Informed savers are successful savers. The more you know about how your bank fixes interest rates on its savings and CD products, the better able you’ll be to anticipate future rate changes and identify saver-friendly institutions.

Here’s what you need to know about the factors that affect savings and CD rates, and where to find the latest information about them.

Factors That May Affect Savings & CD Rates

These five factors may affect savings and CD rates. In many cases, multiple factors are at work simultaneously, making it difficult to determine which bear the most responsibility.

1. The Federal Funds Rate

The Federal Funds Rate is the rate charged by the Federal Reserve Bank of the United States — America’s central bank — to borrower banks. In other words, when private banks need low-cost, short-term capital from the federal government, this is the rate they pay.

The Federal Reserve adjusts the Federal Funds Rate in the service of its dual mandate: to “promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates.” Savings and CD rates rise in proportion to the Federal Funds Rate and fall when the Federal Funds Rate falls. 

2. U.S. Treasury Rates (Especially the 2- and 10-Year)

Savings and CD rates also move in proportion to U.S. Treasury bond rates, especially on the 2- and 10-year notes. Since Treasury bonds trade on the open market, pricing changes every weekday, but bank rates tend to be stickier, resisting minor moves and instead changing gradually over time.

3. Demand for Savings Accounts and CDs

The laws of supply and demand work quite well in the banking industry. When demand for savings products increases, banks can reduce savings rates to reflect a larger customer pool. When demand for savings products decreases, banks may need to raise rates to attract new savers.

4. Competition for Savers’ Dollars

Another facet of supply and demand is competition among banks. As the supply of savings products increases, banks may need to do more to attract customers, including raising rates or offering special teaser rates. This is common in the online banking niche, where upstarts regularly threaten established banks’ market share.

5. Banks’ Business Strategy

Some banks simply don’t prioritize attracting savers’ dollars. For others, this is an imperative. How banks view the importance of consumer savings can greatly affect where they fix their savings and CD rates.

Where to Find the Latest Information About Savings & CD Rates

Where can you find the latest information about savings and CD rates? Try these online resources. 

• Rate Aggregators: These third-party websites collect up-to-date information about savings and CD rates so you don’t have to. Their databases generally include national players that you’ve probably heard of, along with regional banks like this one and smaller community institutions.
• Bank Websites: If you have a preferred bank in mind, why not visit their website directly? It’s a bit more time consuming to compare multiple rate offers this way, but the information is more likely to be accurate.
• Personal Finance Apps: Many personal finance apps include a rate-finder feature. Download one for free today.

Earn More Today

Is your savings account or CD paying a fair rate of return? If it has been some time since you’ve shopped around for a new place to put your money, you may be missing out. Now that you understand the factors that may affect savings rates and know where to find the latest rate information, you’re set up to seek out the best deal. It’s out there, just waiting to be discovered.