Interest Rates Are Dropping -- Should You Move Money Out of Your HYSA?

Earlier this month, the Federal Reserve dropped its benchmark interest rate by half a percentage point. Since the interest rates offered by high-yield savings accounts (HYSAs) are impacted by the Fed's benchmark rate, there's a good chance that your HYSA's interest rate will drop as well.

In fact, you may have already noticed a lower APY on your account. But does that mean it is time to move your savings out of your HYSA and into a more lucrative account? Before you start moving money around, here are a few things to consider.

Does your HYSA offer a competitive rate?

Not all HYSAs offer the same interest rate. Compare your current interest rates to rates offered by other banks. You may be able to earn slightly more by switching to another bank or credit union. Some banks offer sign-up bonuses, which can help pad your savings even more.

Looking for a new HYSA to maximize your savings and earn a top APY? Click here to see our curated list of high-yield savings accounts, chosen by our experts.

Our Picks for the Best High-Yield Savings Accounts of 2024

Product	APY	Min. to Earn
American Express® High Yield Savings Member FDIC. APY 3.80% Rate info 3.80% annual percentage yield as of December 28, 2024. Terms apply. Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	3.80% Rate info 3.80% annual percentage yield as of December 28, 2024. Terms apply.	$0	Open Account for American Express® High Yield Savings On American Express's Secure Website.
Capital One 360 Performance Savings Member FDIC. APY 3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening.	$0	Open Account for Capital One 360 Performance Savings On Capital One's Secure Website.
Western Alliance Bank High-Yield Savings Premier Member FDIC. APY 4.46% Rate info The annual percentage yield (APY) is accurate as of November 7, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY. Min. to earn $500 to open, $0.01 for max APY Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website. Member FDIC.	4.46% Rate info The annual percentage yield (APY) is accurate as of November 7, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.	$500 to open, $0.01 for max APY	Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website.

What is your HYSA fund for?

HYSAs earn more interest than traditional savings accounts, but it's still relatively low compared to other investment opportunities, like stocks. If the money in your HYSA is your emergency fund or for a purchase you plan to make in the near future (one to three years), then keep it in the HYSA.

High-yield savings accounts held at FDIC-insured banks are not impacted by stock market fluctuations. FDIC insurance will also reimburse depositors for up to $250,000 per bank, per account ownership category, even if the bank fails. Basically, as long as you have $250,000 or less in your HYSA, it's perfectly safe.

If the cash in your high-yield savings account is for far in the future, like retirement or sending the kids to a good college, then consider moving it to a brokerage account where you can invest in funds that track the S&P 500, which has seen average historical returns of about 10% annually.

Calculate how much less you'll earn

The Fed's decision to drop the federal funds rate by half a percentage point is a huge shift. The Fed tends to move the benchmark in smaller increments so it can judge how it impacts the economy before making larger moves.

But half a percentage point isn't really that much in the context of your savings account's APY. Say you keep your $20,000 emergency fund in a HYSA and you earned 4.50% APY last month, which is $73.50 per month. If your bank drops your interest rate in line with the Fed (half a percent), you'll now earn 4.00% APY. That means you'll only make $65.47 this month, a decrease of $8.03 per month -- which is not that huge of a change.

A lower interest rate will reduce your earnings over time, but it's worth considering how big of an impact this change will really have on your savings.

Remember, slow and steady wins the race

The drop in HYSA interest rates is a bit of a bummer. The reality is, we weren't going to earn those sweet rates forever. As interest rates drop, it may be time to consider other options for your money, like stocks or mutual funds that earn a higher interest rate.

But if the money in your HYSA is an emergency fund or for a purchase in the next few years, leave it where it is. Yes, you're earning a bit less, but your money is secure and you're not risking loss to market fluctuations -- the peace of mind alone is worth it.