3 reasons to open a CD in 2024
A certificate of deposit (CD) is a savings account that enables you to earn a generally higher interest rate on your deposit in exchange for keeping your money locked in the account for a set period. CD terms typically range from a few months to five years.
Remember, however, withdrawing your money before the term ends—also known as its maturity date—can trigger an early withdrawal penalty. Penalties and fees vary by bank and financial institution, but they're usually equal to a specific amount of interest earned, such as 60 or 120 days of interest or more.
In the current high-interest rate environment, CD rates are significantly higher than just a few years ago. If you have funds you won't need to access for a while, stashing it in a CD account could be beneficial for multiple reasons. Below, we'll break down why you should open a CD now and in 2024, too.
3 reasons to open a CD in 2024
Here are four reasons why you should strongly consider opening a CD in 2024.
High-interest rates (at least for now)
Certificates of deposit usually deliver a higher annual percentage yield (APY) than a traditional savings account. According to the Federal Deposit Insurance Corporation (FDIC), the latter currently offers an average yield of 0.46% as of October 2023. Meanwhile, CD interest rates range from 4.60% to 5.55%, depending on your term.
While the average annual yield on a five-year CD—currently 4.60%—is lower than shorter-term CDs, it may be worth locking in this rate if you anticipate interest rates will drop in 2024 and beyond. It was only two years ago, in November 2021, that interest rates ranged from 0.05% to 1.18% on similar accounts.
Alternatively, high-yield savings accounts also offer generally higher yields compared to traditional savings accounts but typically allow you to access your money without incurring an early withdrawal penalty.
Explore your CD account options here and start earning high interest rates on your funds.
Possible market volatility
No forecaster can predict how the stock market will perform in 2024 with 100% accuracy, but you can potentially limit your exposure to loss by parking some of your money in a CD. While the stock market generally delivers higher returns over time, it also comes with a degree of risk.
If you're concerned the market may decline, a CD may offer a secure way to save money to help you reach your financial goals. Unlike stock market investments, CDs offered through banks and credit unions are typically federally insured by the FDIC and NCUA, respectively, up to $250,000 per depositor.
Safe account to grow your money
CDs often have a minimum opening deposit of at least $500, although some accounts require no initial deposit. If you have a decent chunk of cash from an inheritance, tax return or another windfall, a CD could help you grow your funds safely.
For example, let's say you open a 36-month CD account with a $10,000 deposit with a 5% annual yield. In this case, you'll earn $1,576.25 in just three years without risking your money to market fluctuations.
Get started with a top-earning CD here now.
The bottom line
The new year is approaching, making it an excellent time to review your portfolio's performance and your financial goals for 2024. Opening a CD could be a good option, especially if you're looking for a higher rate of return on your savings, FDIC insurance up to the federal limits and a guaranteed, fixed rate of return.
To open a CD, shop and compare rates and terms at your current bank or credit union and don't hesitate to look for online banks and lenders, too. Without the overhead of managing physical branch offices, many online banks offer top CD rates. Verify the bank offers FDIC or NCUA deposit insurance.
Once you decide on a bank, submit your application and fund your account. Additionally, consider employing a CD ladder strategy, which may help you gain access to your money on a more regular basis.
