Are CDs Still a Good Investment for December 2024?
KEY POINTS
- Pick a CD for its high interest rates and security.
- Avoid CDs if you're not sure you can keep your money locked up for a certain period of time.
- Some CD rates are still hovering around 4.50%, meaning now is still a good time to open a new account.
Certificates of deposit (CDs) can be a wise choice for savers who want to park cash in a short-term investment with rate security and little risk. Unlike most bank accounts, CD rates are fixed, meaning you'll earn interest at the same rate for as long as your CD is open. It can be a useful tool to fight back against inflation, but is it the best one for your money right now?
Let's take a look to see if today's best CDs are right for you.
Get a CD to lock in today's best interest rates
CDs were much more popular last year, due to the unusually high interest rates on some CD products. While rates aren't nearly as high as they were in 2023, you can still find some lucrative deals on short-term CDs.
For example, Prime Alliance Bank is currently offering a 6-month CD with a 4.65% APY and $500 minimum opening deposit. That's an excellent rate for a CD of this term length. If you're looking for something longer, Discover® Bank is offering a 1-year CD with a 4.00% APY and $0 minimum opening deposit (use this link to take advantage of this offer).
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 December 27, 2024. Terms apply.
Min. to earn
$0
Open Account for American Express® High Yield Savings
On American Express's Secure Website. |
3.80%
Rate info
3.80% annual percentage yield as of December 27, 2024. 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. |
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
4.46%
Rate info
The annual percentage yield (APY) is accurate as of November 7, 2024 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. |
4.46%
Rate info
The annual percentage yield (APY) is accurate as of November 7, 2024 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. |
Another benefit of CDs is their fixed interest rates. Once you open a CD account and lock your money in, your interest rate stays the same, no matter what happens to CD rates in the market thereafter. Since rates are dropping across the board, you could end up earning interest at a rate much higher than the best current APYs.
Why you might want to shy away from CDs right now
Regardless of interest rates, CDs have some cons that are true at any time. One is early withdrawal penalties. Most CD products penalize you for trying to withdraw money before your term is up. The severity of the penalty depends on the length of your CD term, with longer terms typically seeing higher penalties. For example, a 2-year CD might have a penalty equal to 12 months of interest -- earned or not.
If you're not sure about CDs, you could open a high-yield savings account. The best high-yield savings accounts have rates that are comparable to CDs. They won't impose a penalty for withdrawing cash, and you can continue to deposit money into your account over time, a feature that most CDs don't offer.
CD interest is also taxed at the federal and state level. This makes CDs slightly less advantageous than other short-term investments like Treasury bills (T-bills), which aren't subject to state taxes. One workaround is to open a CD within a tax-advantaged retirement account, like an IRA or 401(k). Most retirement accounts come with big tax advantages that can take pressure off your tax bill.
Ultimately, a CD is right for you if its benefits align with your financial goals. If you don't want to invest a portion of your savings, but you're going to spend it in the short term, a CD could be the best way to generate interest. Take a look at the best CDs on the market today to see how much your savings could earn you.
Our Research Expert
Steven Porrello writes about personal finances topics ranging from credit card offers to Costco deals to choosing the best places to park your cash.
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