Inflation's falling. Here's why you should open a CD now.
Millions of Americans received some welcome news on Tuesday when a new report showed inflation easing in November. The Consumer Price Index increased by 0.1% in the month, leaving it 3.1% higher than a year ago, the Labor Department reported. It was 3.2% for October. While that may not be the decrease many were hoping for, it's still a move in the right direction and an indicator that the Fed's aggressive rate hikes over the last year and a half have been successful at lowering inflation.
As inflation cools, however, rates are likely to remain paused and may even drop a bit in 2024. This could be beneficial for borrowers but may not be as advantageous for savers, thus underlining the importance of opening a high-interest-earning account now. There are multiple timely reasons for doing so, particularly for those who want to open a certificate of deposit (CD) account.
Start by exploring your CD account options here to see how much more you could be earning.
Why you should open a CD with inflation falling
Here are three timely reasons why you should open a CD now.
Interest rates are still high
Interest rates on CDs won't immediately fall as soon as inflation cools. So today's rates, for example, will still be high, with many in the 5% to 5.5% range. By opening a CD with that APY, you could earn significantly more than you would by leaving your money untouched in a regular savings account.
The latter account, for example, only comes with an average rate of just 0.46% currently. By leaving your money in that account, then, you're essentially losing money. No matter which CD term you choose — short or long ± you'll make exponentially more than you would with a regular account.
Crunch the numbers to see how much more you could be making now.
Interest rates are locked
Rates on high-yield savings accounts are also high right now, leading many to wonder why they should open a CD instead. But unlike variable high-yield savings accounts, CDs have their rates locked in for the full term. So if rates drop at some point in 2024 — as many are forecasting — the rate you opened the CD with in December 2023 will remain the same.
This will allow your savings to grow at a higher rate, and it will inject some predictability into your budget by allowing you to know exactly how much money you'll have when the CD expires. And it can protect against unfavorable rate drops, not just in 2024, but for the years to come if you elect to proceed with a long-term CD instead.
Interest rates will likely fall soon
If inflation continues its downward trend, interest rates will soon follow, meaning that now may be your final window of opportunity to open a CD with a high APY. It's certainly possible that rates on these accounts can hit these heights again, but no one knows when or if that will even happen, not to mention the economic circumstances that could cause that scenario.
Instead, you're better off taking advantage of the rate climate as is by locking in a high rate. This will protect your funds from any rate drops in the future while allowing your money to grow uninterrupted at that elevated rate.
Get started with a CD here now.
The bottom line
Inflation has led to a poor climate for borrowers but an attractive one for savers. But there are real signs that those dynamics will be changing in 2024. For those interested in opening a CD, then, it's beneficial to act now before inflation falls further and the interest rate environment becomes less favorable. By opening a CD promptly, savers will still be able to secure a great rate, and they'll have that great rate locked, which will then provide them protection against any rate decreases to come, too.
