4 reasons to open a long-term CD this March, experts say

After a string of cuts were made to the federal funds rate by the Federal Reserve in 2024, many savers have felt like the good times were over for certificate of deposit (CD) account yields. But while CD rates have come down a bit from recent highs, many savers are still locking in solid returns by opening a CD account — and the returns aren't the only reason savers are flocking to these accounts.

Unlike high-yield savings accounts, CDs also offer guaranteed returns that aren't affected by fluctuating rates, which is helping to drive more people to these types of accounts. CDs also provide a simple way to grow your savings and can be ideal for meeting short-term financial goals — like a down payment on a home or a dream vacation.

But beyond these well-known benefits, experts say there are some unique reasons why you might consider opening a long-term CD this March. 

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4 reasons to open a long-term CD this March, experts say

Here are a few reasons why opening a long-term CD now might be the right move for your savings.

CD rates are still high

Interest rates on deposit accounts have dipped slightly but remain well above pre-pandemic levels. In January 2020, the Federal Deposit Insurance Corporation (FDIC) reported average 36-month CD rates of 0.80%, but as of January 21, 2025, 36-month CDs are averaging 1.32%. These figures include low-earning CDs from large traditional banks, but top-earning CDs are offering yields of 4% or more. That's good news for savers looking to earn a solid return on their deposit.

"Long-term CD rates are currently higher than historical averages, largely due to the Fed's aggressive rate hikes to combat inflation," says Mike Crossley, vice president of treasury processing at America First Credit Union. "For savers, the key consideration is whether they want to secure today's relatively high rates or take the risk of waiting for potential, but uncertain, short-term opportunities. Given past trends, those seeking a stable, long-term return may benefit from locking in a portion of their savings now."

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Federal Reserve may cut rates later this year

While the Fed doesn't set deposit rates, the rates on these accounts tend to move in response to changes in the federal funds rate. When the Fed lowered interest rates three times at the end of 2024, Federal Reserve Chairman Jerome Powell signaled the possibility of more rate cuts occurring in 2025. If that happens, it could result in lower yields on deposit accounts like CDs and high-yield savings accounts.

But at the Federal Open Market Committee's (FOMC) January meeting, Powell adjusted his outlook, suggesting a slower pace for rate cuts, with some economists now expecting them in the latter half of 2025. If that holds true, then March may be a good time to lock in a long-term CD to guarantee today's rate for the CD's term.

Crossley suggests the rate at which rates potentially fall will play a key role in how savers are impacted. 

"If the Fed acts gradually, CD rates may decline slowly, giving savers time to adjust. But, if rates drop sharply, those who locked in long-term CDs early will benefit the most. Given the uncertainty, a diversified approach, such as spreading funds across different CD terms, can help mitigate these risks of adjusting rates," says Crossley.

Long-term CDs may offer more value and stability

Long-term CDs typically offer higher yields than their short-term counterparts. However, many savers are currently taking advantage of short-term CD rates similar to or even higher than long-term ones. This inverted curve — when short-term rates are higher than long-term rates — is largely due to banks' expectations of future rate cuts.

Short-term CDs work well for near-term savings, but they don't offer the same stability as long-term CDs, especially if rates drop before they mature.

"Despite short-term CDs currently offering higher yields than longer-term CDs, a saver is subject to rollover risk that interest rates will be lower when the CD matures. A long-term CD provides peace of mind that the rate will remain constant over the investment horizon," Dwayne Safer, a finance professor at Messiah University, says.

Long-term CDs can anchor a strong CD ladder strategy

Many savers create a CD ladder, which is a way to spread out your investments across multiple CDs with different maturity rates. This strategy allows you to benefit from today's higher short-term CD rates while securing a guaranteed return on a long-term CD.

Opening up a long-term CD now could help you anchor your CD portfolio with a guaranteed rate for, say, a 1-, 3- or 5-year term. 

"CD ladders are typically structured short to long term with a positive sloping yield curve where the longest term earns the highest rate," explains Derik Farrar, head of personal deposits at U.S. Bank. "In the current environment, with elevated uncertainty about when the FOMC will next reduce rates, you can still create a ladder with multiple CDs to take advantage of high short-term CD rates while also locking in a certain yield on a longer-term CD."

The bottom line

While CD rates have declined from their recent historical highs, long-term CDs may still offer an elevated and predictable yield. Locking in a rate now can help safeguard your savings against potential rate cuts in the future.

That said, whether a short-term or long-term CD is right for you depends on your financial goals and how comfortable you are with risk. If you're saving for something in the near future, like a down payment or vacation, a short-term CD might be the better choice. But if your goal is long-term growth — such as building a nest egg or setting aside a significant amount for a future home purchase — a long-term CD could be the smarter option.