Seek more from your cash amid higher rates

Money markets and CDs may offer more income, and risk, than savings accounts.

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Key takeaways

  • Interest rates have moved higher in recent years, changing the potential opportunities for cash holdings. Choosing the right option for cash depends on your goals, attitude, and needs.
  • Higher yields exist, but may require you to accept tradeoffs, like fluctuations in the returns of your investments.
  • Money markets have lower earning potential than CDs or bonds, but can offer easy access to your savings and quick adjustments when rates change.
  • Short-term CDs and short-duration bonds may provide higher yields than the average savings account, but come with different risks.

If you are like most people you probably have some money in a checking account for your spending needs, some cash on hand for major purchases that are coming up, and maybe some other funds that you are holding onto, waiting to find the right investment.

If you do have money in cash, you should consider your options. Interest rates have moved up significantly for some types of investments in recent years, but the average savings account still pays barely any interest.1 While rates are still low, choosing a higher-yielding home for some of your cash could make a meaningful difference. If you have $50,000 in cash for the next 3 years, the difference between the average savings account, and some higher-yielding options could be thousands of dollars (see table).

Before you move your cash to find the highest yield—meaning the amount of income relative to the amount invested, be sure to consider the tradeoffs that come with these other options. For instance, CDs and bonds might come with less liquidity, meaning you have to wait for a set period of time, accept the price a buyer is willing to pay to get your cash, or pay a fee that could impact your expected return. Finding an appropriate choice depends on your situation.

  Savings account High-yield savings account Prime money market CDs 2-year Treasury
Yield/Interest 0.2% 1.7% 1.9% 3.0% 2.65%
3-year return $375 $2,604 $2,918 $4,500 $3,975
Savings accounts and high-yield savings accounts data from BankRate. All other yields based on data. All returns are hypothetical, assume a $50,000 initial investment and that July 2018 rates hold steady for the investment period and ignore any taxes or fees. Returns for money market and savings account compounded biannually. For illustration only. CD and Treasury bonds assume a 3-year maturity and compounding or reinvestment.

First consider your goals

Before you look for higher-yielding options, take a second to reconsider the role of your cash in your financial plan.

The goal: Everyday expenses The goal: Emergency fund
  • Daily liquidity need: High
  • Tolerance for losses: Low
  • Vehicles to consider: Money market funds, checking, and savings accounts
  • Liquidity need: High for a portion of the fund, lower for the rest
  • Tolerance for losses: Low
  • Vehicles to consider: A mix of highly liquid accounts, such as money market funds, and less-liquid options, such as CDs or short-duration high quality conservative bond funds
The goal: Near-term savings target The goal: Low-volatility, "short-term" allocation in long-term portfolio
  • Daily liquidity need: Low
  • Tolerance for losses: Low
  • Vehicles to consider: Treasury bonds and FDIC-insured CDs with laddered maturities or maturities that correspond to the date you need your money
  • Daily liquidity need: Low
  • Tolerance for losses: Moderate
  • Vehicles to consider: A range of bonds, bond maturities (ladder), or short duration bond funds with a history of offsetting stock volatility 

To get a better sense of the tradeoffs for these options, consider the following pros and cons.

High-yield savings accounts

While traditional savings accounts offer very little interest these days, some banks offer higher-yielding savings options.

Yield: In some cases, the yields are as high as 1.9%.

Liquidity: These accounts come with high liquidity—you can access your savings without having to find a buyer as you would with a stock and there is no set time you have to keep your money in the account.

Protection: These accounts offer full FDIC protection—which means the government would protect you from losses due to the bank. The FDIC protection covers up to $250,000 per person, per bank, for a given ownership category. (See "Insurance for your cash" for details.) Some brokers offer cash management accounts, which aggregate FDIC protection. For instance, Fidelity’s cash management account sweeps balances into accounts at up to 5 partner banks, aggregating up to $1,250,000 of FDIC protection.2

The details: While a high-yield savings account can allow you to access your cash, it may not be the same setup as your corner bank. Some of these accounts are offered online only, and some may not offer ATM access. You need to be aware of fees, which could eat into your interest, and account minimums, which can be required for the best rates. It makes sense to shop around. Also, the FDIC insurance limit per account may require you to spread your money across accounts at several banks to achieve insurance protection for all of your savings.

Money market mutual funds

Money market funds offer easy access to your investment and low risk. Held in your brokerage account, they may come with checkwriting and ATM card access similar to a savings account, making these investments a good option for funds you may need in a hurry. And, as interest rates rise, those higher rates typically pass through to money market funds quickly. For example, as rates rose over the last year, money market fund yields more than doubled, far outpacing the increase in savings accounts.3

Yields: As of July 11, yields on some prime funds offered on, which primarily invest in riskier corporate debt and may pay higher yields, ranged from 1.85% to 2.09% for a minimum initial investment of $2,500 to $1 million or more.

