APY is just one thing to consider when you decide whether or not you should open a CD now.
Before becoming a personal finance editor, I knew nothing about deposit certificates. Then I learned how interest rates work and I realized that timing is everything. The Fed has kept interest rates stable in its last three meetings, and it is likely to keep interest rates the same in the upcoming meeting next week. Experts say central banks may start lowering rates later this year, possibly in the fall or winter.
Now, instead of putting my money on the table, I let the interest rate guide my savings strategy. This is when you should lock the CD when you wait better.
Read more: Best CD prices for June 2025: Lock up to 4.50% APY while you can
Open CD when the rate is high
When you open the CD, whether it’s five months or five years. Turning on a CD while competing can help you maximize your revenue. If you wait too long and the price drops, you won’t get a high APY.
For example, in 2023, the APY of the highest CDs we tracked on CNET soared to 5.65%. Now, the maximum interest rate is 4.50%. This is still more than three times the national average for a certain term, but that means you won’t make that much money if you turn on your CD when the fees are at their highest. Over the past decade, CDs sometimes offer APY or less at 0.5%.
So, how do you know if the rates are rising or falling? Keep an eye on current interest rate news.
The Fed is the central bank of the country, adjusting interest rates to stabilize prices, promote economic growth or maximize employment. If the Fed’s monetary policy meeting is approaching (the next one is June 17-18), check if the Fed plans to increase, lower or maintain its benchmark interest rate. Other banks and financial institutions usually set savings accounts and CD tax rates based on the Fed’s actions.
“When the Fed raises interest rates, banks provide more interest to make people save,” said Taylor Kovar, CEO of Centire Financial Planner, 11 Financial.
The Fed has kept interest rates stable in its last three meetings and may remain the same during next week’s meeting. Experts say central banks may start lowering rates later this year.
“Banks don’t have to try to attract deposits when the Fed keeps or starts cutting, so they withdraw these rates. Banks will start to adjust according to their ideas even before the Fed takes action.”
We have seen some banks quietly lower their income on deposit accounts. If you are looking for a low-risk investment tool right now, locking CDs at the highest price today can help you maximize your income potential.
When you have a specific savings goal, turn on the CD
CD comes in a variety of terms, ranging from months to years, so you can choose a timeline that aligns with your savings goals.
If you are spending money on a specific date fee (such as a wedding or holiday), then a CD can be a great tool. Your funds will increase reliably until you need them, and withdrawing the fines early will prevent you from falling into cash too early.
“If you invest in a CD, you plan to not touch the money until the end of the semester,” said Noah Damsky, head of dock wealth consultant. “Getting funds from a CD can result in fines or over-earning interest.”
Open CD when you want to protect your retirement funds
Low-risk assets like CD do not have high revenue potential for certain stocks, but they are not that volatile. For example, you won’t see savings. That’s why experts recommend that assets in your portfolio mix together.
If retirement is decades away, keeping a larger percentage of your money in high-risk, high-return assets such as stocks can help you grow nest eggs faster. You just need to save the temporary market decline.
But if you are retiring, it’s time to focus on growth and more on the money you’ve accumulated. Once you stop working, transferring most of your money to the CD can give you more stability.
If you are not sure, please build a CD ladder
If you know you want to open CDs now, but you also want the flexibility to take advantage of advanced APYs, CD ladders can help if they appear. With the CD ladder, you spread your funds across multiple CDs on multiple maturity dates. For example, if you have a $10,000 investment, you can divide it into:
- $2,000 in a year CD
- $2,000 in two years CD
- $2,000 in three years CD
- $2,000 in four years CD
- $2,000 in five years CD
When the term of a CD arrives, you can withdraw funds and reevaluate the way you want to use or invest.
Maybe you’ll decide to remit these funds to the new CD with an equal or better APY. Or you can open another account elsewhere. CD ladders allow you to keep some available money regularly and increase the higher price when available.
Expert tips: CD interest rates vary greatly during term expiration and between banks. Always compare multiple banks and accounts to ensure you get the best APY for your savings schedule.
