Is a 10-year CD term worth it?
As interest rates have risen over the past several months, certificates of deposit (CDs) have only grown more enticing. These savings accounts are not only safe and secure, but also offer some of the best low-risk returns you'll find for your savings balance today.
But before you can lock in a great CD, you should decide what CD term best fits your needs. When you deposit your money into the account, you'll agree to leave it there for the entire term length, or else face an early withdrawal penalty. So it can pay to choose your term carefully.
Shorter-term CDs may currently have the highest rates, with some inching close to 5.50% APY — but there are also some good reasons to lock in a long-term CD today. Start comparing for yourself with some of today's best CD rates here.
Is a 10-year CD term worth it?
Long-term CDs can range from three years to a maximum of 10 years, with decade-long terms typically the longest you'll find.
Ten-year CDs also tend to offer the lowest interest rates today. While some shorter-term CDs offer over 5.00% APY — and even close to 5.50% APY for some one-year CDs — many 10-year options earn less than 3.00% APY right now.
But there are still benefits to opening one. Because the current rate environment won't last forever, locking in a competitive rate for a longer term now — even if it's not the highest — could help you earn more over time. For example, let's say you put $5,000 in a 10-year CD today earning 2.75% APY. When the account matures, you would have earned more than $1,500 in interest for a total balance of about $6,558.
Still, it's also important to keep in mind the potential opportunity cost of putting a large balance in a CD for a long term. If you know you won't need the money for a decade or more, a long-term CD could be worth considering instead of leaving it in a deposit account. On the other hand, a very long CD could still be worth it if you absolutely do not want to risk the money in the market.
To maximize rates while keeping your money safe, an alternative worth considering is a 5-year CD term. Though you'll only lock in your rate for half the time, 5-year CDs today can earn upward of 4.50% APY. It's impossible to predict where interest rates will be when the five years ends, but at that rate, you could earn nearly the same amount as a 10-year CD even with the shorter time period.
Thinking about a CD today? Start here by comparing some of the top rates available now.
Top-earning 10-year CDs available now
If you're looking for a 10-year CD, you may find that they are less common than shorter CD terms, but you can still score competitive rates on these accounts today. Here are a few of the top 10-year CD rates we found from FDIC-insured online banks:
Discover Bank: 3.80% APY
If you have at least $2,500 to deposit, Discover Bank's 10-year CD is one of the highest available options right now at 3.80% APY. There are no fees to open the account, but you'll incur a penalty fee of 24 months' simple interest if you need to withdraw early.
Vio Bank: 2.75% APY
When you open a 10-year CD with Vio Bank, you'll earn a 2.75% APY. This account requires just $500 as a minimum deposit and you won't pay any monthly fees. If you need to withdraw your money early, you must pay a penalty equal to 3% of the amount you withdraw, plus a $25 fee.
Emigrant Direct: 2.75% APY
Emigrant Direct, the online division of Emigrant Bank, offers a 2.75% APY for 10-year CD terms. You must deposit at least $1,000 to open the account. Though you won't pay monthly fees, you will take on a fee worth 180 days of interest for early withdrawal.
You may also want to check out local credit unions or community banks in your area if you're interested in this term length. Some credit unions throughout different areas of the country — which you may be eligible for depending on your location or other factors — may offer up to 4.00% APY on 10-year terms.
It can also pay to compare CD rates available for you today with different term lengths. Get started here now.
The bottom line
Locking in a long-term CD rate today can be a smart move for savers who have a lengthy timeline for saving. But while 10-year term lengths may be useful for some, including those who don't want to risk market volatility or interest rate changes, do your research before locking in a term this long. If you can earn the same amount over time, a shorter CD term with a higher rate could be better fit for your needs. It can pay to compare all your savings options against your individual savings goals before you choose your new account.
