Savings Accounts a Good Option With No Clear Sweet Spot for CDs

A sharp move upward in intermediate bond yields last week left the market for certificates of deposit unmoved — which is to say, stuck in low-yield territory. All things considered, savings accounts are looking like an attractive alternative to CDs.

At the beginning of Spring, there was a clear advantage just in making the small move out from a one-month to a 6-month CD. Now, the average 6-month CD is yielding less than a savings account, making it difficult to justify why you would want to lock up your money for the term of a CD. There can be an advantage to locking in an interest rate if rates subsequently fall, but at this time there isn’t much farther for them to go down.

In contrast, while the average savings account is yielding a fairly modest 1.69%, there are a number of options offering over 2%. While you could do better if you were willing to extend out to a longer-term CD, this does not seem like the right time for a lengthy commitment — not with interest rates so low, and with some hints of inflation on the horizon.

In short, a savings account is a good way to keep your powder dry while you wait for more attractive conditions — but you should still shop around to get a higher yield while you wait.