  Average yield (7-day yields)
Prime 1.76%
Government 1.47%
Tax-free 0.73%
Source: iMoneyNet, as of July 11, 2018. Yields show the average 7-day yield for money market mutual funds in the category.

Liquidity: Government money market funds are highly liquid and may make sense for cash you might need. Prime and municipal money market funds may no longer be as liquid as US Treasury or government money market funds during periods of market stress, and may be more appropriate for cash you might not need immediately.

The details: Municipal money market funds offer federally tax-free income, and some offer income also free from state tax. 


These days, certificates of deposit offer significantly higher yields than most savings accounts, but to get those yields, you may have to lock up your savings for a set period of time until it reaches maturity—for instance, a CD may reach maturity and return your principal in 3, 6, 12, 24, or some other number of months.

Yields: As of July 6, the highest yielding 6-month CDs paid more than 2%, 1-year CDs yielded 2.45% interest, and 3-year CDs were at 3%.4

Liquidity: Fidelity recommends holdings CDs until maturity. If you need access to your savings before maturity and you own a brokered CD, you would have to turn to the secondary market, which would incur transaction costs, and you may need to sell for a loss. Banks may charge a fee for early withdrawals.

Protection: CDs are eligible for FDIC protection. For some people, the FDIC protection offered by a single bank account is not enough to cover their full savings. A brokerage account can aggregate brokered CDs from different FDIC banks in one account, so you may be able to put more than $250,000 in CDs without running into the FDIC insurance limit.

The details: There are multiple ways to buy CDs. You could buy one directly from a bank, or you could buy one through a brokerage, known as a "brokered CD." If you buy a brokered CD as a new issue, there are no transaction costs or management fees at Fidelity.

One way to manage the trade-off of higher yields and lower liquidity from CDs may be with a ladder. A ladder arranges a number of CDs with staggered maturities, freeing up a portion of your investment at preset intervals as each CD matures. If you choose to reinvest, you will buy another longer-maturity CD, and eventually your ladder will yield the prevailing rates of the longest-date CDs. (Watch our video.) Learn about Fidelity's Model CD Ladders that simplify the purchase of a CD ladder.

Short-duration bonds

Individual bonds offer a range of yields for different risk levels and maturities. These securities could be laddered, and the range of credit risk in the market means that you can select a yield–risk option that suits you.

Yields: The yields on bonds have moved higher in recent years.

Median 3 mo. 6 mo. 9 mo. 1 yr. 2 yr. 3 yr.
Treasury 1.96% 2.13% 2.29% 2.41% 2.67% 2.76%
Corp AAA 2.11% 1.50% 2.33% 2.43% 2.47% 2.64%
Muni AAA 1.08% 1.39% 1.41% 1.46% 1.61% 1.76%
Taxable Muni 2.08% 2.29% 2.43% 2.50% 2.80% 2.95%
Source: as of July 28, 2018. (Note: Shows median yields available per category).

Liquidity: You also may not be able to find a buyer if you decide to sell, forcing you to accept a lower price if you need to sell your bond. And if interest rates rise, the price of your bond will fall. So if rates have gone up since you bought your bond, you may experience a loss. These risks mean it is important to consider whether a bond is an appropriate alternative investment for your cash. You should also try to diversify among individual bonds, perhaps by holding a number of securities from different issuers. To achieve diversification, it might require that you invest a significant amount of money. You also have to account for transaction costs—the fees to buy or sell individual securities.

Protection: Unlike CDs or savings accounts, individual bonds don't offer FDIC insurance. There is, however, Securities Investor Protection Corporation (SIPC) insurance for brokerage accounts. SIPC protects against the loss of cash and securities — such as stocks and bonds—held by a customer at a financially troubled SIPC-member firm. SIPC protection is limited to $500,000 and has a cash limit of $250,000. SIPC does not protect against declines in the value of your securities, and is not the same as FDIC protection.

Short-duration bond funds and ETFs

Many actively managed bond funds and ETFs do offer professional credit research, portfolio construction, and broad diversification to help manage credit risk. Those services come with fund fees, but these products also offer competitive yields.

Yields: Yields vary based on the strategy of the fund, including the maturity and credit quality of the bonds that the fund holds.

