Should I Open a CD Right Now or Wait According to the Fed?
If you are trying to reassess your personal finances and want something more outside the deposit box than a high-yield savings account, it may be time to consider certificates of deposit, or CDs. As with anything, timing is everything and when the intention is to earn higher rates sometimes it is best to wait until interest rates increase in the short-term to help with your long-term financial goals.
Certificate of Deposit: Quick Take
A certificate of deposit, or CD, is essentially a type of savings account where you can earn interest at varying APYs, fixed interest rates and CD terms depending on what your bank or credit union offers. This type of account lets you earn interest on a lump sum for a fixed period of time, but the money can’t be touched for the entirety of the term until it reaches maturity to avoid early withdrawal penalties.
Is Now a Good Time To Open a CD?
In July 2023, the Federal Open Market Committee raised the federal funds rate to a range between 5.25% to 5.50%. Rate rises may occur once more before the end of 2023 according to Fed Chairman Jerome Powell. In this tumultuous time of bank failures and booming inflation, a low-risk investment such as CD seems like a safe bet. As the Fed is predicting another 0.50% rate hike, this could mean it will be a good time to open a CD.
Here are some other key takeaways about investing in CDs now:
Many of the best CDs available pay higher interest rates than high-yield savings or money market accounts.
If you put any money into a CD, you should be comfortable with not having access to it until the term length has reached maturity for the agreed upon fixed period of time.
Though considered by experts a safe or conservative investment with a guaranteed rate of return, there is often less payout than with riskier investments such as stocks or bonds.
If you invested $10,000 in a 1-year CD at the national average rate of 1.72% APY, you would have earned $172 giving you a total of $10,172 at the end of 12 months.
The Highest Paying CD Right Now
Though the Federal Reserve pegs the national average for CD rates to be around 1.72% APY for one-year CDs, many financial institutions are offering great CD rates such as:
American Express National Bank, Member FDIC 12-month CD:
Barclay’s Bank 12-month CD:
Capital One 18-month CD:
Discover Bank 2-year CD:
Marcus by Goldman Sachs, Member FDIC 13-month CD: as of Aug. 28, 2023
Raymond James Bank 1-year CD:
Tab Bank 1-year CD:
Final Take To GO: Are CDs a Good Investment?
If you are looking for a low-risk investment with a guaranteed rate of return, then many financial experts would agree that a CD may be the way to go. This holds especially true in 2023 with increasing interest rates and even certain banks or credit unions offering a CD with a 7% APY. Before you invest, be sure to have a separate savings account or emergency fund you can draw from as funds put into a CD cannot be touched for the entirety of the term length.
FAQ
Here are the answers to some of the most frequently asked questions about CD rates.
How high will CD rates go in 2023?
In July 2023 the Federal Open Market Committee raised the federal funds rate to a range between 5.25% to 5.50%. Rate rises may occur once more before the end of 2023 according to Fed Chairman Jerome Powell.
What is a CD?
A CD is a type of savings account where you can earn interest or fixed interest rates and CD terms on a lump sum for a fixed period. The money can't be touched for the entirety of the term until it matures to avoid early withdrawal penalties. These accounts are low-risk investments with a guaranteed rate of return, however, they do not typically earn as much as riskier investments such as stocks or bonds.
When is a good time to open a CD?
A good time to open a CD could be right now! The Fed is projecting to bump rates one more time by 0.50% by the end of 2023 from the current range of 5.25% to 5.50%. Here are some other things to consider about CDs:
Many of the best CDs available pay higher interest rates than high-yield savings or money market accounts.
Any money you put into a CD you should be comfortable with not having access to until the term length has reached maturity for the agreed upon fixed time.
Though considered by experts a safe or conservative investment with a guaranteed rate of return, there is often less payout than with riskier investments such as stocks or bonds.
If you invested $10,000 in a 1-year CD at the national average rate of 1.72% APY you would have earned $172 giving you a total of $10,172 at the end of 12 months.
How much does a $10,000 CD make in a year?
If you invested $10,000 in a 1-year CD at a national average rate of 1.72% APY you would have earned $172 giving you a total of $10,172 at the end of 12 months.
Who has the highest-paying CD right now?
The current highest-paying CD right now is Alpena Alcona Area Credit Union as it is offering a 7-month CD with a 7.19%7.19% APY. Some other great CD APYs include offerings from the following banks or credit unions:
American Express National Bank 12-month CD
TIAA Bank 9-month CD
NBKC 15-month CD
Consumers Credit Union 10-month CD
Barclay's Bank 12-month CD
Capital One 18-month CD
Discover Bank 2-year CD
Marcus by Goldman Sachs 13-month CD
Raymond James Bank 1-year CD
Tab Bank 1-year CD
Rates are subject to change; unless otherwise noted, rates are updated periodically. All other information on accounts is accurate as of Aug. 28, 2023.
Editorial Note: This content is not provided by any entity covered in this article. Any opinions, analyses, reviews, ratings or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by any entity named in this article.
This article originally appeared on GOBankingRates.com: Should I Open a CD Right Now or Wait According to the Fed?
