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- PERSONAL FINANCE NEWS
- CD NEWS
KEY TAKEAWAYS
- With banks paying their highest rates in two decades, it's an excellent time to stash your tax refund in a high-yield savings account or CD.
- The best savings accounts are paying 5.15% to 5.55% APY and allow withdrawal at any time.
- You can earn a bit more—or at least lock in your rate for months or years—by instead putting your refund into one of today's best nationwide CDs.
- Committing your refund to a CD not only boosts your funds—it also encourages you to save the money instead of spending it.
- Returns on high-yield savings accounts and CDs may fall sometime this year, so it's smart to jump in before rates move lower.
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Grow Your Refund with a High-Yield Savings Account
With Tax Day now behind us, tens of millions of Americans have either gotten a tax refund or are waiting for it to arrive. With the average refund running $3,011, that's a hefty chunk of change you can put to good use.
If you're fortunate enough to not urgently need the cash, you can take advantage of today's stellar interest rate environment to turn that refund into an even larger sum. One easy way to do that is to dump your refund into one of the country's best high-yield savings accounts.
We rank the highest-paying savings accounts every business day, and the top rate is currently 5.55% APY. There are also another 17 options paying 5.15% or better, and there are scores of high-yield accounts paying at least 5.00% APY.
How much can you earn? The chart below shows what a typical $3,000 refund will be worth if you earn 5.55% for six, nine, or 12 months.
Just remember that, although you can withdraw money from a savings account anytime you want, the tradeoff is that savings account rates are variable and never guaranteed. You can earn up to 5.55% right now with the best account and may be able to do so for months to come. But there's no way to predict how long that rate will last.
Earn Even More With a Top-Paying CD
Maybe you know that you won't need your refund money—or at least some of it—for a while. If you can commit to parking your money in an account for months or even years, you stand to earn even more.
Certificates of deposit (CDs) are a kind of bank savings account that offers a locked interest rate you can count on for a specified period. Unlike a savings account rate, which can fall at any time without warning, the rate you sign up for with a CD is guaranteed for you until your CD's maturity date.
The catch is that if you need to take your money out of the CD before it matures, you'll be hit with an early withdrawal penalty. So it's best to open a CD only with money you feel confident you can live without for the full duration of the term.
So how much more can you earn with a CD than a savings account? As you can see below, only the top 6-month CD Rate currently pays as much as the best savings account. But you can still win by investing in a longer CD because the rate you get today is promised to you for the full duration of the CD term—no matter what happens to broader interest rates.
Though you can take the penalty hit if you find you need to withdraw your CD funds in an emergency, the threat of a penalty may help you keep your money in savings longer than if you have easy access to it. So, not only do CDs help you boost your return, but they can also help you resist the temptation to spend the money on unplanned expenses.
Where Are Savings and CD Rates Headed This Year?
Savings accounts and CDs are paying at or near their highest rates in over 20 years. That's because the Federal Reserve aggressively raised the federal funds rates between March 2022 and July 2023 in a fight against decades-high inflation. When the Fed raises that benchmark rate, it triggers banks and credit unions to raise the rates they pay customers for their deposits.
High-yield savings accounts are still paying a peak rate of 5.55% APY, while CD rates have softened since hitting records across different terms in October and November. However, with rates available in the 4% and 5% range for every CD term, the return you can earn is still historically high.
But these lucky days are limited. Because inflation has cooled somewhat, it's likely the Fed will begin cutting its federal funds rate sometime in 2024. The timing of the first cut is unknown—but when it comes, it will certainly put downward pressure on savings and CD rates.
In any case, savings account and CD rates are not expected to rise at this point and mostly have a downside risk. So the sooner you can get your tax refund into a high-yield account, the more time you'll be able to enjoy today's record rates.
How We Find the Best Savings and CD Rates
Every business day, Googlawi tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account's minimum initial deposit must not exceed $25,000.
Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.