Banks are guaranteeing rates over 5% on savings accounts into 2024. Here's the fine print.

By Andrew Keshner

APY rate guarantees aren't new, but banks offering 'aggressive' rates over 5% are, one expert said.

It's easy to find high-yield savings accounts that are offering 5% interest these days, but a handful of banks are now promising they'll pay at least 5% interest on those accounts -- and keep doing that into next year.

While the Federal Reserve's next interest rate move remains to be seen, earning a sure yield into 2024 sure sounds tempting.

Just read the fine print about the terms on these accounts, experts say.

Savings accounts, like bank certificates of deposit, have been having a moment in a time of rising interest rates and rocky stretches for the stock market.

CDs can be an enticing way to secure the benefits of higher interest rates, but the money is locked up for a certain period of time and there are penalties for early withdrawals.

Savings accounts have no early withdrawal rules, but their interest rates can easily swing higher or lower at a bank's discretion.

So a chance to maintain a particular annual percentage rate on a savings account for a period of time combines certainty with an ability to tap the cash.

Banks promising that a savings account will keep the same interest rate over a set period of time isn't new, said Ken Tumin, founder of DepositAccounts.com. What's different now is that "the rate is more aggressive than it has been," surpassing 5%, he said.

Which banks are guaranteeing rates over 5% until next year

For example, Ivy Bank is now offering 5.3% for its savings account through June 2024. The bank's guarantee of at least 5% began in early October, said Katie Catlender, chief customer officer at Cambridge Savings Bank. Ivy Bank is Cambridge Savings Bank's online division. The climb to a 5.3% APY guarantee happened last week, Catlender said.

The offer gives customers "stability and predictability while also allowing for the flexibility to move money as they wish. With a fixed-rate guarantee offer, customers are shielded from fluctuation in interest rates and market conditions," she said.

The account offers "the security of a CD but with the added benefit of flexibility to move money in and out as they wish," she added.

Meanwhile, EverBank says first-time "Yield Pledge" account holders can get an introductory fixed rate of at least 5.15% rate for a year. The rate climbed to 5.15% in early October after its guaranteed rate reached 5% in September, the bank said. Fifth Third Bank (FITB) unveiled an offer earlier this month applying 5.3% on certain new deposits through the end of January 2024, a spokeswoman said.

More banks could start offering savings account rate guarantees, especially if it seems the Fed isn't planning to reduce its benchmark interest rate in 2024, Tumin said.

The central bank is scheduled to announce its next interest rate decision on Nov.1.

For now, traders are widely expecting another rate pause at the 5.25% -- 5.50% target range, according to the CME FedWatch Tool. Last week, Fed Chair Jerome Powell hinted at the chance for more rate hikes in the future.

"Five percent and better is widely available in the world of online banks," said Greg McBride, chief financial analyst at Bankrate. There were nearly 30 banks with savings account offers at or above 5% with rates available on the site.

So a bank guaranteeing a 5% rate into 2024 is "nice, but it's not sticking your neck out in the world in where the Federal Reserve is nowhere close to cutting interest rates," he noted.

For cash savers, the key thing to remember is that rates on certain high-yield savings accounts are often much better than what large, brick and mortar banks are paying, McBride noted. As of mid-October, the national average interest rate on savings accounts was 0.46%, according to the Federal Deposit Insurance Corporation.

There is value in a guarantee, Catlender said. "We are proud that we have the strength and resources to offer our customers stability and support during uncertain market times," she said.

The fine print on savings accounts that 'guarantee' 5% rates into 2024

When weighing banks' offers, one thing to consider is what happens to the rate once the APY guarantee ends. These accounts can also come with rules about minimum balances.

At Ivy Bank, there's a $2,500 minimum balance needed to open and maintain a savings account with a guaranteed rate of 5.3%. If balances fall under the threshold, the APY drops to 0.05%. The guaranteed rate applies to deposits between $2,500 and $1 million. After June 2024, the rate on the account becomes variable and can change. If Ivy decides to increase rates again before June 30th, 2024, existing customers with $2,500 or more in their high-yield savings account will receive the increased rate, Catlender noted.

EverBank says after the introductory rate, the APY on a new Yield Pledge goes from at least 5.15% to the "ongoing rate," which is currently 4.75%. There are no minimums to open or keep the introductory rate, the bank notes on its website.

At Fifth Third Bank, the account needs to maintain a $25,000 minimum balance in order to have the promotional APY of 5.3%, a spokeswoman noted. In the days when the balance dips under $25,000, account holders get the non-promotion rate of 0.01%.

Caveats such as account minimums and rate changes mean people considering these accounts should think hard about the offers, especially "if you think you might be busy" and won't be able to quickly switch your money to a better-yielding account when the guaranteed-rate period ends, Tumin said.

But the most important move for savers may not be weighing one high-yield offer against another, McBride said. The best thing you can do is put your cash to work in high-yield accounts in the first place. If people later discover more favorable terms and rates elsewhere, they can always switch to a new bank. "There are plenty of fish in the sea," he said.

"The bigger issue is that it's not whether it's 5% or 5.125%, it's are you earning 5% or 0.5%?," McBride said. "Moving from low-yielding to more competitive returns, being able lift your interest earnings tenfold, it's about the easiest money you're ever going to earn."

-Andrew Keshner

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10-25-23 0813ET

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