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Why you should open a long-term CD now

Long-term CDs typically range between three, five or 10-year terms. Getty Images

Despite historical precedent to the contrary, many of the top interest rates on certificates of deposit (CDs) have come with short term lengths. Right now, the highest-earning CDs generally have six months to one year terms.

But as we potentially begin to reach a peak in ongoing interest rate hikes it may be time to start thinking about how you can extend today's high rates as long as possible. Given the changing rate tide, that means forward-looking savers may want to consider locking in a longer-term CD.

"To maximize savings rates today, looking at longer duration CDs will allow one to lock-in higher rates for a longer term," Gregory Crofton, CFP, founder of Adap Tax Financial previously told CBS News.

See today's best CD rates and start earning more money now.

Why choose a long-term CD now

When rates are on the rise, short-term CDs make a lot of sense. They tend to offer better rates than high-yield savings accounts, and only require you to lock in your money for a short time period. When that term is up, you can move your cash to another account with a higher rate. 

However, when the rate tides turn, the opposite may be true. Following a rate pause in June and a slight increase from the Fed in July, we could be near a turning point when it comes to federal interest rates. In fact, "savers should consider that savings rates might have peaked," says Phil Rutterer, CFP, founder of Rutterer Planning. "Savers should have an eye on locking in attractive rates for their low volatility assets."

It's true that long-term CDs offer slightly lower rates than short-term CDs today — some top long-term CDs max out around 4.5%, while six-month to one-year CDs may be higher than 5%. But if rates go down, you could earn more in the long run. 

Say, for example, you open a one-year CD at 5.20% APY today. But in one year's time, rates have changed and the most you can get is 4.50%, then 4.00% a year later, then 3.50%. 

If you instead opened a five-year CD today earning a slightly lower 4.5% APY, you can lock in that rate for the entire five-year period. As long as you know you won't need to access it early, you could earn more over the entire time period and avoid the hassle of moving your money every time the shorter CD matures. 

Explore today's best CDs here and lock in a great rate today.

Best long-term CD rates

Here are a few long-term CDs from online banks with the best yields today. Each of the following are FDIC-insured up to $250,000 limits.

Bread Savings 3-year CD: 4.75% APY

You'll get 4.75% APY with the three-year CD term from Bread Savings, with a $1,500 minimum balance and no monthly fees. One reason we chose the three-year CD from Bread because it offers a small rate boost for customers who renew their CDs upon maturity. This may help you secure a better rate when your term ends, even if interest rates have gone down by then.

First Internet Bank of Indiana 3-year CD: 4.75% APY

First Internet Bank's three-year CD option earn another competitive 4.75% APY. You won't pay any monthly maintenance fees, but to earn that amount, you will need to deposit at least $1,000 upon opening. 

Popular Direct 5-year CD: 4.60% APY

The five-year CD option from Popular Direct earns 4.60% APY. This account is for savers who already have a pretty high balance, as it requires a minimum deposit of $10,000. There are no monthly maintenance fees. 

Barclays Bank 5-year CD: 4.50% APY

With Barclays Bank, you can open a 60-month CD online and start earning 4.50% APY. There's no minimum deposit to open your account and no monthly fees, but you must fund your account within 14 days of account opening. 

Find more long-term CD options that may be best for you and compare today's top rates here.

The bottom line

Some experts believe we could have already seen the peak rates that banks will offer on deposit products like CDs. If you have a savings balance that you're looking to maximize — and you know you won't need to access it for a few years — now could be the time to consider a longer-term CD. While the rates may be slightly lower than short-term options, you can lock in your APY at today's high rates and enjoy the interest earnings for years to come, no matter how interest rates move. See how much you could be earning with today's best CD rates here now.

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