Rate Cuts Don't Scare Me. Why My HYSA Still Beats a CD
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Another Fed meeting, another rate cut. And more people are racing to lock in certificates of deposit (CDs) before savings rates drop even further.
I get the logic. CDs are great for some situations and locking in rates.
But personally, I'm staying right where I am earning 4.00% APY in a high-yield savings account (HYSA). My account still beats most CDs and lets me move my money anytime.
If you're debating between locking up your cash or keeping it flexible, here's why a good HYSA is still hard to beat, even as rates fall.
HYSAs are still very competitive
Most big banks are ripping people off. The national average APY for savings accounts is just 0.40%.
Meanwhile, some of the top online high-yield savings accounts are paying 4.00% APY or more. That's 10 times more than the national average, and competitive with many short-term CDs.
And unlike a CD, which typically charges a penalty if you withdraw early, an HYSA gives you:
- Daily liquidity -- you can move money in or out anytime
- No lock-in -- you won't pay penalties to get your cash
- Rate chasing potential -- if your rate drops, you can easily move to a new account offering more
Not every HYSA moves in sync with the Fed, so it really pays to shop around. With a little research, you can still find accounts offering over 4.00% or more even as other banks quietly cut back.
One standout option right now is LendingClub. Its LendingClub LevelUp Savings is paying 4.20% APY with $250+ in monthly deposits. Read our full review here to learn more and open an account.
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LendingClub LevelUp Savings
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- Competitive APY
- No fees
- Easy ATM access
- Unlimited number of external transfers (up to daily transaction limits)
- Requires you to make monthly deposits to earn the best APY
- ACH outbound transfers limited to $10,000 per day for some accounts
- No branch access; online only
The LendingClub LevelUp Savings account has a lot to offer. At the top of the list is its high APY, though you must deposit monthly to earn the best rate. Next is zero account fees, a strong and straightforward perk. Finally, you get a free ATM card, which you can use to withdraw from thousands of ATMs nationwide. Interested? You can open an account with $0.
The cost of flexibility isn't much
Yes, CDs might earn more interest, especially as rates start slipping.
But the trade-off is that you have to lock up your money for the entire term, or face early withdrawal penalties.
Personally, I'm happy to earn a little less interest if it means keeping full access to my money anytime.
For example:
- $10,000 in a 12-month CD at 4.00% APY earns a guaranteed $400 in interest after one year.
- $10,000 in an HYSA, where rates gradually fall from 4.00% to 3.00% over the next year (averaging 3.50%), would earn about $350 in interest.
While the CD technically earns about $50 more, it comes at the cost of not being able to withdraw your entire $10,000 for a full year.
With an HYSA, you're giving up that $50 extra in return for full liquidity. You can move money freely, chase better rates, or tap your cash if plans change.
For me, that trade-off is worth it. I'd rather earn slightly less and stay nimble than tie up my savings just to squeeze out an extra $50.
When a CD does make sense
To be fair, CDs aren't a bad option. Especially if you have a specific savings goal on the horizon, like a home down payment or a big tuition payment in the next 12 months.
If you're comfortable parking your money and not touching it for a set period, a short-term CD can be a great place to earn safe, guaranteed returns.
Just be sure to shop around and jump on a strong rate when you find one. Some of the best CD accounts right now are offering around 4.00% APY, which is a great deal given the rate cuts many expect over the next year.
Some savers even blend strategies by pairing an HYSA with one or more CDs to get the best of both worlds -- flexibility and fixed yields.
The bottom line
CDs might offer a bit more interest, but I'd rather keep full control of my cash.
A good HYSA still pays 4.00% APY or more, and I can move my money anytime without hassle or penalties.
If your savings isn't pulling its weight, now's the time to fix that. See our favorite high-yield savings account offers here, and make your cash work harder today.
Our Research Expert
Joel O’Leary is a full-time Personal Finance Writer at Motley Fool Money, covering credit cards, bank accounts, investing, mortgages, and other personal finance topics. Joel has been writing about personal finance since 2018, previously leading editorial content for the How To Money podcast and serving as a resident writer at Budgets Are Sexy. He bought his first rental property at age 18, funding the down payment with savings from his high school job at McDonald’s -- a testament to his lifelong passion for smart money decisions. His work aims to make personal finance accessible and actionable for everyday readers. When he’s not writing, Joel enjoys surfing and spending time with his family.