As 2025 draws to a close, cash yields are well below their all-time highs, but there are still several places where investors can generate interest from the money they hold. The Fed has cut its key interest rate three times this year, bringing its target rate range from 3.5% to 3.75%. Federal funds futures trading suggests there is about an 82% chance that central bank policymakers will leave interest rates unchanged at their next meeting in late January, according to CME Group’s FedWatch. The Federal Reserve’s interest rate policy is a major driver of the yields paid on savings products such as certificates of deposit. For example, as of July 2024, it was still easy to find high-yield CDs above 5%. Recently, the proportion of the richest has hovered around 4%, and is expected to continue to decline in the new year. Solid CD rates and savings rates right now For investors who have a year to hold their cash and don’t mind tying up their money for that time, Goldman Sachs and Sallie Mae’s Marcus were still offering 4% annualized yields on 12-month CDs as of Friday. Savers who lock in a CD will receive that interest rate for the life of the financial product. That means they will continue to receive compensation even if the Fed continues to cut rates next year. However, you should track your CD as it approaches maturity. Some banks may renew CDs when they mature, and the interest rates offered may not be as generous. High-yield savings accounts are also attractive. As of Friday, Bread Financial was offering an APY of 4.05%, while Lending Club yields 4% for savers who deposit at least $250 each month into a savings account. These rates compare to the current national average of 0.62% APY, according to Bankrate. Keep in mind that unlike CDs, banks have more flexibility in adjusting the yield they pay on high-yield savings accounts. That means interest rates for these wealthy individuals are likely to fall in the new year. Brokerage Cash Brokerage investors also have the opportunity to easily earn interest on uninvested cash, but companies are also lowering the yields they offer on these products. Interest rates on these so-called cash sweep accounts vary widely from company to company. Some companies will offer more generous interest rates to large customers, while others may tend to lower yields to encourage investors to put their money into other products. As a result, Charles Schwab recently lowered its cash sweep rate from 5 basis points to 1 basis point, a Bank of America analysis found. One basis point is equal to one-hundredth of a percentage point. Meanwhile, eToro investors and Robinhood Gold program investors recently saw their sweep rate drop by 25 basis points to 3.25%. Vanguard’s Cash Plus account APY is now 3.1%, a decline of 15 basis points, according to Bank of America analysis. “We expect further cash sweep rate cuts over the next 12 months,” Bank of America analyst Craig Siegenthaler said in a Dec. 22 note. “Cash sweep rates will move in line with deposit beta as brokers react to changes in the federal funds rate.” —CNBC’s Michael Bloom contributed reporting.
