| Rates for I Bonds Purchased in April 2024 | |||
|---|---|---|---|
| Rate for Months 1–6 | Ratefor Months 7–12 | Rate for Months 13+ | |
| Fixed rate | 1.30% | 1.30% | 1.30% |
| Variable inflation rate | 3.95% | 2.94% | Unknown |
| Composite rate | 5.27% | 4.26% (est.) | Unknown |
As you can see, this is a far cry from the historic 9.62% rate that I bonds paid when purchased between April 2022 and October 2022. While a return in the 4% range is still respectable, it's now more compelling for many savers to put their money elsewhere.
Short-Term Savers Are Better Off With a CD
For those who want to sock away cash for the next few years, not decades, today's certificates of deposit (CDs) provide an excellent alternative for two reasons. First, you can earn significantly more than the upcoming 4.26% I bond rate with CDs in every term from 3 months to 5 years, with the current top rate reaching as high as 5.65% APY.
:max_bytes(150000):strip_icc()/4-26-91560ff5969b49809edfa4f090c29f66.png "Is April a Good Time to Buy New I Bonds? (1)")
Second, a CD's rate is locked for the full duration of its term. So if you open, say, a 3-year CD paying 5.00%, you're guaranteed to earn that rate until it matures in 2027. In contrast, an I bond you open now will have an unknowable rate just one year down the road. While it's theoretically possible I bond rates could rise in the near future, the Federal Reserve's commitment to tamping down inflation suggests it's more likely I bond rates will decline.
While it's true that CDs will trigger an early withdrawal penalty if you need to cash out before the maturity date, I bonds that are less than five years old also carry a penalty. On the one hand, the I bond's early withdrawal penalty of the last three months' interest is relatively mild. But on the other hand, you cannot withdraw I bond funds for any reason during the bond's first year.
If you're thinking of a high-yield savings account as another option, they too currently pay more than I bond rates: The top high-yield savings account is offering 5.55%, with more than a dozen additional options to earn 5.20% or more. But unlike CDs, savings account rates are variable, with banks able to change them anytime they like. If the Federal Reserve moves into a period of rate cuts later in 2024 or in 2025, savings account rates will begin to come down.
Why Long-Term Savers Interested in I Bonds May Want to Buy in April
While not currently a competitive savings vehicle for short-term savers, I bonds may still be a good fit for those who are stockpiling savings for the long haul. That's because I bonds are extremely safe and will always earn more than inflation, meaning the future spending power of your cash is protected. Also, after five years, I bonds no longer impose a withdrawal penalty. This makes them an easy vehicle from which to withdraw cash in, say, one's retirement years.
If you find yourself in this camp and have not already bought 2024 I bonds up to the maximum allowable amount of $10,000 per person per year, you may want to make your purchase quickly. That's because the change in the variable inflation rate to be announced May 1, as we discussed above, will lower 6-month returns by about a percentage point. Purchase before April 30 and you can still lock in the previous rate for six months. But beginning May 1, that rate will no longer be available.
Above we also talked about the fixed rate. Currently, the fixed rate is 1.30%. It's unknown what the fixed rate will be for bonds purchased May 1 or later, as that formula is not publicly shared by the Treasury. But experts are expecting it won't change dramatically from the current 1.30%.
If the fixed rate on May 1 stays at 1.30% or goes down, those who bought in April will definitely be better off, having snagged the current rate of 5.27% for their first six months. And that 6-month rate is a certainty, not a guess, for April-issued I bonds.
If instead the May 1 fixed rate is higher than 1.30%, then May I bond buyers may ultimately do better—but over a very long time horizon. They'll earn a bit more every 6-month period in the future vs. April bond buyers, due to their higher fixed rate. But they'll first have to make up the ground lost by losing out on six months of the 5.27% rate.
If you want to buy an I bond with an April issue date, act fast. Starting the transaction on April 30 will be too late. But you can make the purchase online at TreasuryDirect today or over the weekend, and possibly even Monday, April 29, to secure an April issue date.
Best CD Rates for May 2024: Up to 5.51%
Best High-Yield Savings Accounts for May 2024—Up to 5.55%
Best Money Market Account Rates for May 2024—Up to 5.35%
How We Find the Best Savings and CD Rates
Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account's minimum initial deposit must not exceed $25,000.
Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.
