Should I open a CD now or wait? (2024)

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MoneyWatch: Managing Your Money

By Kelly Ernst

Edited By Angelica Leicht

/ CBS News

Should I open a CD now or wait? (2)

If you're looking for a smart and effective way to earn interest while keeping your savings secure, acertificate of deposit (CD)could be the perfect solution for you.

CDs are low-risk investments that often have higher interest rates than savings accounts (including some high-yield accounts). They also provide the same federal protections savings accounts do ($250,000 per account per institution should the bank fail).

That said, there is an element of timing involved when it comes to opening a CD. Since your rate is locked in when you open the CD, current interest rates play a big role in this timing — but rates are not the only factor to consider. There are several things to keep in mind when it comes to determining if you should open a CD now.

Start exploring your CD options online now.

Should I open a CD now or wait?

Here's what you should consider when deciding whether to open a CD now.

What are current interest rates?

CD rates are set when you open the account, so if CD interest rates are high, it's worth opening a CD to take advantage of them. Should overall rates go down in the future, your CD's rate will stay in place for the entirety of the term, allowing you to earn maximum interest.

"Savers should be aware of where the Fed has set rates simply to know why their CDs… are paying a certain level of interest," says Brian Spinelli, CFP, AIF, Co-CIO at Halbert Hargrove. "I think the important thing to remember is that those rates may not always be there to stay in perpetuity."

CD rates are currently high — over 5.50% on some the highest-earning CDs. You may even qualify for a CD with a 7% rate. So, by opening a CD now, you can get the most from these rates and reach your savings goals faster.

See today's current CD rates here.

When will you need to access the funds?

Long-term CDs often have higher interest rates than short-term options, although that hasn't often been the case in today's market. Which length is best for you depends on when you'll need your funds.

With many CDs, your funds are locked in until the CD matures. If you need to access them before the term is up, you face an early withdrawal penalty that can amount to several months' interest.

"If you choose a term that extends beyond your time horizon, you could forfeit interest or miss the opportunity you've been saving for," says Greg Goff, CFP, founder and financial planner at Sound Wealth Management.

That said, if CD rates are high, you can still take advantage of them by utilizing a couple of strategies.

First, you can explore no-penalty CDs. These products may offer slightly lower rates than traditional CDs, but they won't charge a fee if you withdraw funds before the CD matures.

Second, you can create a CD ladder. With CD laddering, you open multiple CDs with staggered maturity dates so you'll have regular access to funds while still enjoying the higher rates long-term CDs can offer.

Do you have a sufficient emergency fund?

Experts recommend putting aside three to six months' worth of income for an emergency, such as a job loss or unexpected medical bills. Since you may need to access these funds at a moment's notice, it could make more sense to keep them in a more liquid account like a high-yield savings account.

It can take a few business days to receive the funds you withdraw from a CD. Savings accounts, however, can provide instant access through account transfers and ATM withdrawals. So, it may be best to fully fund your emergency savings first. After that, you can put excess savings into a CD.

Find the high-yield account that's right for you here.

The bottom line

The decision to open a CD now or wait depends on many factors, including interest rates, when you'll need to access the funds and the state of your emergency fund.

In general, when rates are high — as they are now — opening a CD allows you to maximize your earnings even if rates go down in the future. And, thanks to the flexibility you can enjoy with no-penalty CDs and CD laddering, you can still take advantage of these rates even if you think you may need your funds sooner than anticipated.

When weighing your CD options, be sure to shop around and compare multiple offerings to find the rate and terms that best fit your needs.

Should I open a CD now or wait? (2024)

FAQs

Is it worth putting money in a CD right now? ›

If you don't need access to your money right away, a CD might be a good savings tool for you in 2024 while average interest rates remain high. CD interest rates are high in 2024 — higher nationally, on average, than they've been in more than a decade, according to Forbes Advisor.

Is now a good time to open a CD account? ›

If you're in a position to save in today's higher interest rate environment, investments like CDs could help accelerate your savings. CD rates have skyrocketed since 2022: 1-year CD rates have increased more than twelve-fold, with 3-year and 5-year CDs up nearly six-fold and five-fold, respectively.

