How to Beat Today’s Stubborn Inflation With a Top-Paying CD

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Inflation Is Still Putting Pressure On Consumers

Post-pandemic, inflation reached a level the U.S. hadn't seen in four decades, peaking at 9.1% in June 2022. Before the pandemic's price pressures, inflation had resided for years in the 2% range—and often well below 2%.

Since the June 2022 peak, inflation has come down dramatically, thanks to the Federal Reserve's aggressive rate-hike campaign. With 11 increases to the federal funds rate from March 2022 to July 2023, the central bank has managed to lower inflation to the 3% range.

Unfortunately, that's still too high by the Fed's standard, whose aim is to tamp inflation down to around 2%. While they've made notable progress so far, today's latest monthly reading of the Consumer Price Index (CPI-U) shows that the end game is proving difficult.

Instead of dropping in March, inflation was up 0.3 percentage points vs. the February reading, and 0.4 points since January. The March rate of 3.5% is also the highest monthly reading since September.

That means inflation is still taking a notable bite out of Americans' budgets—and their savings. If what you're earning on your cash in the bank is less than today's 3.5% inflation rate, the value of your money is eroding.

Fortunately, you can easily combat this by putting your savings into higher-yield accounts, and one of the best ways to do this right now is with a top-paying certificate of deposit (CD).

Today's High CD Rates Can Protect Your Savings Against Inflation

While inflation is a moving metric, the rate you earn on a CD is 100% predictable. That's because CDs represent an agreement between you and the bank or credit union—you agree to keep the funds on deposit for however many months or years in the term you choose, and they agree to pay you a locked and guaranteed interest rate.

In other words, you know exactly what APY you're signing up for with a CD, and the bank or credit union is obligated to honor that rate with no changes. This rate predictability—coupled with the federal protections provided by FDIC and NCUA insurance—makes CDs virtually risk-free.

One of the happy byproducts of the Federal Reserve's aggressive inflation-fighting campaign of the last two years is that banks and credit unions are paying their highest savings account and CD rates in about 20 years. In fact, it's easy to earn well above 5% on your savings from dozens of nationwide institutions.

As you can see below, what you can lock in with one of today's historically high-paying CDs is far above the inflation rate of 3.5%. And while you can score the highest APY with a short 6-month term, locking in a longer duration—say 2, 3, or even 5 years—lets you guarantee your rate much further down the road.

Since it's expected the Fed won't rest until inflation is brought lower, it's a reasonable guess that inflation later in 2024 and 2025 will fall from today's rate. To the extent that occurs, you stand to gain more and more from the top-rate CD you lock in today.

What About High-Yield Savings Accounts?

High-yield savings accounts are also paying their highest rates in decades, with the top nationwide rate just bumping higher on Monday. You can now earn as much as 5.55% on a nationwide savings account, with more than 15 additional options paying 5.15% or better.

That's also more than enough to beat inflation, by as much as 2 percentage points. Just keep in mind that, unlike CDs, savings accounts don't pay a fixed rate. The bank or credit union can lower your rate at any time and without warning. So while you can easily outdo inflation right now, it's unknown what savings accounts will be paying later this year and in 2025.

Still, high-yield savings accounts are great to pair with a CD, holding some of your savings in each. Or if you just can't commit to a certificate, shopping around for a top-paying savings account can help you battle inflation at least for the time being.

How We Find the Best Savings and CD Rates

Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account's minimum initial deposit must not exceed $25,000.

Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.