3 CD account terms to consider this March

This March brings a host of new economic developments that savers should consider as they review their financial health heading into the spring. The Bureau of Labor Statistics (BLS) will release its inflation report on March 12th and the Federal Reserve meets March 18 and March 19 to discuss, among other things, its interest rate strategy.

The BLS report will tell us if inflation has risen for a fifth straight month or if it's leveled off or dropped. The Fed isn't expected to make a rate change at their meeting, but what they say about their position on interest rates in the context of March's inflation report could hint at future rate-cut timing.

If you're formulating a savings strategy this March, the possibility of continued inflation growth and more clarity on Fed rate cuts are a combination that should turn your attention to certificates of deposit (CDs), a stable, fixed-rate deposit account that provides guaranteed returns at rates that remain relatively high. Below, we'll break down three specific CD account terms to consider now.

See how much you could be earning with a top CD here. 

3 CD account terms to consider this March

CDs offer terms ranging from just a few months to multiple years. The rate you earn, known as annual percentage yield (APY), depends on which bank or credit union is offering the CD, the term length you choose and, in some cases, how much you deposit. Here are three timely ones to consider now:

6-month CDs

If your goal is to get the highest return from your deposit, then a CD with a 6-month term is likely your best option. Right now, most banks and credit unions are offering their highest APYs via their shorter CDs, partly because they're unsure of how the rate environment will play out later in the year. 

While getting the top rate of return is a definite advantage, it's not the only benefit that 6-month CDs provide this March. Flexibility is a strength of a 6-month CD. Because they reach maturity relatively quickly, you'll have a chance to recalibrate your savings strategy later in the year when we know more about which direction rates are going and when they might change.

"The advantage of opening a 6-month CD now is to take advantage of current rates because it is unknown if they will be as high as they are now in the future," says Miranda Reiter, an assistant professor of personal financial planning at Texas Tech University. "Ultimately, the decision to open a 6-month CD versus one with a longer term depends on the goal for the money. A 6-month CD can be useful for short-term goals while CDs with longer terms tend to fit better for financial goals with longer time horizons."

Get started with a 6-month CD here.

1-year CDs

A 1-year CD can work to your advantage in the current and future rate environment. Thanks to the extended interest-earning opportunity, 1-year CDs will generally earn more money than 6-month accounts. And a 1-year account still gets you a valuable rate of return compared to longer-term CDs and traditional savings accounts. 

As for the future, there's consensus among economic experts that the Fed could lower rates as soon as June, according to the CME Groups' FedWatch tool. If rates drop in the next six months, your 1-year CD account returns will be protected since CD rates are fixed instead of variable. 

2-year CDs

Two-year CDs have lower rates than 6-month and 1-year CDs but the longer term gives your deposit more time to earn interest. Here's what your returns would be at maturity if you opened a $10,000 CD with the following terms at today's top rates:

• 6-month CD at 4.45%: $220.08 earned at maturity
• 1-year CD at 4.40%: $440.00 earned at maturity
• 2-year CD at 4.15%: $847.22 earned at maturity

So, if you open a 2-year CD today at the top rate, your APY will be 0.30% lower than the top rate for a 6-month CD. However, you'll earn around $640 more with the longer option.

Why you should consider CD laddering this March

Combining short-term and long-term CDs in one plan, known as a "CD ladder," is an effective strategy this March for a couple of reasons. First, it allows you to take advantage of the high short-term CD rates available right now, giving you good returns and relatively quick liquidity. Second, a CD ladder helps you combine savings strategies that combat inflation and rate changes with varying levels of liquidity. Here's how that would look using a 6-month, 1-year and 2-year CD ladder strategy: 

• 6-month: Provides the highest APY right now and matures in six months, giving you a chance to use your deposit and returns to adjust your strategy if rates change in the next few months.
• 1-year: Long enough term to protect you from any rate decreases the rest of the year but short enough to give you flexibility to prepare for the spring and summer economic landscape in 2026.
• 2-year: Your baseline interest-earner that anchors your ladder strategy, giving you guaranteed long-term returns impervious to market conditions over the next 24 months. 

The bottom line

This March is a great time to think about a CD strategy that works within your financial goals. Choosing a single CD term simplifies your approach to saving and provides clear benefits with relatively low risk. Stepping up your savings strategy by using a CD ladder makes things more complex, but the flexibility it offers can be a valuable asset amid recent inflation growth and possible rate cuts later this year.