Short answer
A CD keeps its rate when savings rates fall. $10,000 in a 4.50% CD earns $920.25 over 24 months, against $716.48 in a HYSA that starts at 4.00% and falls 0.5 point a year.
1. The model
- CD: balance = deposit × (1 + CD APY)years, with the rate fixed for the term.
- HYSA: starts at its APY, then falls by a set number of percentage points a year, never below zero, and compounds monthly.
2. Interest on $10,000
CD at 4.50% fixed against a HYSA that starts at 4.00%:
| Option | 12 months | 24 months | 60 months |
|---|---|---|---|
| CD at 4.50% fixed | $450.00 | $920.25 | $2,461.82 |
| HYSA, rate holds | $400.00 | $816.00 | $2,166.53 |
| HYSA, falls 0.5 point a year | $377.07 | $716.48 | $1,462.94 |
| HYSA, falls 1 point a year | $354.13 | $617.25 | $839.24 |
3. What the HYSA needs to match the CD
Over 24 months, a HYSA that falls 0.5 point a year must start near 4.98% to match a 4.50% CD. If it falls 1 point a year, it must start near 5.46%. If the rate does not fall at all, it only needs to match the CD's 4.50%.
4. When the CD loses its edge
- Rates rise, so the HYSA pays more than the CD's fixed rate.
- You need the money early and pay a penalty.
- You want to add money during the term, which a CD does not allow.
5. Check your answer
- With no rate change, the higher APY always wins.
- The longer the term, the more the rate path matters.
- These are example rates, not a forecast.
6. Frequently asked questions
Do HYSA rates fall when the Federal Reserve cuts rates?expand_more
Usually, yes. Banks often lower HYSA rates soon after a cut, while a CD keeps the rate it was opened at.
How much more does a CD earn if rates fall?expand_more
On $10,000 for 24 months, a 4.50% CD earns $203.77 more than a HYSA that starts at 4.00% and falls 0.5 point a year.
What if rates go up instead?expand_more
A HYSA can follow rates up, while a CD stays fixed. The HYSA can then earn more than the CD.
Can I model my own rates?expand_more
Yes. Enter your own CD APY, HYSA APY, term and rate path in the CD vs HYSA Calculator.