Why you should open a short-term CD right now
Today's great savings interest rates can help savers earn more on their balance over time. But to maximize your earnings, you'll want to make sure you choose the best account for you and your financial goals.
After several months of continuous interest rate hikes, some deposit accounts offer upwards of 4%, 4.5% and even 5% APY in some cases. High-yield savings accounts generally offer the lower end of this range. Certificates of deposit (CDs), on the other hand, may offer higher rates but require more of a commitment by locking in your savings for a given period, or term.
Today, short-term CDs offer savers the best of both worlds. CDs without long time commitments can be a great way to maintain flexibility while still scoring the best available savings rates today.
Explore your CD options here now to see how much more you could be earning.
Why you should open a short-term CD now
Your savings strategy — including where to save — largely depends on your specific savings goal, says George Kao, CFP, founder of Reach One Teach One Financial. While high-yield savings are always great options for short-term cash, CDs can be good for the longer term, as long as you know you're locking in your money for its full duration.
If you want to score the best interest rate for your savings today, you may want to consider a short-term CD. "Six-month to 12-month CDs currently offer better rates than 12-plus month CDs," Kao says.
Historically, long-term CDs offered better interest rates, as an incentive for you to lock your money in an account with the bank over several years. But in today's rising rate environment, short-term CDs generally offer much higher yields. While you can find short-term CDs with more than 5% APY, longer-term CDs are more akin to high-yield savings. Many CDs with three to five-year terms carry yields around 4.50% APY.
Even without considering the interest rate, some experts say short-term CDs are a better option than long-term. "I usually don't recommend locking up your cash in a CD for more than 12-18 months," says Andrea Oliver, CFP, owner and lead advisor at North Park Financial Planning. "It depends on your needs and other resources."
5 short-term CDs with great rates today
There's no set rule for what makes a short-term CD, but it generally means CDs with terms of six months or less and up to one year. Below, we found five short-term CDs offering some of the highest interest rates available today. Each of these CDs is FDIC-insured up to the $250,000 limit and comes with penalties for early withdrawal.
Bread Savings: 5.20% for a 1-year term
The one-year CD from Bread Savings offers one of the best interest rates around right now, with 5.20% APY. There's a $1,500 minimum deposit required and no monthly fees. As an added bonus, you can get a boosted APY when you renew your CD. If you were to renew a one-year CD today, you'd get a 5.25% APY for a one-year term.
Vio Bank: 5.05% for a 6-month term
At Vio Bank, you can earn 5.05% APY on a six-month CD term. Vio has no monthly fees, and you'll need a $500 minimum deposit to open your account.
Synchrony Bank: 5.00% for a 6-month term
Synchrony Bank's six-month CD offers 5.00% APY with no monthly fees. Unlike many CD options, Synchrony does not require any minimum balance to open your account — however, you won't be able to add more funds to your CD after your initial deposit.
CIT Bank: 5.00% for a 6-month term
You'll also earn 5.00% APY on a six-month CD term with CIT Bank. There are no monthly fees, but there is a $1,000 minimum opening deposit required.
Citizens Access: 5.00% APY for a 1-year term
The one-year CD from Citizens Access earns a 5.00% APY. The bank charges no monthly fees, though you'll need at least a $5,000 deposit upon opening.
Find more of today's top CD rates here now.
The bottom line
If you open a short-term CD today, you can score an interest rate of over 5% APY while only having to part with your cash for six months to a year. While you may still want to maintain your emergency savings in a more accessible high-yield savings account, this account type can be worthwhile for other savings goals that you want to maximize your earnings on.
Whether you're putting away money for an upcoming trip or wedding, or you just want to save some extra cash, a short-term CD can offer added flexibility over longer terms while giving you some of the best savings rates available today.
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