Key Takeaways
- If you’re saving up to buy a house next year, it’s smart to put your down payment money somewhere it will earn a great return while you wait.
- Fortunately, your timing is lucky right now, as banks and credit unions are paying near their highest deposit rates in two decades.
- If you’re unsure when you’ll pull the trigger on a house, the best high-yield savings accounts provide an excellent return with full flexibility.
- Know you won’t buy for a little bit? You can actually lock in one of today’s stellar returns for months with a nation-leading CD.
- A hybrid option also exists—bank accounts that pay a cash bonus if you leave your funds untouched for a couple of months or more.
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It’s a Lucrative Time to Stash Cash In the Bank
With mortgage rates and housing prices elevated, you may be holding off on a home purchase until next year, in hopes that monthly mortgage payments will get more affordable. Or perhaps you need a little more time to build up your down payment funds before you take the home-buying plunge.
In either case, it’s an excellent time to stash cash in the bank, as interest rates are near historic highs. That’s thanks to the Federal Reserve’s aggressive 2022–2023 fight against post-pandemic inflation, which pushed the federal funds rate to its highest level since 2001 and left it there for over a year. That, in turn, pushed banks and credit unions to offer some of the highest savings and certificate of deposit (CD) rates we’ve seen in two decades.
As a result, it’s very easy to earn 5%-plus on your down payment funds right now—with a top high-yield savings account or one of the nation’s best CDs, which guarantee your rate down the road. You could also go with a savings or checking account that offers a bank bonus to boost your down payment fund by a few hundred dollars.
Not Sure When You’ll Buy? Try a High-Yield Savings Account
If you don’t know how soon you’ll jump on a house opportunity, you’ll need to keep your money fully accessible. High-yield savings accounts offer this feature, allowing you to make deposits and withdrawals whenever you like. But an account calling itself “high-yield” doesn’t mean it’s offering a truly competitive rate, so always be sure to shop around.
We make the research easy, as every weekday we post our ranking of the 15 best savings account rates that are available to anyone in the country. The current nation-leading rate is an eye-popping 5.50% APY, with four more offers paying 5.00% or better. Compare that to the national average savings account rate of 0.43% APY and you can see that you stand to earn quite a bit more by putting your down payment money in a top-paying savings account.
For instance, holding $25,000 in an account paying 5.00% APY will earn you roughly $105 per month in interest. Meanwhile, an account offering the national average of 0.43% on the same amount will pay you less than $9 a month. Over six months, that difference accumulates to $630 in earnings vs. only about $50.
To keep things risk-free, make sure the savings account you open is at either a Federal Deposit Insurance Corporation (FDIC) bank or a National Credit Union Administration (NCUA) credit union. By sticking to member institutions of these two federal agencies, your deposits up to $250,000 will be protected in the unlikely event that the bank or credit union fails.
Won’t Buy for a Bit? Lock In Your Return With a CD
If you’re pretty sure you won’t buy a home for at least a few months, you may be able to boost your down payment even more by investing all or some of it in a high-paying CD. The upside is that interest rates on CDs are locked in, so you’ll be guaranteed your high annual percentage yield (APY) for the CD’s full term—whether that’s 3 months, 6 months, a year, or even longer. In contrast, savings account rates can be lowered at any time.
The downside is that putting your funds in a CD requires committing to keep the funds there for the full term you choose. If something comes up and you need the money early, it’s not impossible to withdraw. But you’ll be hit with an early withdrawal penalty that will reduce your earnings. You can—and should—shop around to make sure the CD you choose has a mild penalty policy instead of a harsh one. But your best bet is to keep the funds in the CD until it matures, so choose your CD term carefully.
Right now, today’s top CD rates of 5% or more are available on certificates ranging from 6 months to 1 year. But locking in a guaranteed upper-4% return is also smart if it’s offered on a CD that meets your timeline. You can find plenty of options to consider in our daily ranking of the best nationwide CDs.
Beyond our list of the best overall CD rates, you can also find term-by-term rankings—from 3 months up to 5 years—with our links at the end of this article. And just as with savings accounts, sticking to an FDIC bank or NCUA credit union for a CD will keep your money federally protected.
A Bank Bonus Can Also Boost Your Down Payment
Another strategy you can use instead of—or in addition to—a high-yield savings account or CD is opening a bank account that offers a special cash bonus. These generally pay a few hundred dollars, with a few offers even approaching $1,000. They typically come in two flavors. The most common checking account bonuses pay a certain amount if you set up direct deposit within a defined time frame. Sometimes they also stipulate a minimum direct deposit amount.
Savings accounts bonuses, on the other hand, typically base their cash pay-out on you holding a certain lump sum of money in the account without touching it for a specified period—usually two to four months. This is somewhat like a CD in that earning the bonus depends on not withdrawing the funds during the qualification period. But if you do have to take cash out early, you won’t be hit with a penalty. You’ll simply forfeit the bonus you would have been paid.
If you’re able to open a business checking or savings account, you’ll have even more options, some paying $900 to $1,000. In addition, Chase is currently offering a $900 bonus to those who can simultaneously meet the qualifications of both a checking and savings account bonus.
Right now, you can earn an especially great interest-plus-bonus deal from Live Oak Bank. If you have $20,000 you can sock away for a short time, you can earn 4.30% APY in addition to a $300 cash bonus if you don’t touch the money for two months. Combined, the APY and the bonus could net about $440 for just a two-month commitment.
Daily Rankings of the Best CDs and Savings Accounts
Note that the “top rates” quoted here are the highest nationally available rates Investopedia has identified in its daily rate research on hundreds of banks and credit unions. This is much different than the national average, which includes all banks offering a CD with that term, including many large banks that pay a pittance in interest. Thus, the national averages are always quite low, while the top rates you can unearth by shopping around are often five, 10, or even 15 times higher.
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. It also cannot specify a maximum deposit amount that’s below $5,000.
Banks must be available in at least 40 states to qualify as nationally available. 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.