High Yield Savings
CDs
IRAs
SupportFive Strategies for Getting More Out of Your Savings Accounts and CDs
July 3, 2023
Two of the best ways to help you save money for short-term priorities such as cars, vacations, or just saving for a rainy day are high-yield savings accounts and certificates of deposit (CDs). Here are five strategies to ensure your savings account and CD funds are working just as hard to grow your money as you did to save the money in the first place.
Tip 1: Check Out Online Banks for Best Savings Account and CD Rates
It’s pretty common to compare available interest rates for high-yield savings accounts and CDs by searching online. As of June 2024, average interest-bearing checking accounts deliver only 0.08 percent annual percentage yield (APY)1; typical high-yield savings accounts are offering around 4 percent APY2; and the best CDs offer higher rates.
Tip 2: Consider Interest Rate Trends
Another factor to keep in mind as you decide whether to use high-yield savings accounts and CDs is whether interest rates are trending up or down. For savers, interest rate increases usually mean banks will raise interest rates for their savings account and CD customers in order to stay competitive. On the other hand, when interest rates are trending downwards, banks will usually adjust their rates down as well.
Tip 3: Using CD Ladders
While high-yield savings accounts have variable interest rates that can rise at any time, CD buyers are typically locked into a fixed rate at the time of purchase. CD buyers may wish to understand the potential power of using a “CD Ladder.” With the CD ladder approach, instead of buying one large CD, a person would break the purchase into smaller CDs that mature over different time periods. That affords you the opportunity to buy higher interest rate CDs with the proceeds if interest rates rise.
So for example, instead of investing $10,000 in a single CD, you could build a CD ladder by buying a $2,500 CD that matures in one year, another $2,500 CD that matures in two years, a $2,500 CD that matures in three years, and a $2,500 CD that matures in four years. Then, after the first CD matures, you could buy another CD.
TIP 4: Watch Out for Fees and Minimum Balances
One thing to watch for from both online and traditional banks are unexpected fees and restrictions. Some banks and financial institutions offer higher rates but require minimum balances. Others nickel-and-dime you with a variety of charges: fees to set up accounts, or fees for paper statements.
TIP 5: Ask About Security And Reliability
Before deciding which institution to trust your money with, examine each potential partner’s credibility, and look for a robust security process that safeguards your private information and funds.
Among the questions to ask your provider: Does it use multi-factor authentication (MFA) to prevent unauthorized access? Does it use Secure Socket Layer (SSL) encryption to create a secure connection with your browser when you log in or fill out an application online? Does it automatically log you out of your account after a period of inactivity to prevent others from seeing or accessing your online accounts?
High-Yield Savings Accounts vs. CDs
High-yield savings accounts offer variable interest rates that are typically higher than regular checking and savings accounts.
Where savings accounts have variable interest rates, CDs offer fixed interest rates. But in return for the interest rate certainty, funds can be accessed without penalty only when the CD reaches maturity. CDs generally mature in terms ranging from 6 to 60 months, with many stops in between.
The Bottom Line
High-yield savings accounts and CDs are trusted tools that help you save for short-term spending priorities, especially in an environment of expected interest rate movements. Savers are checking out online banks and financial institutions that many times offer higher rates, are considering CD ladders, avoiding unwanted fees and restrictions, and asking good questions about the security of potential high-yield savings account and CD providers.
Watch Your Savings Grow
Disclosure
This article has been prepared by a third party and is made available to you for information purposes only. This third-party article does not represent the opinions, views, or analysis of American Express, and American Express does not make any representations as to its accuracy or completeness. American Express offers products similar to those discussed by this article. If you have questions about the matters discussed in this article, please consult your own legal, tax, and financial advisors.
Sources
1. “US Interest Checking Account Rate,” YCharts; https://ycharts.com/indicators/us_interest_checking_account_rate
Accounts offered by American
Express National Bank. Member FDIC. Each depositor is insured to at least $250,000 per depositor, per insured bank, per ownership category.
* The Annual Percentage Yield (APY) as advertised is accurate as of . Interest rate and APY are subject to change at any time without notice before and after a High Yield Savings Account is opened. Interest Rate and APY of a Certificate of Deposit account is fixed once the account is funded. [There is no minimum balance required to open your Account, to avoid being charged a fee, or to obtain the Annual Percentage Yield (APY) disclosed to you]
** The national rate referenced is from the FDIC's published Monthly Rate Cap Information for Savings deposit products. Visit the FDIC website for details.
1 There is no minimum balance required to open your Account, to avoid being charged a fee, or obtain the Annual Percentage Yield (APY) disclosed to you.
2 The interest rate and Annual Percentage Yield (APY) will be disclosed in your account-opening documents, which you will receive after funding your Account. The interest rate and APY for your CD will be fixed and will either be (i) the rate reflected at application submission or (ii) the rate being offered when your CD is funded, whichever is higher. All CDs must be funded within 60 calendar days from the time we approve your application or will be subject to closure. After the CD is opened, additional deposits are not permitted. Early CD withdrawals may be subject to significant penalties which could cause you to lose some of your principal. Please see the Consumer Deposit Account Agreement and Savings Schedules for additional information.
3 For purposes of transferring funds to or from an external bank, business days are Monday through Friday, excluding holidays. Transfers can be initiated 24/7 via the website or phone, but any transfers initiated after 7:00 PM Eastern Time or on non-business days will begin processing on the next business day. Funds deposited into your account may be subject to holds. See the Funds Availability section of your Consumer Deposit Account Agreement and Savings Schedules for more information.
4 Calculations are estimates of expected interest earned. Actual results may vary, based on various factors such as leap years, timing of deposits, rounding, and variation in interest rates. The first recurring deposit is assumed to begin in the second period after any initial deposit.
5 IRA Contributions are subject to aggregate annual limits across all IRA plans held at American Express or other institutions. IRA distributions may be taxed and subject to penalties based on IRS guidelines. Required minimum distribution, if applicable, is only relevant to this IRA plan and does not take into consideration other IRA plans held at American Express or other institutions. Please see IRS.gov for more information. We recommend you consult with a financial or tax advisor when making contributions to and distributions from an IRA plan account.