The Best Savings and CD Rates Keep Jumping Higher. What It Means for You

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Savings and CD account rates are jumping up just over one week since the latest Fed rate hike

Banks are aggressively raising both high-yield savings rates and CDs, especially for six- and twelve-month terms. And the trend will continue as long as the Federal Reserve uses rate hikes as a means to tame runaway inflation. 

Savings and CD rates that banks set on their accounts tend to move alongside the Fed’s rate range. As long as the Fed raises rates, you can count on your savings interest rate to get even better. 

However, the rate hikes also lead to financial strain in other areas of your finances, from higher mortgage rates to more expensive credit card and loan debts. While rising interest and inflated prices aren’t an easy combination to navigate, saving is one big defense you have right now. 

If you have the flexibility to spend less that’s a huge skill to have, says Harrison Hinz, CFP and financial advisor for First Pacific Financial in Vancouver, Washington. “Not only for now, but throughout life.”

Here’s a closer look at the best savings and CD rates this week and how you can balance your financial goals as economic uncertainty grows. 

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.

What Are the Best Savings Rates This Week? 

Savings rates from several different banks increased this week, as the Fed’s latest rate hike takes effect. 

Bankrate’s national survey of savings rates stayed the same this week, at 0.16%, along with the Federal Deposit Insurance Corporation’s national monthly index at 0.21%. Both of these averages include traditional savings accounts which often are lower than high-yield savings rates. 

But several of the banks we track at NextAdvisor increased savings account rates this week, bumping the average from 2.89% to 3.06%. That marks the first time the average savings account rate has crossed 3% so far this year. 

Here are a few of the highest savings account rates right now: 

  • UFB Direct: 3.83% APY
  • TAB Bank: 3.64% APY
  • Bask Bank: 3.60% APY
  • Bread Savings: 3.50% APY
  • Dollar Savings Direct: 3.50% APY
  • Salem Five Direct: 3.50% APY

What Are the Best CD Rates This Week?

CD rates are up again this week, too, with short-term CDs, in particular, rising swiftly after the latest rate hike. 

Bankrate’s weekly national rate survey shows that the average one-year CD increased by 0.02% to 1.13%, while three-year CDs remained the same at 1.00% average APY and five-year CDs moved slightly, by 0.01% to 1.03%. 

Rates we track at NextAdvisor saw bigger jumps this week. One year CDs went from 3.81% to 4.04%. Three-year CDs moved from 3.61% to 3.73%. And five-year CDs went from 3.87% to 4.01%.

Here are the best CD rates based on our analysis right now: 

1-Year

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

Short-Term CDs Get Better

CD rates are quickly growing more competitive as federal rate hikes go on, especially for shorter terms. For example, a six-month CD averages just under 3.00%, which can be useful for a short-term goal. On the other hand, many high-yield savings accounts offer 3.00% APY or higher, making them a great place for your emergency fund or any savings you need to keep liquid. 

“CDs are a lot more attractive than they were even six months ago,” says Sara Stanich, a certified financial planner and founder of Cultivating Wealth, a financial planning firm. 

Stanich says she usually recommends sticking to high-yield savings accounts for flexibility and accessibility. But as they grow more competitive she says CDs may be a better option for some people, especially if you already have a fully stocked emergency fund. It wouldn’t be surprising to see shorter-term CDs reach an average 4% by the end of the year, says Stanich, and one-year or two-year CDs closer to 5% or 6%. 

If you’re still building an emergency fund, stick to a high-yield savings account — you’ll have the option to make contributions over time and can access your money whenever you need it in case of emergency. 

After you’ve set aside three to six months of emergency savings, though, putting some savings into a short-term CD can be a good way to save toward other goals while earning a return, says Stanich. For example, maybe you’re planning to go back to school next fall, or you want to put some money aside for an upcoming vacation.

Pro Tip

Stanich recommends building a CD ladder with six-, 12-, 18-, and 24-month CDs to maintain liquidity while taking advantage of higher rates. Every six months, you can choose to move your money into a new CD, depending on interest rates, or consider other savings options. The CD ladder is also good for semiannual goals you may have, such as home repairs or car maintenance.

Saving for Economic Uncertainty 

Despite solid returns on your savings, rising interest rates combined with inflated prices have experts concerned about higher unemployment and economic downturn. In fact, the Fed has signaled that labor market conditions could get tough before inflation is back under control.

“They know that the unemployment rate is going to have to go up, and they have made statements that companies are going to decrease positions within the firms, and pretty much it’s going to be expected,” says Shannon Grey, certified financial planner and founder of InvestEdge Planning, a financial planning firm in San Diego, California. “However, their main goal is to be aggressive in fighting inflation.” 

As long as inflation remains high, we can expect the economic downturn to impact employment, costs, debt, and more. In the wake of uncertainty, now’s the time to take a close look at your savings and budget. 

One of the best ways to prepare yourself is with an emergency fund, or a few months’ expenses set aside in a high-yield savings account. Experts generally recommend three to six months, but you may consider adding to that depending on how secure your income is, how many people are in your household, and other factors. And with inflation still high, it can help to also account for more costly fixed expenses into account, such as the cost of groceries or your electricity bill for colder seasons. 

“You can’t predict the future, and having money set aside for any given thing — whether it’s health, the economy, or any other unexpected event. Reviewing what you have in cash reserves is important,” says Hinz. 

If you’re just starting to save, start small and put away what you can every month or every pay period. You can also set up regular recurring transactions to automate saving. Over time, the funds will add up. You may be able to set aside more money by cutting down on other discretionary expenses, such as eating out or monthly subscriptions. 

Ultimately, make sure every dollar you earn is working for you. Move the money not dedicated to monthly expenses out of your checking account and into savings to avoid spending it, says Stanich. 

“I believe strongly that if you don’t make plans for the dollar, it’s going to get spent,” echoes Hinz. 

Pro Tip

If you’re still able to invest for retirement or future goals, continue to do so. The return you earn on your long-term investment can far outweigh the return you’ll get on a CD or savings account. “It’s best to just continue investing. Buying into the market at different prices and doing it slowly over the long term is the best strategy,” says Stanich.

Savings and CD Rate Frequently Asked Questions 

Who has the best savings rates right now?

The highest savings account rate right now is offered by UFB Direct, with a 3.83% APY.

Where should I put my savings?

Where you put your savings in today’s rising rate environment depends on your short- and long-term goals. You should always keep your emergency fund liquid in a high-yield savings account. But the best places to save your money depends on when you’ll need the money and your personal preference.

Are CD interest rates going up in 2022?

Yes, experts predict that as long as the Fed continues to raise interest rates, we can expect CD rates to go up for all terms.

Fed Rate Hike and Savings Resources 

The Fed’s latest rate moves can impact every aspect of your finances. Here are more resources that break down what the rate hikes mean for your money now and in the future.