Pick the Right CD Term in Uncertain Times: A Guide for Savers
Exploring the Dilemma: Short-Term vs. Long-Term Certificates of Deposit in an Unpredictable market
Want to earn a decent return on your cash savings without the risk of volatile stock markets? Certificates of Deposit (CDs) could be your golden ticket. But with CD rates projected to slide in 2025, choosing the right term has become more crucial than ever. Here's how to navigate this tricky terrain.
Supercharge Your Savings with CDs
CDs offer something the best high-yield accounts can't: the ability to secure a guaranteed Annual Percentage Yield (APY) for a fixed period. While you can sometimes earn more with a high-yield savings account, the rate can plummet at any moment. But a CD's rate is yours to keep until maturity, whether that's just a few months or decades.
Locking in today's top CD rate for 2 years, for example, offers a guaranteed return until 2027, compared to a savings account that currently delivers in the mid-4% range but might slump to around 3% or even 2% in the following two years.
Don't miss the best CD offers! Check our daily rankings for the highest APYs in every term from 3 months to 10 years.
Why CDs Shine When Rates Fall
If you don't need your savings for a while, CDs present an opportunity to earn a safe, high-yield return that's untouchable during the CD's term. The best CD rates will be even more valuable when current rates are high and future rates seem headed lower.
How Long Should You Lock In Your Money?
The key question is simple: "How long can I live without these funds?" Once you've found your answer, our daily rankings of the best CD rates can help you find the highest APYs in every term from 3 months to 10 years.
The Race to 2025: What to Expect
While predictions are never foolproof, it appears likely that the Fed will lower the federal funds rate in 2025, pushing savings and CD rates lower. This uncertainty calls for a careful approach to choosing a CD term.
But don't worry, even with tariff policies throwing a curveball, the Fed will make decisions based on the latest economic data. So the picture should become clearer in a few months.
Today's Rate Predictions for 2025 and Beyond
Here's a glimpse at what the experts are predicting:
- 2025: The Federal Reserve's rate-setting committee anticipates two 0.25-point rate cuts (0.50 points total) by the end of 2025, followed by the same reduction in 2026.
- 2026: With many tariff impacts still possible and numerous data releases that could alter the Fed's course, it's wise to treat these predictions as best guesses rather than set-in-stone facts.
So, What CD Term Should You Choose?
In the face of economic uncertainty, choose a CD term that aligns with your personal financial timeline. Remember, early withdrawal will trigger an early withdrawal penalty that cuts into your earnings.
If inflation stays in check, the Fed may lower the federal funds rate this year, pushing savings and CD rates lower. And even if inflation rises, the Fed may hold the benchmark rate steady.
Given this outlook, the best CD rates you see right now are likely the best you'll see for a while. A shorter CD (3-6 months) will provide a limited secure return, while longer terms (1-year, 18-month, 2-year) offer a longer runway of safe, predictable earnings.
CDs of 3-5 years might be a wise move, as rates may fall from the mid-4% range this year to as low as 2%. If that happens, earning above 4% for the next few years or even beyond would be quite the reward.
Of course, nobody can predict the future with absolute certainty. But historically high interest rates right now, combined with a strong probability of rate cuts, make locking in a guaranteed 4%-plus return an attractive choice in most scenarios.
Stay Ahead of the Curve
Keep tabs on our daily rankings of the best CDs and savings accounts to ensure you never miss out on the top rates. Check out our rankings for the best:
- 3-Month CD Rates
- 6-Month CD Rates
- 1-Year CD Rates
- 18-Month CD Rates
- 2-Year CD Rates
- 3-Year CD Rates
- 4-Year CD Rates
- 5-Year CD Rates
- 10-Year CD Rates
- High-Yield Savings Accounts
- Money Market Accounts
Important
We track the rate data of over 200 banks and credit unions, filtering out those with minimum initial deposits exceeding $25,000 or maximum deposit amounts below $5,000. To qualify, banks must be available in at least 40 states, while credit unions with donation requirements of $40 or more are excluded. Learn more about our rate research methodology.
- In the current economic climate, where experts predict a drop in CD rates in 2025, investing in Personal-Finance strategies such as Certificates of Deposit (CDs) could be advantageous for securing a guaranteed return on savings without the risks of volatile stock markets.
- When considering Personal-Finance matters like investments in CDs, it's crucial to align the CD term with one's personal financial timeline, taking into account the early withdrawal penalty that may be imposed if funds are accessed before maturity.
