I Never Thought I'd Open a CD. Here's What Finally Changed My Mind

I'll be frank -- I like to keep my finances simple, and I've never considered certificates of deposit (CDs) to be the right account type for me. With high-yield savings account rates elevated now, and my personal rate being a fantastic 5.15%, I just didn't see the point in CDs.

But after hearing recently that the Federal Reserve expects the federal funds rate to be a full 2 percentage points lower by the end of next year, I began to question things.

What will I do next year if my savings rate has plummeted to the mid-3.00% range, or even lower? Will my chance to lock in the 5.00% rates of today be gone for good? Ultimately, my fear of missing out on locking in a high rate convinced me that opening a long-term CD at today's rates -- before they begin to drop -- would be worth it.

What's happening to rates?

The Federal Reserve raised rates 11 times beginning in 2022 to help fight inflation caused by the COVID-19 pandemic. As a result, rates on deposit accounts are some of the highest we've seen in more than two decades.

Our Picks for the Best High-Yield Savings Accounts of 2025

Product	APY	Min. to Earn
American Express® High Yield Savings Member FDIC. APY 3.70% Rate info 3.70% annual percentage yield as of March 6, 2025. Terms apply. Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	3.70% Rate info 3.70% annual percentage yield as of March 6, 2025. Terms apply.	$0	Open Account for American Express® High Yield Savings On American Express's Secure Website.
SoFi Checking and Savings Member FDIC. APY up to 3.80%² Rate info You can earn the maximum APY by having Direct Deposit (no minimum amount required) or by making $5,000 or more in Qualifying Deposits every 30 days. See SoFi Checking and Savings rate sheet at: https://www.sofi.com/legal/banking-rate-sheet. Min. to earn $0 Open Account for SoFi Checking and Savings On SoFi's Secure Website. Member FDIC.	up to 3.80%² Rate info You can earn the maximum APY by having Direct Deposit (no minimum amount required) or by making $5,000 or more in Qualifying Deposits every 30 days. See SoFi Checking and Savings rate sheet at: https://www.sofi.com/legal/banking-rate-sheet.	$0	Open Account for SoFi Checking and Savings On SoFi's Secure Website.
Capital One 360 Performance Savings Member FDIC. APY 3.70% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Feb. 6, 2025. 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.	3.70% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Feb. 6, 2025. 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.

Disclaimers

SoFi disclosure:

¹ New and existing Checking and Savings members who have not previously enrolled in Direct Deposit with SoFi are eligible to earn a cash bonus of either $50 (with at least $1,000 total Direct Deposits received during the Direct Deposit Bonus Period) OR $300 (with at least $5,000 total Direct Deposits received during the Direct Deposit Bonus Period). Cash bonus will be based on the total amount of Direct Deposit. Direct Deposit Promotion begins on 12/7/2023 and will be available through 1/31/26. See full bonus and annual percentage yield (APY) terms at sofi.com/banking#1.

² SoFi members who enroll in SoFi Plus with Direct Deposit or by paying the SoFi Plus Subscription Fee every 30 days or with $5,000 or more in Qualifying Deposits during the 30-Day Evaluation Period can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. Members without either SoFi Plus or Qualifying Deposits, during the 30-Day Evaluation Period will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Only SoFi Plus members are eligible for other SoFi Plus benefits. Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet. See the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

³ We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/.

⁴ SoFi Bank is a member FDIC and does not provide more than $250,000 of FDIC insurance per legal category of account ownership, as described in the FDIC’s regulations. Any additional

FDIC insurance is provided by the SoFi Insured Deposit Program. Deposits may be insured up to $2M through participation in the program. See full terms at SoFi.com/banking/fdic/terms

See list of participating banks at SoFi.com/banking/fdic/receivingbanks

⁵ We’ve partnered with Allpoint to provide you with ATM access at any of the 55,000+ ATMs within the Allpoint network. You will not be charged a fee when using an in-network ATM, however, third-party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.

⁶ Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.

⁷ Overdraft Coverage is limited to $50 on debit card purchases only and is an account benefit available to customers with direct deposits of $1,000 or more during the current 30-day Evaluation Period as determined by SoFi Bank, N.A. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the“30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Members with a prior history of non-repayment of negative balances are ineligible for Overdraft Coverage.

But the rate of inflation has decreased in recent months, so the Fed plans to begin lowering the federal funds rate as a result -- with the first cut expected next month at the Fed's September meeting.

When the federal funds rate begins to drop, rates on deposit accounts are likely to follow. While the federal funds rate will drop gradually over time (rather than all at once), it could be a good idea to lock in as high a rate as possible today, before that first decrease happens.

Taking that advice, I decided to lock in the highest rate I could find on a 5-year CD to guarantee myself today's APYs until August 2029. The rate I scored was a very respectable 4.30% (you'll find it on our 5-year CD list linked above). But what will that mean for my savings over that five-year period?

A couple scenarios

To better show what led to my decision to open a 5-year CD, let's take a look at a couple possible scenarios.

In the first scenario, I have $15,000 in a high-yield savings account earning 5.15% in year one, but dropping gradually each year thereafter -- a reasonable illustration of how rates could fall over the next five years.

As you can see, as my savings account APY gradually drops, so does my interest earned each year. At the end of five years, my savings account balance will be $17,765.97 and I will have earned a total of $2,765.97 in interest on my initial $15,000 deposit.

In the second scenario, I have that same $15,000 in a 5-year CD with a locked-in 4.30% APY for the duration of the term.

The trend in this scenario is the opposite. My APY stays the same, but my interest earned each year increases due to compounding interest. At the end of my 5-year CD term, I've earned $3,514.53 in interest for a grand total of $18,514.53. That's about $750 more than I stand to earn in the first scenario.

Things to keep in mind about CDs

For me, running these numbers made the 5-year CD the slam-dunk option. But there are a few things to keep in mind if you're considering going the same route.

• You won't have access to your funds: Money you put in a CD needs to be left alone for the entirety of the CD's term. Put money you may need in the next five years in a high-yield savings or money market account instead where it will be accessible.
• Early withdrawal penalties apply: If it turns out you absolutely must withdraw your money before the CD term ends, you'll be subject to early withdrawal penalties. These vary by bank and CD term, but at the very least you'll lose a portion of your interest earned, which could nullify the whole reason for opening a CD to begin with.
• Rates are not guaranteed: OK, so your CD rate is guaranteed. Whatever rate you lock in now will stick until your CD term is over. But what I mean is that the federal funds rate (and corresponding deposit account rates) is only a projection of what could happen in the future. If the economy tanks or unemployment skyrockets before five years is up, we could very well see the federal funds rate start to inch back up instead of moving downward.

There's no surefire way to tell what rates will look like five years from now, or even by the end of next year. But we can make educated predictions.

It was based on those predictions that I took a gamble and made my own CD decision to cushion my savings from falling rates. Don't find yourself regretting your own savings decisions in the coming years; consider a long-term CD today.