Here’s where you can still snag 4% yields on idle cash
Yields on cash are well off their highs as 2025 comes to an end, but there are still a few places where investors can generate some interest on money they’re holding. The Federal Reserve cut its key interest rate three times this year , bringing the target rate range to 3.5% to 3.75%. Fed funds futures trading suggests a roughly 82% chance that central bank policymakers will hold steady on interest rates at their next meeting in late January, according to the CME Group’s FedWatch . Fed rate policy is a key driver for yields paid on savings instruments, such as certificates of deposit. For instance, in July 2024 , it was still pretty easy to find high-yield CDs offering more than 5%. These days, the richest rates are hovering around 4%, and they’re expected to keep coming down in the new year. Solid CD and savings rates for now For investors who might have a timeframe of one year for their cash holdings – and who don’t mind tying up that money in the meantime — Marcus by Goldman Sachs and Sallie Mae are still offering annual percentage yields of 4% on 12-month CDs as of Friday. Savers who lock in a CD will have that rate for the duration of the instrument’s term, which means they’re still getting paid even if the Fed continues reducing rates in the next year. You’ll want to keep track of your CD as maturity approaches, though: Some banks renew CDs once they mature and the rate offered likely won’t be as generous. High-yield savings accounts are also looking sweet. Bread Financial as of Friday was offering a 4.05% APY, while LendingClub’s yield comes in at 4% for savers who can make deposits of at least $250 per month into their savings account. Those rates compare to the current national average of 0.62% APY, according to Bankrate . Bear in mind that unlike CDs, banks have the flexibility to adjust the yields paid on their high-yield savings accounts. That means those rich rates are likely to cool in the new year. Cash in brokerages Investors at brokerages also have an opportunity to easily generate some interest on their uninvested cash, but firms have been dialing back the yields they offer on these products as well. Rates on these so-called cash sweep accounts will vary sharply from one firm to the next. Some companies will offer richer rates to their largest customers, and others may be inclined to slash their yields in a bid to encourage investors to deploy their cash into other instruments. To that effect, Charles Schwab recently cut its cash sweep rate to 1 basis point from 5 basis points, an analysis by Bank of America found. One basis point is equal to one one-hundredth of a percentage point. Meanwhile, investors at eToro and those in Robinhood’s Gold program have recently seen sweep rates come down 25 basis points to 3.25%. Vanguard’s Cash Plus Account now offers an APY of 3.1%, down 15 basis points, Bank of America’s analysis found. “Expect more cash sweep rate cuts over next 12 months,” wrote Bank of America analyst Craig Siegenthaler in a Dec. 22 report. “Brokers will react to changes in the Fed Funds rate, and cash sweep rates move with a deposit beta.” —CNBC’s Michael Bloom contributed reporting.
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