3 savvy CD moves savers should make before February
Certificate of deposit (CD) accounts have always offered savers safe ways to protect and grow their money. When interest rates bottomed out in 2020 and 2021, they were better for safety and less beneficial as a money booster. But when interest rates surged in 2022 and 2023, they offered both security and a simple way to earn a substantial return on your money. As has been seen in the past year, however, with inflation waning and interest rate cuts more prevalent, these accounts aren't quite immune from an evolving market. CD rates, for example, while still elevated, aren't nearly as high as the 6% or 7% some savers could have locked in in recent years.
Still, that doesn't mean that CDs can't be effective tools for savers. It will just require a more nuanced and strategic approach and it will mean being a bit more proactive. That extends to making timely decisions. With another Federal Reserve meeting set for the end of January, then, and expected interest rate cuts for later in 2025, savers considering this unique account type should consider making some smart moves now, before February 1. Below, we'll break down three savvy ones to make now.
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3 savvy CD moves savers should make before February
While the expectation is that interest rates will remain frozen at next week's Fed meeting, it doesn't mean that savers should stand idle. Here are three CD moves they should consider making before February 1:
Look to online banks
With CD interest rates declining, shopping around for the highest interest rate possible makes sense. And that typically involves using online banks, specifically. These banks tend to offer higher interest rates on CDs than banks with physical locations as the latter has maintenance costs that the former does not. Plus, online banks come with some flexibility and options, like no-penalty CDs, that banks with physical locations often do not provide. But banks don't need to wait for the Federal Reserve to issue rate cuts to change what they offer savers. And if next week's meeting leads lenders to believe that other rate cuts are imminent, they may reduce their CD account rates even further. So don't wait for that to happen.
Get started with a CD online now.
Get started quickly
Whether you ultimately decide to stick with your local bank branch or work with an online lender, it's important to get started quickly. Today's elevated CD interest rates won't last much longer. Depending on the term in question, some have already dropped around a full percentage point from where they were in January 2024. Delaying action, then, or hesitating to act would be a mistake. This is especially true considering that alternative options, like high-yield savings accounts, have variable interest rates likely to decline further in 2025. CD rates, however, are fixed, giving savers a chance to lock in today's high rates for potentially years to come. Just don't wait too much longer to do so.
Consider laddering multiple accounts
Right now, rates are higher on short-term CDs but savers will be positioned to earn more by opening a long-term CD. When the benefits of each of these accounts are significant, then, it doesn't make sense to just use one. In this scenario, savers should consider laddering multiple accounts at the same time. This involves opening different accounts with different terms. These accounts will mature at different times, allowing you to move your funds more freely than if you had just used one account with one term length. But savers should consider doing this before the next Fed meeting and the January inflation reading potentially impacts CD interest rates again.
The bottom line
CD accounts can still be advantageous for savers but to truly take advantage it helps to be proactive. And that extends to making the above moves now, possibly in conjunction with one another, before the start of February. By doing so, savers can exploit today's still-high rates and they can boost their savings both in the months to come and, possibly, multiple years ahead. Just be sure that any amount deposited can remain in the account for the full term to avoid an early withdrawal penalty that can easily wipe out any interest earned to that point.
