Does a short-term or long-term CD make more sense this spring? Experts weigh in

Rates on certificates of deposit (CD) accounts have soared in recent years — and it's largely thanks to stubbornly high inflation. In its attempt to get inflation down to 2% (it's still over 3%), the Federal Reserve hiked interest rates significantly between 2022 and today. That caused CD rates and savings rates to spike as well.

But inflation has started to recede, and those high rates won't last forever. In fact, many banks are counting on rates falling soon, and the fact that long-term CDs have lower rates than shorter ones supports that. This is not the norm in the CD world. Typically, long-term CDs pay much higher rates than shorter term ones do.

Will this trend last, though? And what CD term should you focus on this spring? We asked some experts to weigh in.

Considering a CD now? See how much more interest you could be earning here.

Does a short-term or long-term CD make more sense this spring?

Here are the factors to consider when choosing between short-term and long-term CDs this spring, according to the experts we consulted.

For maximum interest: Short-term CDs

If you want to maximize the interest you earn on your money, then short-term CDs are the way to do it right now — and likely will be for much of this year. 

"Certificate rates should stay relatively flat unless the Fed decides to increase rates again," says Matt Hicks, vice president of deposit products at First Tech Federal Credit Union. "Lower rates on short-term CDs and higher rates on long-term CDs will happen again eventually, however this might not occur until mid to late 2025."

You'll currently find the highest rates on 1-year, 2-year, and 3-month CD terms, according to the FDIC. Just remember, with these shorter terms, you'll get your money back fairly quickly and will need to reinvest it if you're not ready to use it. That might mean earning lower interest on your next investment, depending on where rates sit that time.

"Higher short-term rates imply that the market is expecting interest rates to fall," says Matt Hylland, a financial planner at Arnold and Mote Wealth Management. "While you may be able to lock in a high short term rate now, when that CD matures, you could be faced with much lower rates to reinvest in."

Lock in a high short-term CD rate here.

For flexibility: Short-term CDs

If you want the option to access your cash soon, then a short-term CD is also the way to go. With some CDs, your account matures in just one to three months, allowing you to earn a decent amount of interest and then use the funds as you wish. 

With longer-term CDs, you'll need to wait much longer for your cash — or pay a hefty penalty if you want to access it early.

"Short-term CDs are a great option for people needing flexibility and quicker access to funds," says Andy Levin, vice president of consumer deposits at LendingClub.  

For a far-off goal: Long-term CDs

If you're saving your money for a specific goal — like buying a house or your child's college education, for instance — then a long-term CD is likely your best bet, despite their slightly lower rates.

"If you are setting money aside in a CD for a home down payment in five years, locking in rates with a five-year CD is going to be a safer bet than choosing a three-month CD and hoping to reinvest at an acceptable interest rate," Hylland says. "The most important item to consider when evaluating CDs is matching up the timing of your need for money with the maturity of the CD."

Long-term CDs are also smart if interest rates are expected to fall — which many expect will happen within the next year. 

"If interest rates do fall, the rate lock of the long-term CD can result in much more interest earnings than if the funds were kept in short-term CDs or savings accounts," says Ken Tumin, founder of DepositAccounts.com.

Explore your long-term CD account options online today.

If you're not sure: Both

If you're saving for multiple goals or just aren't sure when you'll need the cash, a CD ladder is another option. With these, you open several CDs with varying terms, and the accounts mature at different intervals. You can then opt to take the money out at the time or reinvest it in another CD.

"Typically, retirees or those approaching retirement like laddering because it gives them consistent, rolling windows to liquidity," says Matt Willer, managing director of capital markets at Phoenix Capital Group Holdings. "It also ensures that you have access to capital if other more favorable opportunities arise rather than having everything locked up in one CD with one maturity."

Regardless of which CD term you choose, it's important to compare rates before opening your account. Interest rates can vary widely between financial institutions, so make sure to consider all your options, including your main bank, local credit unions, and online banks. This will ensure you get the highest-paying CDs possible.