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By Joshua Rodriguez
Edited By Angelica Leicht, Matt Richardson
/ CBS News
The Federal Reserve decided to hold rates steady again on Wednesday. The Fed increased interest rates 11 times over the last two years in an effort to combat high levels of inflation. Their goal is to bring the annual inflation rate down to 2%. Although consumer price growth has cooled in recent months, leading to a prolonged interest rate pause, prices are still growing at over 2% annually. So a rate cut may be premature right now.
All of that is to say, the target federal funds rate is unchanged - which may be good news for savers. After all, high rates usually equate to high returns on deposit accounts. So, what types of deposit accounts should you open with interest rates on hold?
Take advantage of today's high rates with a high-yield savings account now.
3 account types to open with interest rates on hold
"When saving for short and long-term goals, it's important to consider and evaluate a variety of savings vehicles," explains Brian Kelly, SVP and retail market manager at Rockland Trust Bank. So, with interest rates on hold, what deposit accounts should you explore? Here are three compelling options:
Certificate of deposit (CD)
"With recent interest rates slowing down and inflation cooling off, CD yields are at a high," says Kelly. "Because CDs generate steady growth over a long period, opening a CD now can be a major pay-off down the line, especially if rates decrease in the future."
"CDs are a good, low-risk option for those who are wary about what may lie ahead as the future of interest rates remains a bit uncertain," Kelly says. "Think of a CD as the longer the term, the more money you earn." Essentially, if you open a CD now, you can lock in today's high rates for months or years to come.
Lock in today's high returns with a CD now.
High-yield savings account
"Savings account rates are loosely linked to the benchmark rate the Federal Reserve sets," explains Chuck Czajka, founder of Macro Money Concepts in Stuart, Florida. "After the central bank raises its rate, financial institutions tend to pay more interest on high-yield savings accounts to stay competitive and attract deposits. So, a higher benchmark interest rate may mean your money in a savings account may earn more interest."
Considering the Federal Reserve's decision to keep interest rates where they are, a high-yield savings account could produce a strong return.
High-yield checking account
You can't lock all of your money into a CD. You'll need money for daily expenses as well. That's wherehigh-yield checking accountscome in. These accounts generally come with the same benefits you get with most traditional checking accounts. You'll usually have access to checks, debit cards and ATM transactions.
The difference between high-yield and traditional checking accounts lies in the returns. Most traditional checking accounts don't offer a return at all, and if they do, it's minimal. However, many high-yield checking accounts offer returns that are hard to ignore.
3 tips for earning more interest on your deposits
When you save money, it's important that your savings earns a return that's at least equal to inflation. If not, you could lose buying power. So, how do you maximize your earnings on your deposit accounts?
- Compare your options: Financial institutions are free to pay whatever returns they'd like to attract their customers. Some offer larger returns than others. So, compare your options before you open your account. As you do, pay special attention to online banks and credit unions as these options tend to offer some of the highest APYs.
- Make larger deposits: Banks and other financial institutions often reward their customers for depositing more money. For example, you may earn more on your high-yield checking account if you maintain a $15,000 balance than you would if you maintained a $1,000 balance.
- Consider promotions: Banks often offer bonus cash when you open a new account. Look for these opportunities and consider the bonus as part of your overall return when you compare your options.
Compare today's top high-yield savings accounts.
The bottom line
The Federal Reserve's decision to keep interest rates on hold in an effort to combat inflation means that there's still time to earn a meaningful return on deposit accounts. If you want to earn more on your cash, consider opening a CD, high-yield checking or high-yield savings account - or a mix of the three - today.
