Money Management

The Federal Reserve is expecting several rate cuts in 2024. Does that mean CD yields will fall? Here’s what you need to know. 

In its December meeting, the Federal Reserve surprised experts by calling for several interest rate cuts in 2023 as inflation has cooled off. But what does this mean for yields on certificates of deposit (CD), which are currently at multi-year highs? Here’s a rundown of what the Fed expects to do, what it could mean for CDs, and some important things to keep in mind as we head into 2024.

The Fed expects several rate cuts in 2024

The Federal Reserve decided to hold the benchmark federal funds rate steady at its December 2023 meeting, but the big story is in the economic projections the Fed released along with its decision.

In the latest projections, the policymakers are expecting three quarter-point (0.25%) cuts to the federal funds rate in 2024. This is a more aggressive pace of reduction than the Fed members had previously called for.

To be clear, these are projections, and nobody (not even the Fed members themselves) have a crystal ball that can tell them what’s going to happen. For example, in December 2021, the Fed expected the benchmark federal funds rate to be 0.9% at the end of 2022. It actually ended 2022 at a target range of 4.25%-4.5%. The projections are simply the best estimates the members can make with the information currently available.

What does the Federal Reserve mean for CD yields?

One important point to keep in mind is that while CD yields as a whole tend to move in the same direction as benchmark interest rates set by the Federal Reserve, they do not have a direct relationship. In other words, if the Fed cuts rates by 1 percentage point, there’s no guarantee that banks will move CD yields by the exact same amount. But it would be a smart bet that they’ll trend lower.

It’s also important to point out the different dynamics that govern short-term CDs versus those with longer maturities. I don’t want to turn this into an economics lesson and will spare you any mathematics involved, but the general idea is that shorter maturity CDs (say, 18-month and lower) have yields that are mainly dependent on the current state of benchmark interest rates.

On the other hand, longer maturity CDs have yields that are influenced by future expectations of interest rates.

To illustrate this, consider that as of this writing, there are 1-year CD yields available with yields as high as 5.5% from reputable financial institutions. On the other hand, the top 5-year CD yields available as of December 2023 are in the 4.3% ballpark. This is the opposite of the historical norm — typically, the longer you are willing to keep your money locked up, the higher the yield you can expect. The simple explanation is that while prevailing interest rates are relatively high right now, they are expected to drop significantly over the next few years.

The bottom line

The short explanation is that if the Federal Reserve ends up cutting the federal funds rate in 2024 as it expects, it is likely to push CD yields lower. However, there are a few key principles to keep in mind:

There’s no guarantee the Fed will actually cut rates, or by how much. If economic data trends in the wrong direction, there could be no rate cuts at all.CDs and benchmark interest rates are not directly correlated.Nobody has a crystal ball that can predict economic conditions, political events, or other factors that can influence interest rates.

With all of that in mind, it could be a smart idea to put money into CDs now, if you have idle cash you’ve been waiting to deploy. And regardless of what happens to overall CD rates in 2024, it’s fairly certain that you’ll find the best yields from online banks like those on our best CD rates list.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Car insurance discounts are one of the easiest ways to reduce auto insurance premiums. See what may be standing between you and those discounts. 

Did you know that bundling your insurance policies can trim up to 25% off your premiums? And that’s just one discount offered by insurance companies. Imagine qualifying for several discounts and stacking them for even greater savings.

If you’re having trouble scoring auto insurance discounts, it may be that one of these issues is standing in the way.

1. You drive a frightfully powerful car

Many car enthusiasts love muscle cars with enough power to blow their socks off. If that describes you, that’s okay, as long as you know that you probably won’t qualify for a safe vehicle discount.

Insurance is all about crunching the numbers to figure out where the greatest risks lie. Simply put, powerful cars capable of moving at high speeds are more likely to be involved in accidents. To reward drivers for choosing safe vehicles, insurers make those cars cheaper to insure.

Takeaway: If you’re concerned about a high insurance premium, consider trading your vehicle for a safer model.

2. You rack up the miles

If you’re someone who puts a whole lot of miles on your vehicle each year, you’re missing out on the low-mileage discount. Statistically speaking, the more miles you drive per year, the more likely you are to make a claim. No matter how careful a driver you are, you never know when someone else is going to run into you or your car will fall in a pothole the size of Nebraska.

Auto insurers tend to reward drivers who keep their annual mileage low with a sweet low-mileage discount.

Takeaway: If possible, cut your mileage by carpooling.

3. You are not what insurers consider a “safe driver”

It’s no secret that speeding tickets and accidents can scare insurers off. In fact, if you pile up enough of either, you may find yourself on the receiving end of a cancellation letter from your insurance company. At the very least, you likely won’t qualify for a safe driver discount.

Takeaway: The best thing you can do is slow down, drive carefully, and consider taking a defensive driving class. Many insurers offer discounts to those who complete the class.

4. You hop from insurer to insurer

Once you find an insurance company you like, stick with it. Better yet, bundle your coverage. For example, if you have homeowners or renters insurance, ask about bundling it with your auto policy. Sticking with one company and purchasing multiple policies should score you a loyalty discount.

Takeaway: Stop playing the field and find an insurer you like and trust.

5. You drive a car with few safety features

Again, insurance companies operate on statistics. The more safety features your vehicle has, the better insurers feel about its chances of surviving an accident. More importantly, the more confident insurers are that you will survive an accident. To reward you for driving a car with a nice array of safety features, insurance companies offer a vehicle safety features discount.

