As we look ahead to 2025, the anticipated cuts in interest rates are becoming less straightforward, yet there’s a bright side for savers: attractive yields on cash deposits are still on the table. It seems like yesterday’s news from the Federal Reserve’s December meeting gave us a glimpse of their cautious stance on inflation and a hint that they might take it slow with rate cuts. Just last month, the central bank adjusted its forecast to suggest only two rate cuts in 2025, down from the four they mentioned back in September. This slower pace has sent savings institutions into planning mode, scaling back the yields they offer on deposit products. For instance, around this time last summer, Bread Financial was tempting savers with a one-year certificate of deposit at a generous 5.25% annual percentage yield. Now, that one-year CD comes in at 4.1% APY. Just as the Fed is treading carefully with rate reductions, banks might also opt for a gradual approach when cutting the yields they offer.
In the words of BTIG analyst Vincent Caintic, “We’ve heard from some online banks that they got ahead of potential Fed rate cuts, which implies the December cut might not trigger a widespread decrease in bank deposit rates until the Fed goes further.” So, where can savers find decent yields for their emergency funds or short-term savings? BTIG’s analysis points to Marcus by Goldman Sachs as a frontrunner, offering one-year CDs with an attractive 4.25% APY. Right behind them, Bread Financial and Sallie Mae offer a 4.1% APY on their one-year CDs. The perk of opting for a CD is you lock in that rate for its entire term. However, when it matures, you may face reinvestment risk if you can’t find a comparable yield, and there’s always the chance your bank will renew the CD at a lower rate, so it’s crucial to stay on top of your timelines and plan accordingly. Plus, if you decide to cash out a CD early, you should be prepared for a penalty, which usually means sacrificing some interest.
For those who prefer easy access to their money, high-yield savings accounts could be the way to go. Right now, LendingClub and Bread Financial are offering these accounts with an APY of 4.5%. Of course, the catch is the bank can change its rates whenever they please. But, even a yield over 4% stacks up nicely against the national average, which, according to Bankrate, sits at a mere 0.56%. Whether you decide on a high-yield savings account or a CD, rest assured that these accounts are safeguarded by the Federal Deposit Insurance Corp. for up to $250,000 per depositor, per FDIC-insured bank, per ownership category. Just a heads-up: We initially misstated the APY for LendingClub’s high-yield savings account—it’s 4.5%.
