Is the Surge in High-Yield Savings a Windfall — Or a Warning?
By Matt Doffing, Senior Editor at The Financial Brand
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Key Takeaways
- As consumer interest in CDs wanes, high-yield savings accounts are gaining in popularity, drawing institutional strategies away from traditional term deposits.
- But institutions counting on high-yield products to grow customers and drive primacy may find that savings accounts are not as “sticky” as they once were.
- To drive sustained growth, high-interest products need to be integrated into product suites that broadly serve customers’ needs, not just deliver yield.
Everyone appears to want high-yield savings accounts. Banks, credit unions, and depositors have shifted focus from term deposits to liquid and floating rate deposits. What could that mean for deposit competition and institution profitability?
Deposit experts say institutions need to be mindful of the good, the bad, and the ugly elements of meeting demand for high-yield savings and money market accounts.
The Good: HYSAs May Allow Cost Reductions
Looking at data on which deposit products have grown since the end of 2024, banking has seen a stark reversal: Certificate of deposit growth has become negative, and liquid account growth — high yield savings account and money market accounts — has become positive.
According to data published by Curinos at the end of April, monthly growth in CD volumes has stopped, dropping to negative growth rates first in October 2024, even though institutions offer top-of-the-market rates. On the other hand, the average monthly growth in savings and money markets reached 0.9% in February, the latest data available.
“For many consumers, today’s diminished CD rates appear no longer to be sufficient to overcome the downside of locking up their funds,” wrote Andrew Jiang, director of strategy consulting at Curinos. “As a result, savings accounts have become the biggest beneficiary of the flight from CDs.”
Bank and credit union attendees also reported at The Financial Brand Forum in April that their institutions were focused on originating liquid deposit products.
“With CD rates expected to gradually move lower, the reduction in CD volumes could become a competitive advantage for banks that are well-positioned to capture those maturing CD balances in an attractive savings/money market product,” Jiang says.
The Bad: Savings Accounts Are Not the Only Alternative to CDs
Because banks and credit unions only offer savings accounts, money markets, or certificates (mostly), it’s tempting to assume deposit volumes move because depositors shift their preference for that limited set of options.
Savings accounts, money markets, and certificates may be all the bank offers, but they’re not the only options the depositor can access to invest their savings.
What about U.S. Treasuries?
U.S. Treasury rates are generally higher than CDs. The income they generate is tax-exempt. Depositors can buy them simply by calling their representative at Charles Schwab, Vanguard, or Edwards; they don’t need a Treasury Direct account or need to understand bond investing beyond rate and term. If they need their money out early and rates have declined, which is what bankers expect rates to do, given their focus on HYSAs, they can dial their rep to sell their treasury for a gain.
Banking Institutions Playing a Game of Chicken
| Deposit Products | National Deposit Rates | Treasury Yield |
|---|---|---|
| Savings | 0.41 | 4.33 |
| Interest Checking | 0.07 | 4.33 |
| Money Market | 0.62 | 4.33 |
| 1 month CD | 0.24 | 4.33 |
| 3 month CD | 1.42 | 4.32 |
| 6 month CD | 1.60 | 4.23 |
| 12 month CD | 1.77 | 4.03 |
| 24 month CD | 1.49 | 3.99 |
| 36 month CD | 1.25 | 3.99 |
| 48 month CD | 1.27 | 3.99 |
| 60 month CD | 1.24 | 3.96 |
Source: FDIC resources; April 21, 2025
U.S. Treasuries issuances were up in April over March and February of 2025. The current $28.6 trillion is up 6.1% year over year. Moreover, in the first month of decline in CD growth (October 2024), U.S. Treasury volumes hit their high point of the last 12 months, according to the Securities Industry and Financial Markets Association, a trade association for broker-dealers, investment banks, and asset managers.
Fintechs, such as Public.io, Wealthfront, and others, are making the U.S. Treasury look and act like a time deposit at a bank. Is it that people prefer HYSAs now and not CDs? Or is it that the market is undergoing a broadening in depositor awareness of their options outside of the incumbent banking industry?
HYSA growth may not be a win in that case. The growth could be just people who want high rates and short commitments — all the while U.S. Treasuries picks up savers willing to commit for a term, albeit at a higher rate.
The Ugly: Rates May Not Fall, HYSAs Can Leave Instantly
The elephant in the room regarding institutions overcommitting to HYSAs is recent banking history. Rates may fall, and they may not. How many institutions hoped for significant rate reductions from the Federal Reserve by the end of 2024?
In a context of declining rates, HYSAs are appealing to banks — maybe so appealing that an institution might consider setting its CD rates below its HYSA rates. By giving depositors a higher HYSA rate than CDs, the institution gets deposit volumes on which it can change the price.
This approach has three potentially perilous downsides:
- Can the institution lower HYSA rates and keep the deposit volumes? Will people who came for a rate stay when that rate is gone?
- If rates don’t fall, the institutions can end up back where some were in 2023: Wishing they had locked depositors in.
- The downsides of a price-driven deposit strategy (covered in the next section).
HYSAs occupy the middle ground between term deposits and transaction accounts. “Transaction accounts let you manage your spending and expenses; the CD lets you manage for a higher rate of interest,” explains Neil Stanley, founder and CEO of The CorePoint.
A major potential pitfall for HYSAs when institutions over-emphasize their liquidity. “Any of those depositors could wire their money out at any moment, and the banker has no recourse,” Stanley explains. “At least with the CD promotion, once the depositor got in, you could count on having it for months. With today’s technology, the HYSAs are even more easy-come-easy-go than they were a few years ago.”
Often, institutions use teasers to entice people to open HYSAs; the depositor knows at origination that the rate offered will not stay for the long term. “There are ways of bundling HYSA structures with other accounts to generate longer-term relationships,” Stanley acknowledges, “but if HYSA is the sole play, then you’ve probably attracted rate shoppers on the hope that they will stay after the teaser is over.”
The Potential Warning
Technology has accelerated depositors’ ability to execute transactions in their best interest. The more bankers treat deposits like a commodity, the more efficiently and effectively depositors will use technology to negotiate against the banks’ best interests.
An example of services that have taken automated yield harvesting to the next level is MaxMyInterest, a perfect tool for those with larger balances, and even better for a market in which institutions homogeneously compete with higher HYSA rates. MaxMyInterest automatically moves deposits to the highest-paying HYSA a depositor owns.
With services like this in wider use, is it a win for institutions to gather more HYSA money? Perhaps not. It may instead be a sign of even hotter hot money. Depositors do not even need to shop very much anymore. They only need to open high-rate specials through banks’ slick-and-easy digital account opening and then integrate them with yield-harvesting software.
Banks get to decide which products they offer, how they structure them, and how they price them, and then people determine if they use those products. As depositors’ level of technological sophistication increases, being good at attracting deposits may soon be about offering, structure, and pricing, more than it is just about pricing. Pricing alone as a strategy may be the riskiest of all to deposit profitability.
