has caused economic pain for millions of Americans in recent years. Whether it was at the grocery store, or when buying a new home or using a credit card, inflation and the corresponding high interest rates meant to tame it hurt the pockets of many people. But there was one major advantage (if you knew where to look): high returns on traditional savings account vehicles.
While rates onand accounts were less than 1% just a few years ago, they've surged in the last two years, making both accounts a great way to grow and protect your funds. But, like all financial products and services, there are better times to open these accounts than others. The rate climate is evolving and savers will need to adapt.
Accordingly, this February could mark one of the final opportunities of this economic cycle to secure a great CD account. Below, we'll break down three important reasons why you should open a CD this February.
Why you should open a CD this February
Here are three reasons why you should open a CD before March 1.
Rates are the highest they've been in years
How high, exactly, areright now? It depends on the you're looking for but it's possible to find accounts with a or rate right now, especially if you're comfortable using an . That's a significant amount of money to make, simply by transferring some of your funds from one account to another.
Depending on the amount of money you deposit and the length of your term, you could earn hundreds of extra dollars each year —. That said, rates on these accounts are unlikely to stay this high much longer. That's why it makes sense to take advantage of it this month.
Rates may fall in March
The Federal Reserve raised its benchmark interest rate tolast July, but has since kept the rate the same. And as inflation has cooled speculation about a potential rate cut has risen dramatically. .
While their March 19 - March 20 meeting. And while the Fed doesn't directly dictate CD rates, lenders usually follow their lead.saw them keep rates as is, they may issue a cut as soon as
So if rates come down in a few weeks the returns on CD accounts will, too. That's why it's so valuable to open a CD this February so savers can lock in a high APY for the future, even if rates fall during that time.
The alternatives are not as advantageous
Have you noticed any interest earned on your current savings? You'd be forgiven if you missed it as the average savings account interest rate is just 0.47%, according to the FDIC. Considering that you can earn multiple times that amount with a CD, you're essentially losing money by not making the switch. And while you may be able to get right now, there are two issues with that option.
First, the very highest rates tend to be with CDs, not high-yield accounts. Secondly, rates on high-yield savings accounts are, meaning that they're guaranteed to change as the rate environment evolves. But a rate locked in with a top CD today will stay locked for the CD's full term — whether that be or . With this understanding, it becomes clear that the alternatives are not as advantageous.
The bottom line
While there's usually not a bad time to open a CD, there are better times to act than others. Now, in February 2024, is one of those times. By moving now savers can secure today's still high rates before they potentially fall in the spring or summer. Plus, the alternatives are simply not as beneficial right now. Instead, savers should start hunting for CDs today, ideally looking for a combination of. Just be sure to deposit the right amount to avoid getting hit with an for funds removed prematurely.
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