Why I'm Not Opening Any CDs in 2024 -- Even Though Rates Are Still Near 5%

The long-awaited first Federal Reserve rate cut finally arrived on Sept. 18 -- but CD rates (particularly those on short-term CDs) are still fairly high for now. As of this writing, the top rate on our list of the best 6-month CD rates is 4.90% -- not bad!

But another FOMC (Federal Open Market Committee) meeting is coming up in a few short weeks, and we expect to see another cut to the benchmark rate on Nov. 7 at the conclusion of that meeting. And once that happens, it's likely that banks will lower the rates on consumer accounts (like certificates of deposit and savings accounts) as well.

I could rush to open a CD before that happens, and lock in a rate around 5%. But I'm not going to do this -- here's why.

CDs don't fit my investing needs

At the ripe old age of 40, I finally have a retirement account that I opened a few months ago and have been funneling money to every week. I feel very behind on saving for retirement, and as such, I'm going all in on investments that have a higher rate of return over the long term -- namely, ETFs that track the S&P 500. Its average annual return over the last 50 years is about 10%, which is basically unheard of from CDs, especially over such a long period.

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 28, 2024. 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 December 28, 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. 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 4.46% 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. Member FDIC.	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.

Since I don't want to waste any more time, I'm not using CDs for my long-term savings. A highly rated traditional IRA with a robo-advisor is doing the hard work for me instead.

My savings account is better for me than a CD

The other reason I'm still passing on CDs is that my savings account is meeting my needs for a high interest rate and easy access to my cash. Let's take a closer look.

Interest rate

The APY on my high-yield savings account is still on par with what I'd earn from CDs. Yes, my savings account has a variable interest rate, whereas with a CD, that 4%-5% rate would be locked in for the duration of the term. That guarantee of return still isn't worth it to me for what I'd be giving up -- liquidity (more on that below).

I'm likely to see the current rate of 4% I'm getting on my savings continue to fall as the Federal Reserve moves forward with additional rate cuts, and yes, that will be a bummer. But I can rest easy knowing that my money is accessible for whenever I need it, and I won't have to pay an early withdrawal fee like I would if I needed to break a CD term early.

Liquidity

I recently had to dip into my emergency fund for the first time to cover my very first repair as a new homeowner. I had an HVAC technician visit to check out my system and make sure everything was working, and it turned out, my boiler needed a fairly minor repair. Between the check-up and the fix, I received a bill for $776.

Thankfully, I had my emergency fund to draw from, and since that's kept in my savings account, it was a simple matter to transfer the money to my checking account to pay off the credit card I used to pay the bill. (Whenever you can earn rewards points, you should.)

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I also just don't have saved cash that would be the right fit for a CD. I have my emergency fund, and I have smaller pools of money in different savings buckets within my HYSA that are reserved for expenses like the new living room TV I'm buying next month, a few short trips I'm taking this fall, and my quarterly tax payments (gotta love freelance life). It's surely not worth opening a very short-term CD to store my new TV money -- I'll likely earn 4% on that just from leaving it in my savings account for another month.

Are CDs right for you?

Ultimately, CDs just aren't a fit for me, despite their still-attractive rates. But they could be right for you, especially if you know for sure (as sure as anyone can ever be in this life, that is) that you won't need the cash you'd put into one until the term is up.

If you've got $10,000 you intend to use as a down payment on home purchase a year from now, absolutely look into CDs. You can likely lock in a great rate on a 1-year CD and earn $400 or $500 on your money -- and the threat of an early withdrawal penalty might mean you'll be even more committed to use that money to buy a house instead of being tempted to use it on something else before the time arrives.

Personal finance is just that -- personal. If CDs are on your radar, I recommend you look into them sooner rather than later. Another Federal Reserve rate cut is looming (remember, the FOMC meets again on Nov. 6-7), so don't get caught on the other side of lower CD rates.