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If you were asked in 2023 or 2024 if a high-yield savings account was worth opening at the time, the general answer then would have been a resounding “yes.”
Interest rates on these accounts were up to 5.50%, approximately, meaning savers would earn $5.50 for every $100 deposited. And, unlike certificate of deposit (CD) accounts, no penalties would be levied against savers for withdrawals. So it was generally a smart and effective way to grow your money.
But the economy is evolving again and the rate climate, in particular, has changed from what it was at this point in 2024.
Multiple rate cuts were issued in the final four months of 2024, reducing the returns savers were relying on. And, this month, another rate cut is widely expected when the Federal Reserve concludes its next meeting on September 17. For an account with “high yields” in the title, then, many savers be wondering about the merits of opening one right now. For many, however, this could still be a worthwhile and profitable choice. Below, we’ll explain why.
See how much interest you could be earning with a top high-yield savings account here.
Will a high-yield savings account be worth it after a September Fed rate cut?
So, is it really worth pursuing a high-yield savings account in the face of looming rate cuts. For many, it still can be. Here’s why:
Because rate cuts are expected to start gradually
The wide expectation is that an interest rate cut, at least this September, will be in the amount of just 25 basis points. While the chances of it being half a percentage point have increased in recent days, many still expect just a small cut. And considering that granularity and the fact that savings account rates don’t identically mirror the Fed, changes to high-yield savings account rates will be gradual and have little immediate impact on the returns savers can secure. That said, waiting to open an account makes little sense if you can start earning more on your money now. So, if you’re ready, consider shopping around for accounts online soon.
Get started with a top high-yield savings account now.
Because rates here are exponentially higher than traditional accounts
Just under 1,000%. That’s how much higher high-yield savings account rates (around 4.25% now) are compared to traditional savings account rates (just 0.39%). So, by keeping any amount in the latter account type, you’re essentially losing interest earnings power. Plus, with rates set to decline on all accounts, that 0.39% is likely the highest it’s going to be for the foreseeable future. Transferring your funds into a high-yield savings account, even ahead of rate cuts, against this reality, still makes sense.
Because you’ll still main access to your money
While an interest rate reduction is expected for later this month, the economy overall is still hard to predict. Many experts would’ve predicted a cut earlier this year, if asked in January. But a combination of inflation, economic uncertainty and changing economic policies delayed Fed action. All of those factors still remain in play, however. As such, many will understandably want to maintain their access to their money in a way that a high-yield savings account permits but in a way a CD account simply won’t.
The bottom line
Sure, the 5%-plus returns of recent years are no longer attached to the top high-yield savings accounts. And, yes, rate cuts now look likely again. But the rate climate hasn’t changed so dramatically, either, to render these unique account types useless, even ahead of a September rate cut. With the likelihood of a gradual decline in rates, the reality that returns here are still exponentially higher than some alternatives and the flexibility that some other, high-rate alternatives cannot offer, many savers may still find high-yield savings accounts to be their most advantageous option right now.
