The yields on certificates of deposit (CDs) have dropped from last year's highs. In 2024, APYs of 5.00% were easy to come by, while today's best CD rates are closer to 4.00%.

And more rate cuts could be coming in 2025.

The Federal Reserve kept interest rates the same at its January meeting, and we're unlikely to see big changes anytime soon. However, the Fed has suggested that rate cuts are possible, and many experts think they're likely in 2025.

If the federal funds rate drops, then CD yields will follow. Should you lock in an APY of 4.00% or more now?

Our Picks for the Best High-Yield Savings Accounts of 2025

Product	APY	Min. to Earn
American Express® High Yield Savings Member FDIC. APY 3.80% Rate info 3.80% annual percentage yield as of February 11, 2025. Terms apply. Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	3.80% Rate info 3.80% annual percentage yield as of February 11, 2025. Terms apply.	$0	Open Account for American Express® High Yield Savings On American Express's Secure Website.
Capital One 360 Performance Savings Member FDIC. APY 3.70% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Feb. 6, 2025. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	3.70% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Feb. 6, 2025. Rates are subject to change at any time before or after account opening.	$0	Open Account for Capital One 360 Performance Savings On Capital One's Secure Website.
Western Alliance Bank High-Yield Savings Premier Member FDIC. APY 4.30% Rate info The annual percentage yield (APY) is accurate as of Jan. 24, 2025, and subject to change at the Bank's discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY. Min. to earn $500 to open, $0.01 for max APY Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website. Member FDIC.	4.30% Rate info The annual percentage yield (APY) is accurate as of Jan. 24, 2025, and subject to change at the Bank's discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.	$500 to open, $0.01 for max APY	Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website.

Interest rate cuts will probably have little impact

Let's say the federal funds rate drops by a small amount in 2025, and CD rates do the same. (CD rates don't mirror the federal rate exactly, but they track it pretty closely.)

Here's how much that could change your total earnings on a 1-year CD.

Even if you invest a large amount in CDs, near-term rate cuts will likely have a small effect on your earnings.

Are CDs even worth it?

CDs offer safe, guaranteed returns. They're FDIC insured, so your money is safe. That said, there may be better places for your money.

High-yield savings accounts have similar rates and more flexibility

Today's best savings accounts offer roughly the same rates as CDs -- around 4.00% or higher in some cases. And unlike CDs, they allow you to deposit and withdraw money at any time.

This is why a high-yield savings account is the best place for your emergency fund and any other money you may need on short notice.

Want to earn 10 times the national average APY? Check out our list of the best high-yield savings accounts and open a new account today.

The stock market offers much higher returns

Since 1957, the U.S. stock market has gained 10% per year on average (as measured by the S&P 500 Index). When it comes to money you want to invest for long-term growth, you may be better off investing in stocks through an IRA or a regular brokerage account.

You can even invest in the entire S&P 500 at once with an index fund. Then you'll have a portfolio of 500 of the biggest companies in the U.S.

Just be sure to only invest money that you won't need for at least three years. That way you have time to ride out any near-term dips in the stock market. That means you're less likely to be forced to sell stocks at a loss because you need money right away.

Don't make hasty decisions with your money

CDs are a decent investment, but you shouldn't rush to buy them just because interest rates may drop this year. Make sure you understand how they work and whether they fit into your financial plan. You may find that you have better options.