From CNBC: 2024-12-27 12:38:17

The Federal Reserve predicts a slower pace of interest rate cuts in 2025, disappointing those with debt but benefiting savers. Higher interest rates can increase the cost of borrowing but also help individuals build savings. High-yield cash accounts are offering competitive rates, with top-yielding accounts paying 4% to 5%.

Returns on cash holdings are linked to the Fed’s benchmark rate, which is expected to remain higher for longer in 2025. Higher interest rates can be good for savings and emergency preparedness but increase borrowing costs. High-yield savings accounts and money market funds offer competitive rates, especially at online banks.

When deciding between a high-yield savings account and a CD, consider liquidity and access versus a fixed guaranteed interest rate. Some institutions may require minimum deposits for advertised yields. Ensure deposits are protected by the FDIC, as recent fintech bankruptcies have left customers unable to access their savings.

Read more: If interest rates stay ‘higher for longer,’ the winners are those with cash accounts