I've Been Analyzing CD Rates for Years. Here's the Best Time to Open One
APYs are just one thing to consider when deciding if you should open a CD now.For years, I've been monitoring interest rates on certificates of deposit, a type of low-risk savings account that grows your money over a set term. Maybe it's not the most exciting part of my job as a personal finance editor, but I've learned a thing or two about investment tools.
It's all about timing.
CDs offer fixed returns no matter when you open them. But being strategic about your timeframe can help you reap the biggest earnings. Here's how to decide if now is the right time for you to invest in a CD.
Read more: Best CD Rates for June 2025: Lock in an APY up to 4.50% While You Still Can
Open a CD when rates are high
When you open a CD, your annual percentage yield is locked in for the entire term, whether it's five months or five years. Opening a CD when rates are competitive can help you maximize your earnings. If you wait too long and rates drop, you won't be able to secure a high APY.
For example, in 2023, APYs for the top CDs we track at CNET soared to 5.65%. Now, the top rate is 4.50%. That's still more than three times the national average for some terms, but it means you won't earn as much as you would if you'd opened a CD when rates were at their highest. In the last decade, CDs have sometimes offered as little as 0.5% APY or lower.
So, how do you know if rates are headed up or down? Keep an eye on the current interest rate news.
The Federal Reserve, the country's central bank, often adjusts interest rates in an effort to stabilize prices, boost economic growth or maximize employment. If the Fed's monetary policy meeting is around the corner, check to see if the Fed plans to increase, reduce or maintain its benchmark interest rate. Other banks and financial institutions typically set savings account and CD rates based on the Fed's actions.
"When the Fed hikes rates, banks offer more interest to get people to save," said Taylor Kovar, certified financial planner and CEO of 11 Financial.
While the Fed held rates steady at its last three meetings, experts expect it to start cutting rates later this year, possibly after summer.
"When the Fed holds or starts cutting, banks don't have to work as hard to attract deposits, so they pull those rates back. Even before the Fed makes a move, banks start adjusting based on what they think is coming," Kovar said.
We're already seeing some banks quietly lower their APYs on deposit accounts. If you're looking for a low-risk investment tool now, locking in a CD at today's top rates could help you maximize your earning potential.
Open a CD when you have a specific savings goal in mind
CDs come in a variety of terms, ranging from a few months to several years, so you can choose a timeframe that aligns with your savings goal.
If you're putting aside money for an expense with a specific date, like a wedding or vacation, a CD can be a great tool. Your funds will grow reliably until you need them, and early withdrawal penalties can discourage you from dipping into your cash prematurely.
"If you invest in a CD, plan to not touch the money until the end of the term," said Noah Damsky, CFA, Principal of Marina Wealth Advisors. "Withdrawing funds early from a CD could result in penalties or foregoing earned interest."
Open a CD when you want to protect your retirement funds
Low-risk assets like CDs don't have the high earning potential that some stocks do, but they're also not as volatile. You won't see your savings plunge, for example. That's why experts recommend a mix of assets in your investment portfolio.
If retirement is decades away, keeping a larger percentage of your money in high-risk, high-reward assets like stocks can help you grow your nest egg faster. You'll just have to ride out temporary market dips.
If you're approaching retirement, however, it's time to focus less on growth and more on protecting the funds you've accumulated. Shifting a larger portion of your money into a CD can give you more stability once you stop working.
If you're unsure, build a CD ladder
If you know you want to open a CD now, but you also want the flexibility to take advantage of higher APYs if they emerge, a CD ladder can help. With a CD ladder, you spread your money across multiple CDs with different maturity dates. For example, if you have $10,000 to invest, you could divide it up this way:
$2,000 in a one-year CD
$2,000 in a two-year CD
$2,000 in a three-year CD
$2,000 in a four-year CD
$2,000 in a five-year CD
When one CD's term is up, you can withdraw the money and reevaluate how you want to use or invest it.
Maybe you'll decide to roll those funds over into a new CD at an equal or better APY. Or you may open a different account somewhere else. A CD ladder allows you to keep some money available at regular intervals and jump on higher rates if they become available.
Pro tip: CD rates can vary significantly from term to term and bank to bank. Always compare multiple banks and accounts to make sure you're getting the best APY for your savings timeline.
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