CD and Savings Rates Are Up After the Latest Fed Rate Hike. These Are the Best Right Now:

Photo to accompany a story about the best CD and savings rates for week of December 19, 2022
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Savings and CD rates are already rising after the Federal Reserve’s latest rate hike

The Fed last week announced its decision to move rates up for the seventh time this year, in an ongoing push to lower inflation. The federal funds target rate range is now at 4.25% – 4.50%. 

Savings and CDs don’t directly rise with that rate, but today, some high-yield savings accounts are approaching 4%, and average high-yield CD rates are above 4% across several terms

For now, those savings and CD rates will still swing on the upside, says Jose Hernandez, NextUp honoree, founder of Financial University, and author of the forthcoming book “Invest Like You Mean It.”

“Short-term savings rates are going to mirror pretty closely what’s going on with the federal funds rate,” says Hernandez. Like other experts we’ve spoken to recently, he says you can probably expect your savings rates to keep going up until there are signs of “a pause or a pivot” from the Fed.

But the latest rate hike still has experts concerned about economic uncertainty ahead, and the potential for a recession and a softer job market next year. 

Fortunately, there are steps you can take now to prepare for the future while taking advantage of great savings rates today.

Here’s what you need to know about savings rates and spending this week:

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

Quite a few banks increased high-yield savings account rates this week, either in anticipation of the Fed’s rate hike or directly following it. 

By comparison, Bankrate’s average savings remain at 0.19%, while the FDIC is now at 0.30%. These national averages include traditional savings account rates, which are lower — sometimes as low as 0.01%. 

Our weekly analysis

Average high-yield savings accounts we track at NextAdvisor are much higher, with many banks we track inching closer to 4%, or even passing that amount, this week. The average rate increased by 0.09% this week: 

Average Savings Rate
Last week3.34% APY
This week3.43% APY

Here’s a closer look at how some of the best high-yield savings account rates have moved this year. Today, most high-yield savings rates offer between 3% and 4%. 

Putting money in a high-yield savings account with a competitive rate can help you earn more toward your savings and goals over time. Here are some of the best rates based on banks we track at NextAdvisor:

The Best CD Rates This Week

CD rates increased marginally this week. 

For now, experts still recommend sticking to short-term CDs as the Fed keeps raising rates. But when the Fed slows rate hikes, or pauses, longer CD terms could become a better option.

The FDIC’s average rates for CDs updated mid-week. Now, those rates are 1.07% for one-year CDs, 1.02% for three-year, and 1.09% for five-year. However, Bankrate’s weekly national survey shows that one-year CDs went up significantly from 1.24% to 1.36%, and the average three-year CD rate moved 1.04% to 1.13%. Five-year CDs also saw a sharp increase from 1.09% to 1.16%. 

Based on banks and CD terms that we track, one-, three-, and five-year terms went up this week. Here’s a closer look compared to last week:

1-year Term3-year Term5-year Term
Last week4.20% APY3.78% APY4.05% APY
This week4.26% APY3.81% APY4.06% APY

Here are the best CD rates by term this week: 

1-Year CDs

  • CFG Bank: 4.86% APY 
  • Live Oak Bank: 4.60% APY 
  • Bread Savings: 4.50% APY 

3-Year CDs

  • CFG Bank: 4.60% APY 
  • Bread Savings: 4.50% APY 
  • Sallie Mae: 4.40% APY 

5-Year CDs

  •  CFG Bank: 4.60% APY 
  • Bread Savings: 4.50% APY
  • Sallie Mae: 4.25% APY

Savings Rates in the New Year 

Despite last week’s lower hike, the Fed is not done raising interest rates. 

“They’re signaling that they might continue to raise some more next year. I don’t think that it will be as high, it might be more moderate,” says Anna N’Jie-Konte, NextUp honoree, financial advisor and founder of Dare to Dream Financial Planning.

Even Fed Chair Jerome Powell has reiterated that it’ll take more to bring down inflation to the 2% target: “We’ve covered a lot of ground, and the full effects of our rapid tightening so far are yet to be felt, Powell said in a press conference following last week’s announcement. “Even so, we have more work to do.”

The downside of those ongoing hikes though is the greater likelihood they can make for an impending recession, which some experts think is still very likely.

“We’ll see a big softening up in a multitude of jobs and the labor market having an impact on what the Fed does with rates moving forward,” says Hernandez.  

While they hope a “soft landing” can avoid a lot of distress, it’s still unclear just how much further rates need to go up, or how long they must stay elevated, before prices stabilize. 

But one thing is clear: the time to prepare is now.

High-yield savings account rates will remain competitive, especially for online banks, as long as the Fed keeps rates high. Keeping a well-stocked emergency fund in a savings account with a competitive rate can help you feel more secure in case of a job layoff or unexpected expense.

Pro Tip

Automate your savings to ensure you’re putting money away regularly. You can set up recurring transfers from your checking account to your high-yield savings account. You may also be able to allocate a certain amount from your paycheck with your employer to go directly to the account. That way, you won’t have to think twice about setting aside savings for the unexpected.

While your savings account interest grows, so will any variable-rate debts. Pay off outstanding balances as quickly as possible to avoid paying more in interest as rates continue to go up — especially on exceptionally high-interest credit card debts. If you’re still working to grow your savings, set up a plan to balance your debt and savings with your monthly budget.

Here’s more about what the latest Fed rate hike means for your saving and spending for now and in the new year. 

Savings and CD Rate FAQs

Does the Fed’s interest rate affect savings accounts?

Even though savings account rates aren’t directly tied to the Fed’s moves, banks typically move alongside the Fed’s decision to raise or lower interest rates. Right now, as the federal funds target rate range increases, many banks are pushing savings rates higher. Whereas, if the Fed pauses rate hikes, banks may do the same.

Where do you put your savings during inflation?

During inflationary periods in the economy, it’s best to keep an emergency fund in a high-yield savings account where you can earn interest and have easy access in case you need it. But if you’re saving for longer term goals or retirement, it’s best to stay the course with longer-term investment strategies.

Where can I put my money to earn the most interest?

It depends on your goals. If there’s a chance you’ll need to quickly access the money, it’s best to put your savings in a high-yield savings account or short-term CD with a competitive interest rate. If you’re investing the money for long-term goals, such as retirement or buying a house in a few years, longer-term investments in treasury bonds, investment funds, and other options may yield a better return.

Who is paying the highest rate on CDs?

Merrick Bank has the highest six-month CD rate, with a 4.40% APY. However, it requires a $25,000 minimum deposit. If you’re willing to set aside the money for longer, CFG Bank offers a 4.86% APY on a one-year CD, and it requires a $500 minimum deposit.

Who has the best savings rate right now?

Currently, UFB Direct has the highest savings account rate with a 4.11% APY.