Why I'm No Longer Moving My Money Into CDs -- Even Though Rates Are Up to 6%

Right now, many of the best CD rates are averaging APYs of about 5.00%, with the most competitive rates clocking in around 5.15%. Why, just the other day I came across a 10-month CD with a 6.00% APY from Nuvision Credit Union. It has some restrictions (you have to be a member of the credit union and you can only deposit a maximum of $5,000 into the CD), but it shows that high CD rates are alive and well, despite expectations that the Fed will cut its funds rate in the near future.

But while great CD rates are still available, I've stopped opening new CD accounts. What's more, when my current set of CDs mature, I'm not going to renew my terms, even though I can still snag high APYs. Even with the best CDs still paying out above 5.00%, here's why I'm avoiding them (for now).

It's more important for me to have free cash flow now

In a few weeks, I'm going to move 2,880 miles from Oregon to New Jersey. I've needed cash on hand to cover the moving expenses, including renting a moving container, airfare for three people and two cats, the security deposit on our new apartment, and shipping our car. Since we've encountered surprise expenses along the way -- and expect to face more -- it's been prudent to keep more cash in our high-yield savings account than locked up in CDs where we can't easily reach it.

The problem with traditional CDs, of course, is that they don't allow penalty-free withdrawals. If you want to withdraw money, you'll have to pay the penalty. The severity of the penalty depends on your CD's terms, but, in general, the longer the CD, the higher the costs. For example, one of my CDs -- a 12-month Bread Savings CD -- charges 90 months of simple interest as a penalty. Other CDs charge even more than that.

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 1, 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 1, 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.

Savings accounts don't charge penalties, but they might penalize you for withdrawing over a certain monthly limit. Per Regulation D, this limit used to be six withdrawals per month, but these days many great savings accounts no longer impose that limit. For example, my SoFi Checking and Savings (member FDIC) has no withdrawal limits for savings. That flexibility, coupled with its annual percentage yield of up to 4.00%², is why I've chosen it over CDs to keep my moving money safe and accessible.

The rest of my savings is going into my brokerage account

A CD is a low-risk investment that can guarantee a fixed interest rate for a certain amount of time (the CD's term) When you sign the CD agreement, you know more or less how much your money will grow -- so long as you don't withdraw money early -- and FDIC insurance ensures you'll get back at least your principal.

While a CD's features can offer security to those who are playing it safe, for investors who are willing to take on more risk, it can mean missing out on potentially higher returns on investments with greater potential, like stocks and ETFs.

Over the last 50 years, the stock market has averaged a 10% annual return. Although returns can swing from year to year -- one year it might be 14%, while the next it's 3% -- over a long period, the average return typically flattens out to a steady 10% rate. This is why it's ideal to start investing while you're young, as you can balance lows with the highs.

For this reason, we plan to invest any remaining cash left over from our move into our brokerage account. Although the stock market isn't quite as stable as it was before the Fed started its current rate cycle, it's steadily regaining its optimism. Since I have a longish time horizon, I'm willing to take some risks; yes, even if that means missing out on today's great CD rates. I'm not opposed to CDs per se, but for the unlimited growth potential, the stock market simply offers me a better opportunity.