A rise in Federal Reserve (Fed) rates could change the way money should be saved. For those who have cash available and seek to earn interest without taking great risks, the dilemma is now clear: to open a deposit certificate, known as CD, or to leave the money on a high-performance savings account? The answer depends, above all, on how long you can leave your money without touching it and what you expect to happen with the rates.
On Wednesday, September 16, the Federal Reserve raised its benchmark rate by 0.25 percentage points, to a range of 3.75% to 4.00%. This was the first increase since July 2023 and represents a change over the cuts recorded in 2024 and 2025.
For savers, a higher rate can be an opportunity. Banks and credit cooperatives often adjust the returns they pay for deposits when monetary policy changes, although not all do so at the same time or in the same proportion.
A high-performance savings account has one feature that can be especially useful when rates are rising: its yield is usually variable. That means that if the bank increases the percentage you pay for deposits, your account can start generating more interest without you having to open another product. But there is also the opposite movement: if rates drop, account performance can decrease.
Another advantage is access to money, as, unlike a CD, a high-performance savings account allows you to keep funds available for emergencies or other expenses, although each institution can set its own rules for withdrawals and transfers.
Instead, when you open a deposit certificate (CD), you normally agree to keep the money for a certain period of time in exchange for a fixed rate. If you find a rate that you consider attractive and insure it for several months or years, you will know in advance what return you will receive, as long as you meet the product conditions.
Everything good also has its opposite appearance, because if rates continue to rise, a CD you opened today will keep its fixed rate, although later banks begin to offer higher returns on new certificates. In that scenario, your money could be tied to a lower rate during the contracted period.
If rates stop rising or eventually fall, having secured a competitive rate over a long period of time may prove useful. In fact, the rates of new CDs can also change after a Fed decision; that’s why it’s important to compare the deadline and performance before signing.
If your priority is to keep the money available and have the opportunity to benefit from future increases in returns, a high-performance savings account offers greater flexibility.
If, on the other hand, you know that you will not need that money for a certain period and prefer to know from now on how much interest you will receive, a CD can fit better.
There is also a third option: divide the money. One party can stay on a high-performance savings account to maintain liquidity, while another amount can be placed on one or more CDs with different expiration dates. This strategy can prevent all your money from being committed to a single fee. It also allows you to periodically dispose of funds when certificates are won.
Before opening any of these accounts, check out something more than the advertised percentage. Check the annual percentage return, known as APY, the minimum deposit, commissions, conditions for withdrawing money and, in the case of CDs, the penalty for withdrawing funds before expiry.
It is also important to verify that the institution is insured by the Federal Deposit Insurance Corporation (FDIC), if it is a bank, or by the National Savings and Credit Cooperatives Administration (NCUA), where appropriate.
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