When the Federal Reserve changes interest rates, consumers feel the ripple effects in all sorts of ways.

For savers, banks offering top rates tend to pay more when the U.S. central bank hikes rates and less when it cuts them. The Fed has raised the target for the federal funds rate six times so far in 2022 — most recently by 75 basis points in November — and it looks likely to raise rates again in December.

“With the Federal Reserve raising interest rates to get inflation under control, the outlook for savers has improved,” says Greg McBride, CFA, Bankrate chief financial analyst. “But where you have your cash parked really matters. The top-yielding savings accounts and certificates of deposit remain the place to be as those are the banks that are raising their payouts in an effort to remain competitive for savers’ money. But many banks — and especially large banks — continue to be very stingy about passing along higher rates to savers.”

For anyone hoping to make saving money a top priority, here’s what to consider when the Fed makes a change to the federal funds rate.

The loose link between the Fed and your high-yield savings account

Congress mandates the Fed maintain economic and financial stability. The central bank mostly does so by raising or lowering the cost of borrowing money. Savings account rates are loosely linked to the rates the Fed sets. After the central bank raises its rate, financial institutions tend to pay more interest on high-yield savings accounts to stay competitive and attract deposits.

The Fed’s two cuts in March 2020 brought rates to a range of zero to 0.25 percent. But 40-year-high inflation prompted the Fed to raise rates in March 2022 by 0.25 percentage points and in May by 0.5 percentage points. This was followed by rate hikes in June, July, September and November of 0.75 percentage points each. These 0.75 percentage point increases have been the biggest rate hikes since November 1994.

The ripple effects on your wallet don’t always hit right away. Online banks tend to compete for customers with comparatively high rates, while brick-and-mortar banks tend to avoid paying savers competitive yields. The rates on savings accounts vary drastically. Large brick-and-mortar banks, such as Chase and Wells Fargo, are still paying around 0.01 percent APY, while top savings accounts offer about 3 percent APY — or 300 times more.

Escalating competition is one reason for the disparity in yields. Online banks are in hot pursuit to attract and keep deposits as fintech competitors continue to enter the marketplace. Offering a high-yield account is among the tried-and-true strategies to court customers with a compelling offer — especially for relatively new and small digital banks.

Deposits, in general, are essential to banks’ business models: They are used as a low-cost funding source to fuel loan demand.

“Bankers don’t get deposits just because it’s cool to have deposits,” says Neil Stanley, CEO and founder of The CorePoint, a bank management services company. “They get them because they can invest them in loans.”

If banks make money on investing deposits in loans, then they can afford to pay more for deposits. Spoiler alert: banks are (usually) profitable.

Not every bank is hungry for more deposits. Whether and when banks respond to the Fed changing the rate will vary based on what objectives they are trying to accomplish.

“Every bank could be a little different on this in terms of what their pressures are,” says Betty Cowell, a senior advisor at consultant Simon-Kucher & Partners.

What savers should do

Though the average yield on a traditional savings account is a paltry 0.16 percent, some banks offer high-yield savings accounts paying around 3 percent APY — nearly 19 times more. These accounts won’t do much to counter rising prices at the pump and grocery store, but they will help you earn something.

“High inflation and the loss of purchasing power doesn’t negate the need for emergency savings,” Bankrate’s McBride says. “The primary benefit of emergency savings isn’t the return you earn, it is the immediate access to cash that shields you from high-cost debt or forced asset sales when unplanned expenses arise.”

Online banks are known for offering the highest yields, but it pays to shop around. Also, consider cash management accounts and money market accounts to find the best deals. If you’re able to park your cash for a set period, consider a short-term CD.

“For investors looking for predictable interest income, CDs will provide that and without the price volatility and default concerns that many bonds have,” McBride says. “Just don’t compromise your emergency savings to chase yield in a CD unless the bank is offering a way to cash in early without penalty should the money be needed.”

As you look for the best offers, read the fine print about fees and minimum balances, and check that the account offers the features you need.

“If you are a shopper in the market today,” Simon-Kucher’s Cowell says, “hop online and compare prices and go with the brand you trust.”