Short-term CD accounts vs. long-term CD accounts: Which will be better for 2026?

The Federal Reserve's benchmark rate has fallen by a collective 0.75% this year, thanks to the Fed issuing three 25-basis-point cuts in recent months. In all, the Fed rate has dropped 1.75% since September 2024, which marked the first federal funds rate cut in four years. These cuts have been welcome news for those who've been waiting on the sidelines for more affordable borrowing options to emerge. 

However, a cooling rate environment isn't nearly as beneficial or as welcome for savers who've enjoyed the higher yields that came with elevated interest rates in recent years. Certificate of deposit accounts (CDs), for example, no longer offer yields up to 6%, which was the case at one point. However, CD rates remain competitive and are still higher than what was available in 2020 and 2021.

That means CD accounts are still worth opening. You can find CD yields that are expected to outpace inflation and provide a guaranteed rate of return on your savings. But in this rate environment, is it better to open a short- or long-term CD account? Which option stands to benefit you the most in 2026? Let's take a closer look at both scenarios below.

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Why a short-term CD account will be better for 2026

Historically, banks offer higher rates on longer-term CDs to incentivize savers to keep their money in the account for a longer period. But in recent months, the yield curve has been inverted, with shorter-term CDs offering better rates. 

For example, CDs with terms of one year or less are currently offering slightly higher yields on average than longer-term CDs of 36 months or more, according to Federal Deposit Insurance Corporation data. That inverted yield curve has begun to flatten, but if you anticipate the trend continuing through 2026, a short-term CD may be more beneficial.

Also, banks may seek to offset rate cuts with special promotions. 

"With expected rate cuts on the horizon, many banks are offering higher short-term rates to stay competitive," says Derek Elston, a client deposit services sales officer at Merchants Bank. "Because of this uncertainty around future rate cuts, laddering CDs with 3- and 6-month or even 12-month terms is a smart strategy. It keeps your funds earning strong returns while providing options for your next investment when each CD comes due."

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Why a long-term CD account will be better for 2026

Mary Grace Roske, the head of marketing and communications at CD Valet, notes that shorter-term CDs aren't holding the same yield advantage as they have in recent months. 

"As the CD yield curve continues to flatten, longer-term CDs are looking especially attractive heading into 2026. Savers are beginning to be rewarded more for their longer commitments, and today's rates may look even better if short-term yields drift lower next year," she says.

And if rates continue to drop, long-term CDs could allow you to lock in today's higher returns before banks lower them in 2026. 

"Right now, rates are expected to drop by almost 1% by the end of 2026, which means your short-term rate CDs are likely to renew at much lower rates when they come due," Jeremy Keil, a retirement financial advisor, says.

Should you consider a high-yield savings account instead?

Regardless of whether you prefer short-term or long-term CDs, what's important is that you consider when you'll need access to your money before you lock it in a CD. If you're unsure, consider opening a high-yield savings account instead. These types of savings accounts offer similarly competitive rates to CDs, but you can withdraw your money at any time without incurring an early withdrawal penalty.

Roske says savers may benefit by splitting their savings into liquid accounts like high-yield savings accounts and the guaranteed yields of CDs. 

"Savers who may need access to their money in the next 6 to 18 months should stay flexible with shorter terms," she says. "A blended approach, keeping some funds liquid and locking in the rest, proves most effective."

The bottom line

As you determine the best path forward for your finances for 2026, consider a certificate of deposit term that lines up best with your goals. Short-term CDs may suit you best if you find special offers or want to keep your options open. On the other hand, you may prefer a longer-term CD if you anticipate more rate cuts in 2026 and want to lock in today's higher returns while you can.

Keep in mind, however, even experts struggle to predict where rates are headed. It's more important to think about when you'll need your money, so you can access it when you need to without incurring a penalty. Then, shop and compare the best CD and high-yield savings account offers to see if they fit your goals for 2026.