Interest rates

As the Fed Prepares to Raise Interest Rates, Synchrony Bank Pushes CD Rates Higher

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The Federal Reserve’s plan to raise interest rates in 2022 is primarily designed to slow inflation. But rate hikes can have other impacts on consumers, including pushing up interest rates on savings accounts.

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This is good news for Americans who have been earning microscopic interest on their savings, money market and certificate of deposit (CD) accounts over the past two years due to historically low interest rates.

Normally, it takes at least a few months for banks to raise savings account rates. This is especially true for large domestic banks, which have enough financial muscle that they don’t need to raise rates quickly to attract more deposits, The New York Times reported last week.

But this is not the case in all banks. Some, including Synchrony Bank, are already raising interest rates on some deposit accounts ahead of the Fed’s decision.

As previously reported by GOBankingRates, Fed Chairman Jerome Powell said it would be “appropriate” to raise the target range for the federal funds rate at the central bank meeting later this month.

How much will rates go up?

The Fed did not provide many details on what the rate hikes will look like. That has left economists and analysts playing a guessing game as to how much the Fed will raise rates and how often.

Last week, traders in the futures market bet that the central bank would implement six quarter-point hikes for the year, CNBC reported. Those forecasts will likely change after Fed officials release their latest economic projections at the end of the March 16 policy meeting.

In February – before Russia’s invasion of Ukraine further clouded the economic landscape – GOBankingRates reported several rate hike scenarios.

The Goldman Sachs group has speculated that the Fed could raise rates seven times, with a 25 basis point hike each time. HSBC economists predicted a 50 basis point hike in March, with four more 25 basis point increases to follow throughout the year. Citi economists predict a similar scenario. Nomura Holdings also said a half-point increase is likely for March.

Other analysts are predicting a smaller rate hike of a quarter point in March.

“Twenty-five basis points … seems like about a lock,” Michael Schumacher, director of rates strategy at Wells Fargo, told CNBC on March 10.

As AARP pointed out a few months ago, savings account customers shouldn’t expect a big windfall overnight. Rates are rising from a very low base, so the gains many see in their savings, money market and CDs will be modest.

Synchrony boosts CD rates

One thing is certain, the rates will go up and the banks are already preparing for it. One of them is Synchrony Bank, which offers very robust annual percentage yields (APY) on its CDs – including a 13-month CD that pays an APY of 1.00%.

There is no minimum balance requirement to earn the 1.00% rate. Synchrony also offers a 15-day best rate guarantee, which means that if you open your CD and fund it within 15 calendar days, you’ll get the best available rate if the APY increases further on the day you fund it. .

Beat the average… by a lot

Synchrony presents itself as a leader by offering some of the best rates on the market, and it is not an unnecessary boast. Average US CD rates for the week of March 9 ranged from 0.19% for a one-year CD to 0.37% for a five-year jumbo CD, according to Bankrate.

the 1.00% Synchrony’s APY bids for its 13-month CD, which went live March 8, aren’t even the highest on offer. This price goes to the bank’s 60-month CD, which offers an APY of 1.50%. Here is an overview of Synchrony Lists CD pricing on its website:

Mandate’s durationAnnual Percentage Yield (APY)
3 months0.25%
6 months0.50%
9 months0.60%
12 months0.80%
13 months1.00%
14 months0.80%
15 months0.90%
18 months0.85%
24 months1.10%
36 months1.25%
48 months1.25%
60 months1.50%

Attention to detail

Like many banks, Synchrony may charge an early withdrawal penalty if you withdraw funds from the CD before its maturity date. The penalty applies only to the principal amount withdrawn. There is no penalty on the interest you withdraw early.

Here is an overview of early withdrawal penalties for different durations:

  • Terms of 12 months or less: 90 days simple interest at the prevailing rate
  • Terms of more than 12 months but less than 48 months: 180 days of simple interest at the prevailing rate
  • Terms of 48 months or more: 365 days of simple interest at the rate in effect

Another thing to keep in mind: after you initially fund your CD on Synchrony, you can make additional deposits there during the 10-day grace period following CD maturity.

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Editorial Note: This content is not provided by Synchrony Bank. Any opinions, analyses, criticisms or recommendations expressed in this article are those of the author alone and have not been reviewed, endorsed or otherwise endorsed by Synchrony Bank.

About the Author

Vance Cariaga is a London-based writer, editor and journalist who has previously held positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work has also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal, and Business North Carolina magazine. He holds a BA in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting has earned him awards from the North Carolina Press Association, Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A North Carolina native who also writes fiction, Vance’s short story “Saint Christopher” placed second in the 2019 Writer’s Digest short story competition. Two of her short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. Her first novel, Voodoo Hideaway, is published in 2021 by Atmosphere Press.