hike this week, expect even better savings rates in the near term.

As the Fed increases its target rate, banks’ savings and CD rates will continue to go up slightly, but lag behind a bit, says Kevin Lao, CFP and founder of Imagine Financial Security, a financial planning firm in Jacksonville, Florida. “You’ll start to see that uptick, and we’ll probably continue to see that for a while,” he says. 

But if the Fed slows the rapid pace of rate increases, and keeps rates stagnant for a while, you may not see banks raise savings rates much. Many banks have already pushed rates as high as we can expect them to, for now, Lao says.

That doesn’t mean you can’t still get a very competitive rate. Even though interest rates likely won’t see big jumps, they’ll remain steady for a while. “I don’t anticipate rates going back down,” Lao adds.

Should You Get a Savings Account or CD?

Amid still-high inflation and ongoing concerns of economic downturn, the best thing you can do now is stay the course and focus on contributing toward your financial goals — like an emergency fund or buying a home

“Once you have your financial plan and you have your goals, you can shut out a lot of the economic noise and work on things that are important for your household,” says Ranstrom. 

Despite this year’s focus on rising rates, a great return on your money isn’t the only thing you should consider. The best account for you depends on a few factors, including your time horizon and whether you’ll need regular access. 

“I like to make sure the focus is not on yield,” says Lao. Instead, focus on your goals and the purpose of the money. 

If you’re saving toward your emergency fund or money you may need access to quickly, put the funds in a high-yield savings account. You’ll get a solid return and have the option to make contributions over time but can also withdraw when you need to without paying a penalty. 

On the other hand, a short-term CD can be a better option if you know you won’t need the funds for a while. CDs earn slightly higher rates today, and if your savings goal aligns with the CD term, you can guarantee a fixed return without penalty when you withdraw after the CD matures.

Long-term CDs can still be valuable, too, depending on your goals. For instance, if you’re nearing retirement age and want to begin moving some money into less-risky accounts, to avoid stock market volatility. Experts generally don’t recommend long-term CDs for many savers now, though, because there’s a chance that rates will continue to rise (and you’d miss out on better returns to come).

If you’re still curious about how the Fed’s rate changes can impact your money and future goals, these resources can help: 

Savings and CD Rate FAQs

What is considered a good CD rate?

Based on the best banks we track at NextAdvisor, most CD rates are around 4%, depending on the term. The average one-year CD rate is 4.20%, while three-year CDs are at 3.78%, and five-year CDs average at 4.05%.

Are CD rates higher than savings accounts?

It depends on the bank and term. Most banks are offering slightly higher rates on CDs, but as interest rates continue to rise, savings rates could catch up. Right now, the average savings rate among banks we track is 3.30%, compared to 4.20% for a one-year CD rate.

Is it worth opening a three-month CD?

Depending on your goal, a three-month CD could be worthwhile. You may choose a three-month CD to lock away the money to avoid touching it. However, a high-yield savings account may offer a higher interest rate and more liquidity in case you need the money sooner.

How often do interest rates on savings accounts change?

Savings rates we track at NextAdvisor change frequently, but it varies. Some banks increase interest rates weekly, while others are less frequent — every two to four weeks.