I’m usually not the type of person to hop on the latest trend. When flared jeans became the latest fad during my college years, I said no and stuck to my boring old pants. When reality TV took off, I still refused to watch anything other than sports and the occasional sitcom.
But there’s a trend happening these days that I am interested in taking part in — opening CDs. With many CDs paying APYs of 5.00%, a lot of people are eager to open one. And I feel similarly. Why wouldn’t I want a risk-free 5% return on my money?
But I have a specific time frame for opening my next CD, and it’s somewhere between now and July 30. And there’s a reason for that.
I want to set myself up with the best rate possible
CD rates are pretty unlikely to get better from where they are today. But they do have the potential to drop.
Our Picks for the Best High-Yield Savings Accounts of 2024
|
American Express® High Yield Savings 
APY 4.25%
|
APY 4.25%
|
Min. to earn $1 |
|
UFB Secure Savings Account 
APY 5.25%
|
APY 5.25%
|
Min. to earn $0 |
|
Western Alliance Bank High-Yield Savings Premier 
APY 5.31%
Min. to earn $500 to open, $0.01 for max APY
|
APY 5.31%
|
Min. to earn $500 to open, $0.01 for max APY |
The reason CD rates are up right now is that the Federal Reserve raised interest rates numerous times in 2022 and 2023 in order to slow the pace of inflation. And because the Fed made some nice progress, it’s been saying that it plans to start cutting interest rates at some point in 2024.
No one knows exactly when the Fed’s first interest rate cut will be. But we do know two things.
First, the most recent Consumer Price Index (which measures changes in the cost of consumer goods and services) showed a modest cooling of inflation, which may be enough to get the Fed to feel comfortable with the idea of lowering rates.
Secondly, we know that the Fed is next scheduled to meet on July 30 and 31. So there’s a chance the Fed will announce its first rate cut on the 31st, as that meeting wraps up.
If a rate cut happens, CDs rates won’t necessarily start to fall the minute that Fed announcement is made. But to me, there’s no upside to waiting because the general consensus is that CD rates have peaked and won’t go up from where they are today. So I’d rather lock in my next CD before the end of the Fed’s next meeting just to play it safe.
Should you open a CD this July?
There is a chance that after July, CD rates will start to fall. So if you have money you can afford to tie up in a CD, now’s a good time to make a move.
But it’s also important to make sure that a CD is the right place for your money. Here’s why I’m confident in that decision:
- I have a separate emergency fund in a regular savings account that I can access at any time for unplanned expenses.
- I don’t have near-term financial plans, like home improvements, that I expect to need the money for.
- I have separate money invested for long-term goals, but I want to keep some of my money in a less-risky vehicle, like a CD, because college isn’t so far off for my oldest child.
Your situation might be different. So I’d encourage you to think carefully about opening a CD, since there can be costly penalties for taking an early withdrawal. But if you’re convinced that it makes sense to open a CD in the near future while rates are up, then you might as well get moving and lock yours in before the end of July.
These savings accounts are FDIC insured and could earn you 14x your bank
Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts could earn you 14x the national average savings account rate. Click here to uncover the best-in-class accounts that landed a spot on our short list of the best savings accounts for 2024.
