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Five Strategies for Getting More Out of Your Savings Accounts and CDs

January 31, 2023

Two of the best ways to help you save money for short-term priorities such as cars, vacations, or just saving for a rainy day are high yield savings accounts and certificates of deposit (CDs). Here are five strategies to ensure your savings account and CD funds are working just as hard to grow your money as you did to save the money in the first place.


Tip 1: Check Out Online Banks for Best Savings Account and CD Rates

Search online and it’s pretty easy to compare available interest rates for high yield savings accounts and CDs. A recent check would show you that the average interest-bearing checking account delivers only 0.04 percent annual percentage yield (or APY); typical high yield savings accounts are offering around 2 percent APY; and the best CD rates are now going up to 3.0 percent APY (for a CD that matures in two years, often with a minimum deposit of up to $10,000).


Online banks often offer some of the best interest rates, since they don’t have the same overhead costs as brick-and-mortar banks. Moreover, in addition to having leaner operations, the online banks are also aggressively competing for business with traditional banks. Another advantage of online banks is that they are open 24/7 whenever you need access, not only when the doors of the bank are open. ("The Basics of High Yield Savings Accounts")


Tip 2: Consider Interest Rate Trends

Another factor to keep in mind as you decide whether to use high yield savings accounts and CDs is whether interest rates are trending up or down. There are no guarantees, of course. With the economy in good shape, the Fed has raised the federal funds rate three times this year as a hedge against inflation, the latest lift to a range of 2 to 2.25 percent. Fed officials have said to expect at least three rate hikes in 2019, and more in 2020.


For investors, these fed rate hikes are good news because they usually mean banks will raise interest rates accordingly for their savings account and CD customers in order to stay competitive. Indeed, in the past two years as the Fed interest rate has risen, the national average rates for CDs of all maturities have been rising, and the rate for a 12-month CD has roughly doubled.


Tip 3: Using Ladders to Optimize CD Interest

While high yield savings accounts have variable interest rates that can rise at any time, CD buyers are typically locked into a fixed rate at the time of purchase. So, with more increases to the Fed’s discount rate expected over the next year and the potential of higher CD interest rates on the horizon, CD buyers may wish to understand the potential power of using a “CD Ladder.” With the CD ladder approach, instead of buying one large CD, a person would break the purchase into smaller CDs that mature over different time periods. That affords you the opportunity to buy higher interest rate CDs with the proceeds if interest rates rise.


So for example, instead of investing $10,000 in a single CD, you could build a CD ladder by buying a $2,500 CD that matures in one year, another $2,500 CD that matures in two years, a $2,500 CD that matures in three years, and a $2,500 CD that matures in four years. Then, after the first CD matures, you could buy another CD and take advantage of any interest rate rises that occur.


TIP 4: Watch Out for Fees and Minimum Balances

One thing to watch for, from both online and traditional banks, are unexpected fees and restrictions. Some banks and financial institutions offer higher rates but require minimum balances. Others nickel-and-dime you with a variety of charges: fees to set up accounts, wire charges to get money in and out the account, or fees for paper statements.


TIP 5: Ask About Security And Reliability

It seems every week there is some egregious security breach or hack of a major financial institution. That’s why before deciding which institution to trust your money with, examine each potential partner’s credibility, and look for a robust security process that safeguards your private information and funds. ("The Basics of High Yield Savings Accounts")


Among the questions to ask your provider: Does it use multi-factor authentication to prevent unauthorized access? Does it use Secure Socket Layer (SSL) encryption to create a secure connection with your browser when you login in or fill out an application online? Does it automatically log you out of your account after a period of inactivity to prevent others from seeing or accessing your online accounts?


High Yield Savings Accounts vs. CDs

High yield savings accounts offer variable interest rates that are typically higher than regular checking and savings accounts from brick-and-mortar banks. In return for higher rates, there are some limitations in withdrawals (typically a maximum of six online and telephone withdrawals per monthly statement cycle). Savings accounts are flexible and are ideal for emergency funds because they are so accessible.


Where savings accounts have variable interest rates CDs offer fixed interest rates that are generally higher than rates from savings accounts. But in return for the higher rate, funds can be accessed without penalty only when the CD reaches maturity. CDs generally mature in terms ranging from 6 to 60 months, with many stops in between.

The Bottom Line


High yield savings accounts and CDs are trusted tools that help you save for short-term spending priorities, especially in an environment of expected interest rate increases. Smart savers are checking out online banks and financial institutions that generally offer higher rates, are considering CD ladders, avoiding unwanted fees and restrictions, and asking good questions about the security of potential high yield savings account and CD providers.

Watch Your Savings Grow



†Accounts offered by American

Express National Bank. Member FDIC. Each depositor is insured to at least $250,000 per depositor, per insured bank, per ownership category.

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*The Annual Percentage Yield (APY) as advertised is accurate as of . Interest rate and APY are subject to change at any time without notice before and after a High Yield Savings Account is opened.


For a CD account, rates are subject to change at any time without notice before the account is funded. The rate received will either be (i) the rate reflected during your application process or (ii) the rate being offered when your CD is funded, whichever is higher. All CDs must be funded within 60 calendar days from the time we approve your application or will be subject to closure. The interest rate and Annual Percentage Yield (APY) will be disclosed in your account-opening documents, which you will receive after completing your account-opening deposit. After a CD is opened, additional deposits to the account are not permitted. Early CD withdrawals may be subject to significant penalties which could cause you to lose some of your principal. Please see the Deposit Account Agreement for additional terms and conditions and Truth-in-Savings disclosures.


**The national rate referenced is from the FDIC's published Monthly Rate Cap Information for Savings deposit products. Visit the FDIC website for details.


‡For purposes of transferring funds, business days are Monday through Friday, excluding holidays. Transfers can be initiated 24/7 via the website or phone, but any transfers initiated after 7:00 PM Eastern Time or on non-business days will begin processing on the next business day. Funds deposited into your account may be subject to holds. See the Funds Availability section of your Deposit Account Agreement for more information.


♢Calculations are estimates of expected interest earned. Actual results may vary, based on various factors such as leap years, timing of deposits, rounding, and variation in interest rates. The first recurring deposit is assumed to begin in the second period after any initial deposit.


§IRA Contributions are subject to aggregate annual limits across all IRA plans held at American Express or other institutions. IRA distributions may be taxed and subject to penalties based on IRS guidelines. Required minimum distribution, if applicable, is only relevant to this IRA plan and does not take into consideration other IRA plans held at American Express or other institutions. Please see for more information. We recommend you consult with a financial or tax advisor when making contributions to and distributions from an IRA plan account.