Fidelity's Mutual Fund Evaluator and ETF screener can provide examples of short-duration bond funds and ETFs. Here are the top results for short-term bond, and ultra-short bond category funds from Fidelity's Mutual Fund Evaluator. (Note: The top results are as of September 28, 2018, sorted by 3-year return, and show top results for Fidelity funds and for all funds.) The ETF results show short duration Fidelity Fixed Income ETFs that can be bought commission-free online. (Results are sorted by Net Assets and exclude ETNs, Schedule K-1 Issuers, and leveraged or inverse products. The all "ETFs" results are sorted by asset size and reflect the same criteria, but for any sponsor.) You should do your own research to find bond funds and ETFs that fit your time horizon, financial circumstances, risk tolerance, and unique goals.

Ultra-short and short-term bond funds Short maturity ETFs
Fidelity Fund 30-day yield Fidelity ETFs
Fidelity® Conservative Income Bond Fund 2.21% Fidelity® Limited Term Bond ETF 2.93%
Fidelity® Limited term Bond Fund 2.91% Fidelity® Low Duration Bond Factor ETF 2.52%
All funds
PIMCO Low Duration Income Fund Class A 2.66% iShares Short Treasury Bond ETF 2.05%
Thompson Bond Fund (THOPX) 3.38% iShares 1-3 Year Treasury Bond ETF 2.58%

Liquidity: You can buy and sell bond funds each day. There is no maturity date for most bond funds, so your return will reflect the market prices of the bonds held by the fund at the time you decide to buy and sell. The value of your investment will change as the prices of the bonds in the fund's portfolio shift, and those market moves could add to your yield, or reduce it.

Details: Defined maturity funds offer professional management and diversification, with declining price volatility as the fund approaches its target maturity. (Learn more about defined maturity funds.)

The right option for your cash

If you have cash, it may well be worth considering some options beyond a savings account. Unlike risky stocks, longer-dated bonds, or other income producing investments, money markets, CDs, and short-duration bonds and bond funds all offer a mix of yield, risk, and access that could make them an alternative for some situations. The key is to look at your situation, feelings about risk, timeline, and goals, and find an option that works for you.

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Free commission offer applies to online purchases of Fidelity ETFs in a Fidelity brokerage account. The sale of ETFs is subject to an activity assessment fee (from $0.01 to $0.03 per $1,000 of principal).
Past performance does not guarantee future results.
1. National average savings rate of .25%, as of July 2, 2018, according to's survey of large banks. Get details.
2. The Fidelity® Cash Management Account's uninvested cash balance is swept to one or more program banks where it earns a variable rate of interest and is eligible for FDIC insurance. At a minimum, there are five banks available to accept these deposits, making customers eligible for nearly $1,250,000 of FDIC insurance. If the number of available banks changes, or you elect not to use, and/or have existing assets at, one or more of the available banks, the actual amount could be higher or lower. For more information on FDIC insurance coverage, please visit Customers are responsible for monitoring their total assets at each of the Program Banks to determine the extent of available FDIC insurance coverage in accordance with FDIC rules. Refer to the FDIC-Insured Cash (Core) Disclosure Statement and list of eligible Program Banks for details. The deposits at Program Banks are not covered by SIPC.
3. Source: Money market yields based on data from and savings account interest rate data from BankRate.
4. Source: as of July 11, 2018.
For iShares ETFs, Fidelity receives compensation from the ETF sponsor and/or its affiliates in connection with an exclusive long-term marketing program that includes promotion of iShares ETFs and inclusion of iShares funds in certain FBS platforms and investment programs. Additional information about the sources, amounts, and terms of compensation can be found in the ETF’s prospectus and related documents. Fidelity may add or waive commissions on ETFs without prior notice. BlackRock and iShares are registered trademarks of BlackRock Inc., and its affiliates.
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Credit ratings are forward-looking opinions about credit risk. Standard & Poor's credit ratings express the agency's opinion about the ability and willingness of an issuer, such as a corporation or state or city government, to meet its financial obligations in full and on time.
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'AAA'—Extremely strong capacity to meet financial commitments; highest rating.
'AA'—Very strong capacity to meet financial commitments.
Information provided in this article is general in nature, is provided for informational purposes only, and should not be construed as investment advice. The views and opinions expressed by the speakers are their own as of July 31, 2018, and do not necessarily represent the views of Fidelity Investments. Any such views are subject to change at any time based on market or other conditions. Fidelity Investments disclaims any liability for any direct or incidental loss incurred by applying any of the information in this article. As with all your investments through Fidelity, you must make your own determination as to whether an investment in any particular security or securities is consistent with your investment objectives, risk tolerance, financial situation, and evaluation of the security. Fidelity is not recommending or endorsing these investments by making this article available to its customers.
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In general, the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so holding them until maturity to avoid losses caused by price volatility is not possible. Lower-quality debt securities involve greater risk of default or price changes due to potential changes in the credit quality of the issuer.

