Why a 1-year CD is worth it now
In today's economic climate, there aren't many sure bets. While items like mortgages and mortgage refinancing were clearly beneficial for wide swaths of the country in the recent past, inflation has caused borrowing costs to skyrocket, thus leaving many on the sidelines. But it's not just mortgages. Personal loans, credit cards and even home equity loans all have higher interest rates than they did just at the start of 2023.
That said, there are still some (rare) opportunities for savers to both protect and grow their funds. High-yield savings accounts are one such way. Certificates of deposit, otherwise known as CDs, are another. Unlike high-yield and regular savings accounts, however, CDs come in specific time frames, or terms, in which savers will need to leave their money untouched. If they don't, they could get penalized some of or all of the interest earned to date.
While each CD term has its own set of pros and cons, there are some compelling reasons why it may be worth opening a 1-year CD now. Start by exploring your CD account options here to see how much more interest you could be earning.
Why a 1-year CD is worth it now
While everyone's personal circumstances are different, there are some wide-ranging benefits to opening a 1-year CD today. Here are three major ones:
Rates are high
Rates on short-term CDs (generally considered to be 12 months or less) are the highest they've been in years. By shopping around online, you can easily find an account with an interest rate of 5.5% or higher right now. Considering the minimal 0.45% that can be found with most regular savings accounts, you're likely losing money by not depositing some portion of your funds into a CD. Even a $5,000 deposit would grow to $5,275 in one year at today's rates. That's free money you can get by simply opening an account now. Get started here!
Rates are locked
CD rates are locked at the same rate you opened the account with. This is particularly helpful now with many experts expecting a minimal raise in rates in the year to come with many others thinking that rates have already peaked. What does this mean? If you open a 1-year CD in October — and rates drop sometime in the spring — you'll continue to earn interest at that elevated rate until your CD expires. But don't wait for the economy to change. It's unlikely that CD rates will stay elevated long term.
Predictability
Because these elevated CD rates are locked in you'll be able to inject some much-needed predictability into your finances. Not only will you know exactly when your term will expire, but you'll also know exactly how much you'll have earned by that point. This can be particularly helpful for those who want to use a CD to build toward a particular savings goal.
Even high-yield savings accounts, as beneficial as they are currently, won't offer this same help, as the rates on those accounts are variable and subject to change often. But that won't be an issue with a CD; before even starting you'll know exactly what your CD will be worth at the end of its 1-year term.
The bottom line
Now is a great time to open a CD, but it may be an even better time for many savers to open a 1-year account. Because rates are elevated currently — and because they'll be locked for the full duration of the CD's term — you can make significant sums of money simply by moving your funds into this sort of account. And, unlike other savings accounts, you'll know exactly how much you'll have earned in advance.
Get started with a 1-year CD today and start earning more on your money!