Takeway: The next time you purchase a car, check the Insurance Institute for Highway Safety’s latest report on top safety picks just to see if any of the vehicles mentioned sends a thrill through you. And if you’re driving an old car that you kind of love, consider having it retrofitted with updated safety equipment.

6. You have yet to go paperless

While it’s not a huge discount, allowing your insurance company to correspond with you via email will trim your premiums a bit. And you can benefit the environment this way, plus declutter your mailbox in the process.

Takeaway: Either go online and check the paperless option (if your insurer includes the option) or call your agent and ask about changing the way you receive your mail.

7. You haven’t signed up for auto-pay

Insurance companies adore knowing that they’re going to be paid on time — every time a premium is due. Given the speed with which auto insurance rates have increased since the pandemic, there’s no doubt that insurers are dealing with more late and missed payments.

Takeaway: To ease your insurer’s worries, sign up for automatic payments to be withdrawn from your checking account when payment is due, and ask how much of a discount you will receive.

8. You haven’t asked

It’s possible that you don’t know about every discount available to you, and your insurance company does not realize you qualify. For example, your insurer may offer discounts to members of certain civic organizations, sororities, or fraternities. It may offer discounts to employees at specific companies or past and present members of the military.

Takeaway: Call your insurer and ask about discounts, or check your insurer’s website to find a list of potential discounts.

It’s nice to believe that insurance rates will decrease one day, at least by a little. Until that time, though, your best bet is to keep milking those discounts.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Dana George has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Getting an upgrade to business class is the Holy Grail for many less-than-frequent flyers. If you want to fly business class more often, follow these tips! 

Getting an upgrade to business class is one of the most popular perks for frequent flyers. Business class seats are wider, the legroom is better, you get free drinks and premium food offerings, and other cushy perks like lie-flat seats on international flights.

I’m usually an airline-free agent who always tries to find the cheapest flights possible. But I also have personal experience with flying business class. I once got a surprise upgrade to business class, entirely by accident, along with my entire family on an international flight to Germany on a Boeing 787 Dreamliner. That undeserved upgrade to business class was the greatest airline experience I’ve ever had, and I think about it every day. I’ve been considering joining a frequent flyer program just so I can have a chance of getting into business class again.

But even though I don’t get an upgrade to business class very often, I have spent a lot of time researching airline rules and interviewing travel experts and frequent flyers. They taught me the following expert tips on how to get an upgrade to business class.

1. Get elite status with airlines

If you want to get the best chance of a free upgrade to business class, you should do what it takes to get elite status with an airline (or multiple airlines). Getting elite airline status can help put you at the front of the line for a business class upgrade whenever seats are available.

The airlines all have different names for their elite status programs, but here are a few, along with their tiers:

United Airlines MileagePlus® Premier® Status

Premier Silver®Premier Gold®Premier Platinum®Premier® 1K

American Airlines AAdvantage®

AAdvantage® Gold®AAdvantage® Platinum®AAdvantage® Platinum Pro®AAdvantage® Executive Platinum®

Delta Air Lines SkyMiles®

Silver MedallionGold MedallionPlatinum MedallionDiamond Medallion

How to get elite airline status: Different airlines have a few different rules. But in general, you gain elite airline status by flying (going on flights to earn frequent flyer miles) and buying (earning loyalty points by purchasing tickets from the airline, and/or using airline credit cards to earn bonus miles and other travel rewards). The more you fly and buy, the faster you can climb the status ladder — and earn more business class upgrades.

Want to get a head start on elite airline status? Consider signing up for an airline credit card to start racking up frequent flyer miles (and status points) fast.

2. Use frequent flyer miles and points

Once you have your favorite airline’s credit card in hand, it’s time to start earning frequent flyer miles. The more miles you have, the better your chances of upgrading to business class, even if you don’t have elite status.

Airlines often have special deals before your flight, where you can buy an economy class seat, and upgrade to business class using miles. (This is also sometimes possible with reward points from travel reward credit cards.) Keep checking your email and refreshing your airline app to see if the price of an upgrade goes down before your flight date. Even if a business class upgrade costs too many miles or points on the day you book your flight, the airline might offer a better deal as the departure date gets closer.

3. Choose unpopular flights

Getting a business class upgrade is just like finding cheap flights: your chances are better when there are empty seats on the plane. Try to choose flights that are less popular (less expensive).

If you choose a flight with early morning takeoff or late night arrival, or that requires you to travel on a holiday, that means fewer people are trying to book tickets. And you’ll boost your odds of getting into business class.

You can also search for cheap business class tickets, so you can see the going rate for full-price business class seats. The less people are willing to pay for those seats, the more likely you can get upgrades for free.

4. Volunteer to give up your seat on overbooked flights

Airlines are seeing strong demand for air travel, and that means flights are more likely to get overbooked. If you’re on a full flight, airline gate staff will make an announcement asking passengers to volunteer to give up their seats in exchange for travel vouchers.

These vouchers can often be used for business class upgrades. Depending on the situation and your travel plans, you might even get a free night in a hotel, free meals, and other perks to thank you for volunteering. But don’t respond to the first announcement; if no one volunteers right away, airlines will often sweeten the deal. Make them work for it!

Bottom line: Business class upgrades are not guaranteed, except for the highest-spending frequent flyers. But these tips can help you boost your chances. Try to get elite status so you’re a VIP customer with your airline. Look for opportunities to cash in your frequent flyer miles for good deals on upgrades. Be quick (but not too quick) to volunteer to give up your seat on a fully booked flight. Keep in mind that airlines are always going to have more empty seats in business class on the emptiest, least-popular, least-convenient flights. Better legroom awaits!

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.

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