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The content operations team recently shared data from the Federal Deposit Insurance Corp. (FDIC) with me. This data, collected quarterly from member banks, offers a comprehensive view of the banking industry. One key finding from the latest data is the shift towards certificates of deposit (CDs) among both big and small banks, as customers seek higher yields than what traditional banks offer.
According to the FDIC data, major banks are seeing customers move funds out of low-interest accounts, but total deposits remain stable. This trend is being offset by an increase in CD and brokered CD deposits. This shift indicates that savers are increasingly turning to CDs as a safe and competitive option for their cash.
Meanwhile, businesses and consumers are moving funds from low-yielding accounts at big banks to online banks and fintechs for better returns. This behavior reflects a healthy market response to changing interest rates and consumer preferences.
Looking at Bank of America as an example, the FDIC data shows a steady increase in interest-bearing deposits and CD balances over the past two years, while non-interest-bearing deposits have declined. This trend mirrors the broader shift towards higher-yield accounts in response to rising interest rates.
Overall, the FDIC data provides valuable insights into market trends and consumer behavior, highlighting the importance of considering different deposit options to meet financial goals.
The three other major banks we examined from the FDIC data, Citibank, JPMorgan Chase, and Wells Fargo, exhibit similar patterns.
Looking for the best CD rates to maximize your savings? Our comprehensive list of top-yielding, competitive CD rates is a great starting point for your research.
However, keep in mind the early withdrawal penalties that may apply. Cashing in early could result in a significant loss of interest and even part of your principal. If you’re looking for flexibility but still want a fixed rate of return, consider CD laddering, where you open multiple CDs with different maturity dates.
High-yield savings accounts (HYSAs): While regular savings accounts offer competitive APYs, HYSAs stand out with APYs reaching as high as 5.30 percent. These accounts allow easier access to your funds compared to CDs, but keep in mind that rates are variable and subject to change. HYSAs are safe and federally insured, often offered by online-only banks with convenient digital tools for managing your savings.
Series I savings bonds: Though not as high-earning as CDs or HYSAs, Series I savings bonds are a secure savings option. Issued by the U.S. Dept. of Treasury, these bonds offer a fixed rate combined with an inflation rate. With a current interest rate of 4.28 percent, including a fixed interest rate of 1.30 percent, savings bonds can earn interest for up to 30 years.
Don’t Panic About Interest Rates
Despite talks of potential interest rate cuts by the Fed, sudden drastic drops are unlikely. The Fed will carefully assess the situation and gradually adjust rates if needed. The goal is to maintain inflation at the target rate of 2 percent. So, there’s no need to fear that interest rates will vanish overnight.
Still not convinced? Consider this analogy: Interest rates rising was like taking an elevator to the top, but lowering rates will be more like taking the stairs down. The view may change slightly, but it’s not a rapid decline.
Conclusion
At Bankrate, we prioritize reliable financial data and analysis. The recent FDIC data highlights the importance of strategic saving in high-yield accounts like CDs, HYSAs, and even high-interest checking accounts. With various options available, consumers can build their wealth securely while maximizing yield within FDIC limits.
— Bankrate senior writer Karen Bennett contributed to this article.