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A certificate of deposit (CD) account has often been a viable option for those savers looking to protect their principal and grow their interest. And, in recent years, it’s been an easy way to do so. When inflation surged, interest rates rose alongside it. That caused interest rates on CDs to grow exponentially. This made earning hundreds and even thousands of dollars with a CD relatively simple and stress-free.
While those rates have declined a bit over the past year, however, they’re still relatively high, making this account type beneficial for a wide swath of savers. But with inflation rising again and interest rate cuts seemingly on pause, there are some moves prospective CD account holders shouldn’t (and shouldn’t) make now, at the start of 2025. And that extends to getting the right answers to a series of critical questions. Below, we’ll break down four specific CD account questions savers should be asking now.
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4 CD account questions savers should be asking now
Don’t yet have a CD or do you have one approaching its maturity date? Here are four questions to start thinking about now:
Is it worth waiting for rates to change again?
CD rates are relatively stable currently, with many in the 4% to 4.50% range. And in recent years, waiting for rates to rise was likely a smart move as the Fed issued a series of interest rate hikes. Now, however, waiting for rates to change again could be risky. Interest rate cuts still appear likely for later in 2025, albeit more delayed than many would have liked. This gives savers an opening to lock in a relatively high rate now, in January. Waiting could reduce what you could’ve earned if you simply acted a few weeks earlier.
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Which CD term is worth opening?
For much of the last two years, a short-term CD was more valuable than a long-term one. These accounts had higher rates and more flexibility for savers looking to take advantage of additional rate hikes to come. And short-term CDs can still be valuable for some savers. But long-term CDs, with slightly lower rates and much greater earning potential, may be better for many right now. To determine which CD term is worth opening for your financial needs, then, consider using a CD calculator to precisely determine how much you stand to earn with an account opened at today’s rates.
Can I afford to keep my money untouched?
No matter the amount you deposit into a CD account, whether it be $500 or $10,000, if you fail to keep your money untouched for the full CD term, you’ll likely pay an early withdrawal fee to regain access. This could wipe out all of the interest the account has earned to date. So it’s critical to weigh today’s slightly lower interest rates against your ability to keep the account intact up until the maturity date. If you can’t do so or don’t want to give up the accessibility most CD accounts require, an alternative account type may be better suited for you.
Will alternative accounts be preferable?
If you find yourself unable or unwilling to leave your CD funds untouched, then don’t worry. There are still high-rate account alternatives worth exploring. These range from high-yield checking to money market to high-yield savings accounts. The last type, in particular, comes with rates matching some of the highest CDs and it won’t require the loss of access that a CD will. Still, high-yield savings accounts have variable interest rates, unlike the fixed ones CDs have, so that consideration will need to be accounted for before you start moving your money around.
Explore your high-yield savings account options here.
The bottom line
CD accounts can still be valuable for savers, but in the changing economic climate of 2025, it’s critical that they first weigh the answers to these questions before getting started. Considering that CD terms can last anywhere from a few months to a decade or more, savers should be strategic in their approach. By doing so, they can better ensure safety (and a big return on their money) for months and even years to come.