If you’ve been sitting back, relaxing, and watching the interest pile up in your high-yield savings account over the past couple of years, then I can relate — I’ve been in that same boat. The current federal funds rate of 5.33% has been good to deposit account holders, with the best high-yield savings accounts offering APYs that are generally in line with that number (the top APY on our list is currently 5.31%, and that’s no coincidence)
But you can’t open up the paper or turn on the news without hearing that the Fed plans to begin lowering the federal funds rate in September, with continued decreases likely for at least the next couple of years. The Fed predicts that by the beginning of 2026, rates could be as low as 3.1% — more than 2 full percentage points below the current.
What does that mean for our savings account APYs? Unfortunately it likely means they’ll look pretty similar. And it’s for this reason that today is an excellent time to lock in one of the best CD rates on a longer-term CD.
Why does term length matter?
With CDs, term length could mark the difference between choosing to lock up your money in a CD vs. leaving it in savings or investing some other way (like a brokerage account).
Our Picks for the Best High-Yield Savings Accounts of 2024
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Capital One 360 Performance Savings APY 4.25%
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APY 4.25%
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Min. to earn $0 |
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CIT Platinum Savings 
APY 5.00% APY for balances of $5,000 or more
Min. to earn $100 to open account, $5,000 for max APY
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APY 5.00% APY for balances of $5,000 or more
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Min. to earn $100 to open account, $5,000 for max APY |
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American Express® High Yield Savings 
APY 4.25%
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APY 4.25%
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Min. to earn $0 |
In short, you’re in it for the guarantee. If you’re worried that Fed predictions will come to fruition and savings rates will plummet by 2 percentage points or more in the next two years (and possibly even further after that), then the peace of mind that locking in a high CD rate today provides could be just the thing to head off any regrets down the road.
If you lock in a 4.30% APY on a 5-year CD now, then you can rest reasonably assured that your APY will outpace that of the federal funds rate (and thus, savings accounts) over that five-year stretch. And when savings rates begin their gradual decline, you won’t have to wallow in the regret from not having made a move sooner.
How much could you earn?
The amount you earn in your long-term CD will depend on how much you have to invest and the exact APY you lock in, but let’s look at a few basic scenarios using our example of a 5-year CD earning 4.30% from above:
| $5,000 Deposit | $10,000 Deposit | $20,000 Deposit | |
|---|---|---|---|
| Interest Earned After 5 Years | $1,171.51 | $2,343.02 | $4,686.05 |
| Total After Interest | $6,171.51 | $12,343.02 | $24,686.05 |
Source: Author’s calculations
Even our lowest deposit guarantees that your money will have grown by more than $1,000 over five years, with absolutely no requirements on your part other than opening the account and leaving that money alone. The more cash you have to deposit, the more growth you’ll see by the end of your CD’s term.
Only invest in a long-term CD if…
Make sure the following are true before you lock up your funds in a CD.
- You have separate emergency savings that are easily accessible and will allow you to make it through your CD’s term without having to withdraw the money and pay an early withdrawal penalty.
- Your investing timeline has a medium term of around three to five years. Short-term cash should go in savings, while cash you won’t need for the long term should go in a brokerage account where it can compound and grow to its maximum ability. Historically, the S&P 500 has an average return of about 10% — even the most premium CD rates can’t touch this number.
- You want to earn the most possible interest on your funds over a longer stretch. Admit it, it’s going to feel excellent come 2026, 2027, and beyond when your 5-year CD is still earning upward of 4.00% APY. Meanwhile, your neighbor’s savings account APY is languishing around 2.50% or 3.00%, or even lower.
FOMO (fear of missing out) is legit, and in today’s high, but soon-to-drop rate environment, there’s a very real possibility that savers who are content with keeping their money in a high-yield savings account may experience it.
Open a CD and lock in a high APY today, while rates are hot. Then, over the next several years, while everyone else is mourning lower rates, you can instead relax and be grateful for the foresight you had to open your long-term CD.
