Preserve Your Earning Power with Competitive CD Rates
Despite the Federal Reserve’s recent rate cuts, certificate of deposit (CD) rates remain high by historical standards. Savers can still lock in a competitive return on their investment, but time may be running out.
CD Rates Today: A Snapshot
For shorter terms, rates of 4.00% APY or higher are available. Even for longer terms, the best available rates hover near 3%-4% APY. Currently, the highest CD rate is 4.35% APY, offered by Synchrony on its 13-month CD, with no minimum opening deposit required.
Why CD Rates Are Tied to the Federal Funds Rate
When the Federal Reserve increases its target rate, deposit account rates usually follow. Conversely, when the Fed lowers its target rate, deposit account rates decline. With the Fed holding interest rates steady for most of 2024 and then slashing them in September, November, and December, CD rates have begun to fall.
Is Now the Right Time to Invest in a CD?
Experts predict additional rate cuts in 2025, making now a prime opportunity to lock in today’s higher CD rates. But before investing, consider the following key factors:
Interest Rates: A Key Consideration
CDs are more attractive when interest rates are high or trending downward, as they lock in the current rate for the entire term. With rates falling, it may be wise to secure a guaranteed rate of return.
Financial Goals: Weighing Your Options
CDs are a safe investment choice for preserving capital and earning a steady return. However, if you’re saving for a long-term goal like retirement, a CD may not be the best choice, as market investments tend to provide higher returns on average.
Liquidity Needs: Understanding the Trade-Off
CDs require locking in your money for a set period, known as the term. If you think you’ll need to access your money before the term ends, you may want to avoid CDs, as they come with early withdrawal penalties.
Where to Find the Best CD Rates
Not all CDs offer competitive rates, even in a high-interest rate environment. Online banks, credit unions, and community banks often provide better rates and lower fees than traditional brick-and-mortar banks. Compare multiple CD account options to find the best fit for your needs.
Online Banks: A Hub for High-Yield CDs
Online banks can pass on their operational savings to customers in the form of lower fees and higher rates on deposits. If you’re interested in opening a CD with a high rate, online institutions are a great place to start.
Credit Unions: A Not-for-Profit Alternative
Credit unions tend to offer better rates and lower fees than for-profit banks. Research local credit unions in your area, as well as online credit unions, to find out if you qualify to join.
Community Banks: Personalized Service and Competitive Rates
Local banks strive to serve their communities and often provide more affordable and personalized service than large, national banks. They also typically offer more competitive interest rates on deposits.
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