Why should you put $5000 in a 6-month CD now? ›

While longer-term CDs may tie up your funds for years, a 6-month CD allows you to access your money relatively quickly. If you suddenly need your $5,000 for an emergency or a more lucrative investment opportunity arises, you won't have to wait years to access your funds without incurring hefty penalties.

How high will CD rates go in 2024? ›

CD Rates Forecast 2024

The CME FedWatch Tool, which measures market expectations for federal funds rate changes, shows that most experts expect rates to sit between 4.50% and 5.25% by December 2024.

Why is CD not a good financial investment? ›

CD rates tend to lag behind rising inflation and drop more quickly than inflation on the way down. Because of that likelihood, investing in CDs carries the danger that your money will lose its purchasing power over time as your interest gains are overtaken by inflation.

How much does a $10,000 CD make in a year? ›

Earnings on a $10,000 CD Over Different Terms
Term LengthAverage APYInterest earned on $10,000 at maturity
1 year1.81%$181
2 years1.54%$310.37
3 years1.41%$428.99
4 years1.32%$538.55
1 more row
Apr 24, 2024

Is it good to open CD during a recession? ›

During the Great Recession and its aftermath, the stock market went through turbulent shifts, resulting in great losses for some stockholders. CDs are one option that can help protect your investment from times of turmoil by providing a stable income.

Can you get 6% on a CD? ›

You can find 6% CD rates at a few financial institutions, but chances are those rates are only available on CDs with maturities of 12 months or less. Financial institutions offer high rates to compete for business, but they don't want to pay customers ultra-high rates over many years.

What is the best CD rate for $100,000? ›

Compare the Highest Jumbo CD Rates
InstitutionRate (APY)Minimum Deposit
GTE Financial5.38%$100,000
Credit One Bank5.35%$100,000
Third Federal Savings & Loan5.25%$100,000
CD Bank5.25%$100,000
15 more rows

What bank is paying 5% on CDs? ›

Featured Nationally Available Deposit Rates
Account NameAPY (Annual Percentage Yield) Accurate as of 5/10/2024Minimum Account Opening Balance
Barclays 1 Year Online CD5.00%$0
Western Alliance Bank 3 Month CD, powered by Raisin5.26%$1
Barclays 6 Month Online CD5.00%$0
SkyOne Federal Credit Union 1 Year No Penalty CD4.75%$1
6 more rows
2 days ago

What is the biggest negative of putting your money in a CD? ›

Banks and credit unions often charge an early withdrawal penalty for taking funds from a CD ahead of its maturity date. This penalty can be a flat fee or a percentage of the interest earned. In some cases, it could even be all the interest earned, negating your efforts to use a CD for savings.

What is the biggest negative of investing your money in a CD? ›

The biggest disadvantage of investing in CDs is that, unlike a traditional savings account, CDs aren't flexible. Once you decide on the term of the CD, whether it's six months or 18 months, it can't be changed after the account is funded.

How to avoid tax on CD interest? ›

How to avoid taxes on CD interest. One way to postpone being taxed on CDs is to put them in a tax-deferred individual retirement account (IRA) or 401(k). As long as money placed in a traditional IRA is below the annual contribution limit, interest you earn may be tax deductible.

What is considered a good 6 month CD rate right now? ›

The national average return on a 6-month CD is currently 1.49%. Online banks, however, offer much higher returns — as high as 5.50% APY right now.

Are CDs a good investment for 2024? ›

The bottom line

Overall, long-term CDs could be a good investment for those who want to lock in guaranteed returns at a relatively high rate in early 2024. But as the year progresses, if interest rates fall as expected, then long-term CDs could lose some of their appeal.

How much will a $500 CD make in 5 years? ›

This CD will earn $120.39 on $500 over five years, which means your deposit will grow by 24.6%.

Is there a risk of losing money in a CD? ›

Standard CDs are insured by the Federal Deposit Insurance Corp. (FDIC) for up to $250,000, so they cannot lose money. However, some CDs that are not FDIC-insured may carry greater risk, and there may be risks that come from rising inflation or interest rates.

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