Key Takeaways
- Banks and credit unions are still paying historically high rates on deposits, thanks to the Fed raising interest rates to fight inflation.
- The best high-yield savings accounts pay up to 5.50% APY and allow you to withdraw anytime you want.
- Money market accounts give you the ability to write checks and pay a top rate of 5.35% APY.
- CDs let you lock in a rate that's guaranteed until the CD matures, with options to earn 5% or better for as long as 3 years.
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3 Types of Accounts Make It Easy to Earn 5% or More
Thanks to the Federal Reserve aggressively hiking interest rates in 2022 and 2023 to battle decades-high inflation, banks and credit unions have been paying the highest deposit rates they've offered in two decades. As a result, you have a bountiful smorgasbord of options to earn 5% or better on your cash savings in the bank.
The three ways to do this, while incurring virtually no risk, are high-yield savings accounts, money market accounts, and certificates of deposit (CDs) held at federally insured institutions. Let's go through all three to help you make the best choice—or choices—for your funds.
The Federal Reserve is currently keeping the federal funds rate in a holding pattern. But it expects to begin reducing this important benchmark rate—which directly influences the rates banks and credit unions are willing to pay—sometime in 2024, and likely drop it further in 2025. Once it appears the Fed is ready to make a rate cut, savings, money market, and CD rates are expected to decline. So it's smart to make a move now to capture today's high rates while you can.
Earn a Top Rate With a High-Yield Savings Account
If you don't know how soon you'll need your cash, you'll want to keep the funds fully accessible. High-yield savings accounts offer this feature, allowing you to make deposits and withdrawals whenever you like. But an account calling itself "high-yield" doesn't mean it's offering a truly competitive rate, so always be sure to shop around.
We make the research easy, as every weekday we post our ranking of the 15 best savings account rates that are available to anyone in the country. The current nation-leading rate is an eye-popping 5.50% APY, which is available from Poppy Bank, with plenty of additional options in our list to earn at least 5.20% APY.
Compare that to the national average savings account rate of 0.46% APY and you can see that you stand to earn quite a bit more by putting your money in a top-paying savings account. For instance, holding $10,000 in an account paying 5.25% APY will earn you almost $44 per month in interest. Meanwhile, an account offering the national average of 0.46% on the same amount would pay you less than $4 a month.
To keep things risk-free, just make sure the high-yield savings account you open is at either a bank that's insured by the Federal Deposit Insurance Corporation (FDIC) or a credit union insured by the National Credit Union Administration (NCUA). By sticking to member institutions of these two federal agencies, your deposits of up to $250,000 per institution will be protected in the unlikely event that the bank or credit union fails.
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Add Check-Writing With a Money Market Account
Another option that keeps your money liquid—meaning accessible whenever you want it—is a money market account. Traditionally, these accounts were offered to banking customers who could keep a large balance in the account, and the rates tended to be higher than what the bank paid on regular savings accounts.
But times have changed, given the rise in popularity of high-yield savings accounts. To compete, many money market accounts now have low minimum balance requirements, or even no minimum at all. And while sometimes the top money market rate is higher than the top high-yield savings account rate, sometimes it isn't.
An added feature you can get with a money market account is the ability to write checks. So if you find this feature useful, seek out one of these accounts. Once again, we do the rate research for you—every morning we publish our ranking of the 15 best money market accounts. Right now, you can earn slightly less with the nation's top money market than with the best savings accounts, with Brilliant Bank offering the leading rate of 5.35% APY.
If you don't value paper check writing, however, be sure to shop high-yield savings accounts as well—and then simply choose whichever account offers you the highest APY with features that fit your needs. As with savings accounts, be sure the bank or credit union offering the money market account is an FDIC or NCUA member to keep your deposits safe.
The rates on savings and money market accounts are variable, meaning they can change at any time. The bank or credit union doesn't even need to give advance warning. That means any time broader U.S. interest rates are falling, the annual percentage yield (APY) on your savings or money market account will almost surely decline as well.
Stretch Your Rate Into the Future With a CD
If you're pretty confident you won't need a chunk of your savings for months or even years down the road, you may be able to earn even more by putting it in a high-paying certificate of deposit (CD). Today's leading rate on a nationally available CD is a remarkable 5.75% APY, which is available for a 6-month term from Andrews Federal Credit Union.
But you have a lot more choices than that. Our daily ranking of the best CD rates includes options paying 5% or better in every CD term up to three years. While many of these rates are lower than what you can currently earn with a high-yield savings or money market account, your CD rate will be locked and guaranteed for its full term. So if you open a 5% certificate with a 3-year term, you'll be able to count on that rate until 2027 with no surprises.
The trade-off is that putting your funds in a CD requires committing to keep the funds there for the full length of the term you choose. If something comes up and you need the money early, it's not impossible to withdraw. But you'll be hit with an early withdrawal penalty that will reduce your earnings. You can—and certainly should—shop around to make sure the CD you choose has a reasonable penalty policy instead of a harsh one. But your smartest move is to only put money into a CD that you feel fairly confident you can keep in place until the CD matures.
Just as with savings and money market accounts, opening a CD with an FDIC-insured bank or NCUA-insured credit union will protect your funds in case the institution fails, making CDs virtually risk-free.
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How We Find the Best Savings and CD Rates
Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account's minimum initial deposit must not exceed $25,000.
Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.
Correction—March 1, 2024: An image in this article has been corrected to state that today's top 18-month CD rate is 5.35% APY.
