3 Great Reasons to Open a CD Today

Certificate of deposit, or CD, accounts have become far more appealing to savers than they were just a few years ago. As I'll discuss in a bit, CDs have their highest interest rates in more than 15 years, but there's no guarantee it will stay that way. Plus, the requirements for opening a CD make it easier than ever to get started, even if you don't have a ton of money available.

1. Historically high yields

As of this writing, CD rates are hovering near their highest level since before the 2008 financial crisis, and the rise has been especially apparent among shorter-term CDs. According to data from the Organization for Economic Co-Operation Development, the average rate on a 3-month CD rose from an average of 0.11% in 2021 when the Fed's zero-interest policy was in full effect to 5.16% in 2023, and they remain near that level.

2. Interest rates are forecast to go down

By far, the most compelling reason for using a CD instead of a savings or money market account is that you get a guaranteed yield for a certain amount of time.

To be perfectly clear, as of this writing, it's entirely possible to get a higher yield from a savings account than a CD in many cases. But it's important to realize that this is the yield you're getting today.

Our Picks for the Best High-Yield Savings Accounts of 2024

Product	APY	Min. to Earn
American Express® High Yield Savings Member FDIC. APY 3.80% Rate info 3.80% annual percentage yield as of January 10, 2025. Terms apply. Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	3.80% Rate info 3.80% annual percentage yield as of January 10, 2025. Terms apply.	$0	Open Account for American Express® High Yield Savings On American Express's Secure Website.
Capital One 360 Performance Savings Member FDIC. APY 3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening.	$0	Open Account for Capital One 360 Performance Savings On Capital One's Secure Website.
Western Alliance Bank High-Yield Savings Premier Member FDIC. APY 4.40% Rate info The annual percentage yield (APY) is accurate as of Jan. 2, 2025, and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY. Min. to earn $500 to open, $0.01 for max APY Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website. Member FDIC.	4.40% Rate info The annual percentage yield (APY) is accurate as of Jan. 2, 2025, and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.	$500 to open, $0.01 for max APY	Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website.

For example, let's say that you have $10,000 that you'll need in about five years to help pay your child's college tuition. You're torn between putting that money in a 5-year CD with an APY of 4.25% or a high-yield savings account with an APY of 5.00%.

The problem is that 5.00% APY from savings isn't guaranteed. If the economy takes a downward turn and the Federal Reserve starts to aggressively cut rates, that yield could fall sharply. But the rate you lock in on a CD now is guaranteed for the duration of its term, be that three months, or five years

We certainly have no idea if rates will plunge anytime soon, or when it could happen. But virtually all experts believe the general direction of interest rates over the next few years will be downward, so opening a CD now while rates are up can let you lock in a high yield.

3. You can (literally) get started with a dollar

Of course, $1 compounded at a 4%-5% annualized rate isn't likely to get your blood pumping, but the point is that with the emergence of online banking, CDs have become far more accessible than they once were. It wasn't too long ago when banks often required $500, $1,000, or even more just to open a CD.

That has changed. There are now some excellent financial institutions that offer CDs with no minimum deposit whatsoever, and in many cases, you can have dozens (or more) CDs open at the same time with the same bank.

So, if your goal is to save a certain amount of money in a CD (say $1,000), you don't necessarily need to wait until you've saved it. Let's say that you have $200 available today. You can open a high-yield CD with it, and simply open additional CDs as you have more money available. If you don't think you have enough money to earn a reasonable amount of interest in a CD, it doesn't necessarily need to stop you from opening an account today.

Should you open a CD today?

CDs aren't the best fit for everyone, and there's no way to say with 100% certainty that right now is an ideal time to open a CD. After all, it's entirely possible that inflation could spike again, and CD yields could rise to 6% or even 7% as a result. It's not the most likely scenario, but it could happen.

However, if any or all of the three reasons I've outlined above seem as if they fit your current financial situation, it could be an excellent idea to open a CD right now.