This week, the Federal Reserve decided tofor the second time this year. This is welcome news to consumers, and while it means savings rates won't go up much in the near future, there are still ways you can in today's rate environment.
and can both offer great returns, but there are some between them. Which is better for you, given the Fed's latest move? That depends.
With interest rates paused, should you open a CD or high-yield savings account?
Here's what you need to know to determine whether a CD or high-yield savings account is your best choice now that rates are paused.
What to know about CDs
CDs are deposit accounts that offercompared to traditional savings accounts (and even some high-yield savings accounts). They're an excellent choice for those who want a low-risk investment with a guaranteed rate of return.
With CDs, you deposit money for a predetermined(usually from a few months to several years), and in return, you receive a fixed interest rate. So, if you lock in a rate now and rates go down in the future, you'll still enjoy the same rate as when you opened the account.
The downside of CDs is that they're less flexible than other types of deposit accounts. If you need to withdraw your money before the term ends, you'll likely pay aequal to some of the interest you've earned.
What to know about high-yield savings accounts
High-yield savings account offersthat can be 10 times higher than regular savings accounts — if not more. And while these rates may not be quite as high as some CDs, they're often close.
With a high-yield savings account, you can deposit and withdraw funds as needed without facing penalties. In addition, because many high-yield savings accounts are offered by, they tend to have low or no minimum deposit requirements and low or no fees.
The downside of high-yield savings accounts is that their interest rates are variable, meaning they fluctuate in response to market conditions. If rates go up, so will your earnings. But if rates go down, your earnings will, too.
In addition, since you have easy access to your funds at any time, this type of account can make it easier to dip into your savings before you really need them.
CD vs. high-yield savings account: Which is better today?
So, which account is better when interest rates are paused? There's no "right" answer, but there are some general points to consider when.
Take into account your savings goals and timeline. If you want to earn a higher, predictable interest rate and you have funds you won't need anytime soon, a CD may be a better option. CDs can be well-suited to savings goals with a particular date in mind, such as building a down payment on a house you'd like to buy in a few years.
If you want a flexible account that allows you to easily access funds, a high-yield savings account likely suits your needs better. These accounts are great foryou may need to pull from at a moment's notice.
The bottom line
When interest rates are paused, as they are now, it's wise to choose investment options that offer a higher yield. Both CDs and high-yield savings accounts can be viable choices, and which is best for you depends on your savings goals, preferences and needs.
Bear in mind that this doesn't necessarily have to be an "either/or" decision. One smart way to maximize your earnings while enjoying some liquidity is to open both a. If you're on the fence about which route is best for you, consult a financial advisor who can give you guidance based on your personal financial situation.
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