Here’s the short answer: when the Fed cuts, your high-yield savings rate usually drops too. But it won’t happen instantly, it won’t fall to zero, and every bank moves at different paces.I keep over $20,000 for emergencies in a high-yield savings account, so earning high interest is really important for me. I pay close attention when rates move.The good news is that a strong account still beats the average by a wide margin, even after a cut.
How the Fed’s rate decisions affect your savings accountThe Fed doesn’t set your savings rate, but its decisions steer it.
The Fed controls the federal funds rate, which is what banks charge each other to borrow money overnight.The Fed raises or lowers that rate to manage inflation and employment. When it cuts, banks earn less on their own money and therefore offer their customers lower APYs on deposits.When the Fed raises rates, the opposite happens and APYs climb.
Banks don’t follow the Fed in lockstepThere’s no rule that forces banks to follow exactly what the Fed does. Each bank can raise or lower savings rates whenever they please.In fact, that’s why there’s such a huge range of different APYs being offered today. Top online banks pay over 10X the national average savings rate, which sits at just 0.38%, according to Motley Fool Money research. They offer high rates to attract new customers.Big brick-and-mortar banks mostly pay next to nothing on savings accounts. They don’t need to try as hard to win customers because they already have a massive footprint.Compare all of today’s top high-yield savings accounts, some offering APYs up to 4.00% APY.How to keep earning a top savings rate after a cutIf you’ve noticed your interest rate has been lowered, it could be time to shop around and find a new place to stash your savings.Depending on your balance, even a 0.50% difference could mean hundreds of dollars more in interest per year.Online banks by far offer the highest APYs on savings accounts. I check rates for a living, but I’ve moved my own cash only a handful of times.When I compare savings accounts, I look for a few things:A top APY, several times the national averageNo monthly fees or minimum balance requirements (so I can move money in and out however I want without fees)FDIC insuranceEasy transfers to and from my checking accountExplore the best high-yield savings accounts once or twice a year, and you’ll know if yours still measures up.