Is My High-Yield Savings Account Still Worth It?

Rates probably aren't going to rise anytime soon. Here's what you can do.

Less than one year ago, it wasn't difficult to find high-yield savings accounts offering 1.50% APY or higher. Some had APYs in excess of 2.00% APY. Now, thanks to the pandemic-induced recession, you're lucky if you can find half of that. It's discouraging for savers. Some are wondering whether they'd be better off putting their money elsewhere.

The answer to that is: maybe. It depends on what you plan to use the money for. Here's a closer look at why high-yield savings account rates have been falling and whether they're still the right choice for your money.

Why high-yield savings account APYs have fallen

In response to the pandemic, the Federal Reserve slashed the federal funds rate to almost zero. This is the rate that banks use to lend money to one another. They also use it as a baseline when determining the rates to set for their customers. Usually, when the federal funds rate is low, savings account rates are also low. When the federal funds rate rises, savings account APYs go up too.

If the Federal Reserve decides to raise the federal funds rate, you probably won't see your savings account rate change overnight. However, in the weeks and months that follow, your savings account APY will begin to inch upward.

Our Picks for the Best High-Yield Savings Accounts of 2024

American Express® High Yield Savings APY 4.10% Rate info 4.10% annual percentage yield as of October 12, 2024 Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	APY 4.10% Rate info 4.10% annual percentage yield as of October 12, 2024	Min. to earn $0
Capital One 360 Performance Savings APY 4.10% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Sept. 27, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	APY 4.10% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Sept. 27, 2024. Rates are subject to change at any time before or after account opening.	Min. to earn $0
CIT Platinum Savings APY 4.70% APY for balances of $5,000 or more Rate info 4.70% APY for balances of $5,000 or more; otherwise, 0.25% APY Min. to earn $100 to open account, $5,000 for max APY Open Account for CIT Platinum Savings On CIT's Secure Website. Member FDIC.	APY 4.70% APY for balances of $5,000 or more Rate info 4.70% APY for balances of $5,000 or more; otherwise, 0.25% APY	Min. to earn $100 to open account, $5,000 for max APY

The Federal Reserve dropped the federal funds rate in mid-March as the country shut down due to the pandemic. Since then, savings account rates have fallen dramatically. Some continue to decline, although at a slower rate than they did early on in the pandemic. Things aren't likely to change until the economy begins to show real signs of recovery -- which could be awhile. For now, we have to get used to the new normal of lower savings account rates.

Is a high-yield savings account still the right choice for your money?

A high-yield savings account is still the best place for emergency savings or savings you plan to use in the next couple of years. True, you won't earn much interest now as you did in previous years. But online high-yield savings accounts still offer much higher rates than what you find with traditional savings accounts at brick-and-mortar banks.

If you're not happy with your current savings account's APY, it doesn't hurt to explore other options. You may be able to find another high-yield savings account that offers a better rate than yours. Don't forget to check the new account's fees, balance requirements, and deposit and withdrawal options.

You could also try a certificate of deposit (CD) for funds you don't expect to use for a few months or years. CD rates are often higher than savings accounts rates. This is because CDs require you leave your funds untouched for an extended time.

CDs usually lock in your rate for the full term, so one of these can help protect you against further rate decreases. On the other hand, if you choose a CD with a long term and banks begin raising their savings and CD rates, you'll be stuck with your lower rate. Right now, short- or medium-term CDs are the best option.

Investing in the stock market is also an option. Again, only use funds you won't need to touch for several years. Investing can earn you much larger returns than any high-yield savings account. Unfortunately, the stock market can be volatile in the short term. Don't invest your emergency fund or money you might need soon -- you could be forced to sell it at a loss in a crisis.

It's going to be a long time before we see high-yield savings account APYs rise to pre-pandemic levels. But that doesn't mean you necessarily need to abandon your savings account completely. Keep an eye on high-yield savings account rates, and consider alternatives if they suit you. Above all, be patient. Rash financial decisions rarely turn out well. Don't move your money around until you've thoroughly considered your options and feel confident in your decision.

RELATED: Learn the Pros and Cons of High-Yield Savings Accounts in this Guide by The Ascent.