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What's the Best CD Term Right Now? It Depends on Two Things

Putting money into a 澳洲幸运5官方开奖结果体彩网:certificate of deposit (CD) takes a little more thought than simply depositing it into a savings account. That's because you have to choose your time commitment with a CD—and it's a commitment with teeth. If you cash out of the CD before it reaches its maturity date, you'll be hit with an 澳洲幸运5官方开奖结果体彩网:early withdrawal penalty.

That's why the first thing to consider is your own financial timeline. Are you saving the cash in a CD for a specific purpose, like buying a home or paying tuition? Or is it simply surplus savings you know you don't need for a while because, if necessary, you can draw on other savings first? Your answers to these questions can help you decide if you need to stick with a short-term CD, like a 6-month or 1-year CD, or if you can make a longer commitment with your cash, socking it away for 2, 3, or even up to 5 years.

• Best 6-Month CDs
• 澳洲幸运5官方开奖结果体彩网:Best 1-Year CDs
• 澳洲幸运5官方开奖结果体彩网:Best 2-Year CDs
• Best 3-Year CDs
• 澳洲幸运5官方开奖结果体彩网:Best 5-Year CDs

Second, it's useful to consider what's expected for U.S. interest rates in the foreseeable future. For example, if rates were expected to rise, you'd perhaps want to hold off on opening a CD or go with a short-term certificate that will mature when new CD options are paying higher rates. But on the flip side, if interest rates are expected to decline, it's wise to lock in a rate today that you can enjoy for months or years down the road.

Interest Rate Expectations for 2024–2026

To understand what future CD rates are likely to do, you need to know what's expected from the 澳洲幸运5官方开奖结果体彩网:Federal Reserve. That's because the Fed controls the federal funds rate, which impacts what banks and credit unions are willing to pay customers for their deposits. When the 澳洲幸运5官方开奖结果体彩网:federal funds rate moves up, so too do sav🅰ings account and CD rates—and vice versa.෴

We're currently in a period of historically high rates, with dozens of CDs offering rates above 5% on terms up to 2 years and in the mid- to upper-4% range for longer terms. That's thanks to an aggressive 2022–2023 rate-hike campaign by the Fed, aimed at taming decades-high 澳洲幸运5官方开奖结果体彩网:inflation. As a result of 11 Fed rate increases, CDs surged to th💫eir highest rates in over 20 years.

But now that inflation has cooled, the Fed hasn't made a rate increase in over a year, and in fact is expected to begin cutting rates next month. As a result, some banks and 澳洲幸运5官方开奖结果体彩网:credit unions have already begun lowering their CD rates⛄. Instead of a top nationwide CD rate above 6%, today's best offer now pays 5.40%.

Guaranteed returns in the 4%–5% range are still exceptional—and still worth jumping on. But time is of the essence, as rates aren't likely to stay at this level. That's because next month's expected interest rate cut by the Fed will probably be the first of many. According to the 澳洲幸运5官方开奖结果体彩网:CME Group's FedWatch Tool, investors are currently betting the federal funds rates will be lowered three times this year, for an estimated reduction of 1 percentage point by the Dec. 18 meeting.

But the interest rate cuts could also continue for the next two years. Though we won't know the Fed committee members' updated forecasts until Sept. 18, the "dot plot" they released on June 12 showed that, though at the time they didn't predict as fast a reduction in 2024 as traders are currently betting on, they did anticipate lowering the fed funds rate by more than 2 percentage points by the end of 2026.

Time will tell what actually happens to the federal funds rate—and by extension, CD rates—over the next two and a half years. But with the benchmark rate currently at its highest level since 2001, and inflation no longer the same threat it was in 2022 and 2023, it's a reasonable assumption the Fed will make steady and gradual rate reductions for some time to come. That would in turn significantly reduce future CD rates, making today's 4%–5% CDs worth locking in while you still can.

Go for a🍌 Short-Term CD𒁏 Only if APY Is Your Highest Priority

If the best CD duration for you simply means the term paying the very highest 澳洲幸运5官方开奖结果体彩网:annual percentage yield (APY), then your best choice right now is around 6 months. The top overall rate among all nationwide CDs is 5.40% APY, and you can earn that with a 5-month certificate. The runner-up natio✅nwide rate of 5.35%, meanwhile, is offered for a 6-month😼 term.

If you can commit longer than 5–6 months, you can guarantee a rate of 5.30% with the 澳洲幸运5官方开奖结果体彩网:best 1-year and 澳洲幸运5官方开奖结果体彩网:18-month CDs.

To Win Against Fed Rate Cuts♉, Ins𒉰tead Lock in for Longer

As we mentioned, odds are high that the Federal Reserve will begin lowering its benchmark interest rate multiple times this year and likely into 2025—as well as perhaps in 2026. If this long slide does come to pass, the rates you'll be able to earn on savings in a year or two will be much lower.

That's why you're better off stretching to a multi-year CD if your financial timeline can handle it. By locking in a rate such as the top 澳洲幸运5官方开奖结果体彩网:2-year yield of 5.00% APY, you'll be guaranteed to earn that stellar return until late 2026. Or you could go further, locking in 4.75% 🅺APY until 2027 with one of two leading 3-year CDs.

Even 4-year and 澳洲幸运5官方开奖结果体彩网:5-year CDs can be a smart move. While their top rates (in the 4% range) are lower than the returns on shorter certificates, if the Federal Reserve dro💎ps its benchmark rate two or three percentage points over the next few years, a rate promise 💧above 4% that lasts until 2028 or 2029 will be a financial gift to your future self.

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, 澳洲幸运5官方开奖结果体彩网:read our full methodology.