Is a 2-year CD still worth opening?
On the surface, locking your money away for two years may not seem like the best financial decision. Not only will you lose access to funding that you may need in an emergency, but you'll also lose the flexibility to transfer those funds in and out of investments as you see fit. But the economic climate of 2025 is a unique one, with dwindling but stubborn inflation and an unpredictable interest rate climate in which rates could fall or stagnate over the next 12 months. Against this backdrop, then, securing your money for 24 months may make more sense.
One of the better ways to do so is via a certificate of deposit (CD) account. CD interest rates are fixed, allowing savers to have peace of mind in an otherwise unpredictable rate climate. And those rates are still elevated, even with the Federal Reserve issuing a series of rate cuts in the final months of 2024. So, if you're looking for a secure way to grow your money and want to do so over an extended period, a 2-year CD could be the smart move right now. Below, we'll explain why.
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Is a 2-year CD still worth opening?
Here are three reasons why a 2-year CD can still be worth opening for many savers:
Rates are still relatively high
Sure, CD rates overall aren't as high as they were when inflation was surging and interest rates were at their highest point in decades. But they're still very competitive. With a top 2-year CD, you can potentially earn a rate of 4.25% right now. That's more than $4 earned for every $100 deposited, simply by moving some of your funds into this particular CD term. And with inflation rising in both October and November 2024 and interest rate cuts seemingly on pause, rates on this particular CD account are likely to remain high for a bit longer. Just don't wait for them to rise any further, as you could miss out on today's earning potential while readily available.
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You'll earn more than you would with a short-term CD
It may be tempting to lock in one of today's higher short-term CD rates versus a lower, 2-year CD rate. But if the goal is really to boost your bottom line, that would be a misstep worth avoiding. Even with the lower 2-year CD rate, you'll earn more than you would with a short-term account if opened now. Using a $10,000 deposit as an example, your account would only grow by around $228 over six months (at a 4.61% rate). But that same amount in a 2-year CD at a 4.25% rate will have increased by around $868. That's a 280% difference in earnings made simply by extending the term another 18 months.
Alternatives are likely to continue to decline during the same period
The average savings rate on a traditional savings account is a paltry 0.42% now. That's not even 50 cents earned for every $100 deposited. And rates on those accounts are variable and subject to fall even further if the interest rate climate continues to cool. High-yield savings accounts, meanwhile, have rates that are competitive with the top CDs, but those rates are also variable and, thus, likely to cool over the next 24 months. But that 4.25% 2-year CD rate you lock in this January will remain the same until the account matures in January 2027, injecting both security and predictability into your overall financial picture if opened now.
The bottom line
A 2-year CD can still be profitable and valuable for many savers. With rates still elevated, the potential to earn more than a short-term CD and alternatives with declining, variable rates, a 2-year CD becomes a clear, preferential alternative for many. That said, it's critical that any savers who choose this specific CD term now do so with an amount of money that they're comfortable leaving untouched until account maturity to avoid paying an early withdrawal penalty that will eliminate the interest earned to that point.
