Why Are Fidelity's CD Rates Lower Than My 4% Savings Account? A Closer Look at Fixed vs. Variable Yields

Core Insights - The increase in APYs for CDs and high-yield savings accounts is attributed to the Federal Reserve's interest rate hikes since 2022 [1] - A discrepancy exists between the yields of high-yield savings accounts and CDs, with high-yield savings accounts currently offering higher rates [2][3] Group 1: Financial Product Comparison - High-yield savings accounts are currently offering an APY of 4%, while most CDs at Fidelity yield less, except for those with maturities of 10 years or more [2][3] - The lower yields on Fidelity CDs are a result of anticipated interest rate cuts by the Federal Reserve, leading to a decrease in APYs for various bank accounts [3][4] - Financial institutions prefer to offer higher yields on long-term CDs due to the uncertainty of future interest rates and the desire to lock in consumer funds for extended periods [4] Group 2: Interest Rate Dynamics - High-yield savings accounts have variable APYs that can change rapidly, meaning a reduction in the Federal Reserve's interest rates could directly impact these accounts [5][6] - The lack of guarantees in high-yield savings accounts contrasts with the fixed APY offered by CDs, which are locked in for the duration of their term [6][7] - The potential for high-yield savings rates to drop significantly in the future suggests that CDs may provide more certainty and could be a better choice in hindsight if rates decline [7]