You could lose money by investing in a money market fund. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Before investing, always read a money market fund’s prospectus for policies specific to that fund.

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Exchange-traded products (ETPs) are subject to market volatility and the risks of their underlying securities, which may include the risks associated with investing in smaller companies, foreign securities, commodities, and fixed income investments. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks, all of which are magnified in emerging markets. ETPs that target a small universe of securities, such as a specific region or market sector, are generally subject to greater market volatility, as well as to the specific risks associated with that sector, region, or other focus. ETPs that use derivatives, leverage, or complex investment strategies are subject to additional risks. The return of an index ETP is usually different from that of the index it tracks because of fees, expenses, and tracking error. An ETP may trade at a premium or discount to its net asset value (NAV) (or indicative value in the case of exchange-traded notes). The degree of liquidity can vary significantly from one ETP to another and losses may be magnified if no liquid market exists for the ETP's shares when attempting to sell them. Each ETP has a unique risk profile, detailed in its prospectus, offering circular, or similar material, which should be considered carefully when making investment decisions.

For the purposes of FDIC insurance coverage limits, all depository assets of the account holder at the institution that issued the CD will generally be counted toward the aggregate limit (usually $250,000) for each applicable category of account. FDIC insurance does not cover market losses. All of the new-issue brokered CDs Fidelity offers are FDIC insured. For details on FDIC insurance limits, see

Lower yields - Because of the inherent safety and short-term nature of a CD investment, yields on CDs tend to be lower than other higher risk investments. Interest rate fluctuation - Like all fixed income securities, CD valuations and secondary market prices are susceptible to fluctuations in interest rates. If interest rates rise, the market price of outstanding CDs will generally decline, creating a potential loss should you decide to sell them in the secondary market. Since changes in interest rates will have the most impact on CDs with longer maturities, shorter-term CDs are generally less impacted by interest rate movements. 

Credit risk - Since CDs are debt instruments, there is credit risk associated with their purchase, although the insurance offered by the FDIC may help mitigate this risk. Customers are responsible for evaluating both the CDs and the creditworthiness of the underlying issuing institution. 

Insolvency of the issuer- In the event the Issuer approaches insolvency or becomes insolvent, it may be placed in regulatory conservatorship, with the FDIC typically appointed as the conservator. As with any deposits of a depository institution placed in conservatorship, the CDs of the issuer for which a conservator has been appointed may be paid off prior to maturity or transferred to another depository institution. If the CDs are transferred to another institution, the new institution may offer you a choice of retaining the CD at a lower interest rate or receiving payment. 

Selling before maturity - CDs sold prior to maturity are subject to a concession and may be subject to a substantial gain or loss due to interest rate changes and other factors. In addition, the market value of a CD in the secondary market may be influenced by a number of factors including, but not necessarily limited to, interest rates, provisions such as call or step features, and the credit rating of the Issuer. The secondary market for CDs may be limited. Fidelity currently makes a market in the CDs we make available, but may not do so in the future. 

Coverage limits- FDIC insurance only covers the principal amount of the CD and any accrued interest. In some cases, CDs may be purchased on the secondary market at a price that reflects a premium to their principal value. This premium is ineligible for FDIC insurance. More generally, FDIC insurance limits apply to aggregate amounts on deposit, per account, at each covered institution. Investors should consider the extent to which other accounts, deposits or accrued interest may exceed applicable FDIC limits. For more information on the FDIC and its insurance coverage visit

Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. If sold prior to maturity, CDs may be sold on the secondary market subject to market conditions.
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To protect existing shareholders and to ensure orderly liquidation of the Defined Maturity Funds (DMFs), the funds will close to purchases for new and existing shareholders 12 months prior to their maturity date. As the funds approach their liquidation date, the funds' securities will mature, and the funds may reinvest the proceeds in money market securities with lower yields than the securities previously held by the funds. Investment in money market securities is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. In addition, the amount of the fund's income distributions will vary over time and the breakdown of returns between fund distributions and liquidation proceeds will not be predictable at the time of your investment, resulting in a gain or loss for tax purposes.

In addition, the amount of the fund's income distributions will vary over time and the breakdown of returns between fund distributions and liquidation proceeds will not be predictable at the time of your investment resulting in a gain or loss for tax purposes. A portion of fund distributions may be subject to state or federal income taxes, AMT, or taxable as capital gains.
To protect existing shareholders and to ensure orderly liquidation of the funds, the funds will close to purchases for new and existing shareholders 12 months prior to their maturity date. Defined maturity funds are not designed for investors seeking a stable NAV or guaranteed income.
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