Which CD account strategy makes the most sense now?

Certificates of deposit (CD) accounts have spiked in popularity in recent years among savers seeking to take advantage of a sharp rise in their yields. According to January 2022 data from the Federal Deposit Insurance Corporation (FDIC), the average rate for a five-year CD was a paltry 0.28%. At the time, even the best five-year CDs only offered yields of around 1.30%.

That changed and rates soared when the Federal Reserve launched its aggressive series of rate hikes from 2022 to 2023 to slow 40-year high inflation. Ultimately, rates peaked in 2023, and savers could easily find top CDs offering yields of 5.5% or more. 

However, yields began to dip when the Fed made a jumbo rate cut in September 2024, its first move to lower rates in four years. But even after the rate cut, CDs remain a solid option. Today's CD rates are still strong, with top options earning in the 4% to 4.5% range.

To make the most of these rates, many savvy investors are using strategies like CD ladders, barbells and bullets to maximize earnings and flexibility. Choosing the right strategy depends on where the economy is headed and what fits your financial situation best. 

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Which CD account strategy makes the most sense now?

There is no uniform answer to this question as each CD account strategy differs in benefits based on the individual saver. Here's why each could be advantageous now:

CD ladders 

Let's say you're earning 4% on your savings in a long-term CD. It's a solid return, but if rates climb, you could be missing out on even higher earnings. On the other hand, if you go with a short-term CD to keep your options open and rates fall, you might end up with a lower return instead of locking in a higher rate for the long run.

One strategy to manage this risk is CD laddering. To create a CD ladder, you'll divide your funds among multiple CDs with various maturity dates. This helps you maximize returns while giving you more options with greater access to your money.

"A CD ladder is one of the most effective strategies for savers looking to balance higher yields with flexibility," says Michael Crossley, vice president of treasury processing at America First Credit Union. "If rates decline in 2025, those who used a ladder will have already secured some funds at favorable rates. Meanwhile, as shorter-term CDs mature, savers can decide whether to reinvest or explore alternative options."

Compare your current CD account options here to see if a ladder strategy makes sense for you.

CD barbell

A CD ladder approach can include accounts of different term lengths. A CD barbell strategy, on the other hand, will not. This approach splits your money among short-term and long-term CDs. With no middle-range options, it resembles a barbell, with CD accounts weighted at both ends.

Let's say you have $10,000 to invest in CDs. With a CD barbell strategy, you might put $5,000 in a short-term six-month CD and the other $5,000 in a long-term five-year CD. In this case, you'd have the short-term option to access your money in six months—either to use it or reinvest—while still retaining the long-term benefit of a locked rate. 

"The benefits of this approach are similar to traditional ladder benefits, but without a series of CDs maturing at regular intervals," says Derik Farrar, head of personal deposits at U.S. Bank.

"Implementing multiple CD ladders over time is the best way to maintain exposure to various term points on the yield curve to mitigate the risk of unfavorable swings in interest rates. Since deploying this strategy typically requires a significant amount of funds, savers should consider a barbell approach at minimum to gain some exposure to short- and long-term rates," he adds.

CD bullet

A CD bullet strategy eschews the idea of staggering CD term maturity dates and instead puts all of your funds into CDs that mature at the same time. "This can be a useful strategy if you are saving for a big purchase at the end, like a down payment on a house or a wedding," explains Shana Hennigan, chief business officer at Raisin, a savings marketplace. "So you might buy a two-year CD, then six months later purchase an 18-month CD, then eight months later buy a 10-month CD."

"With the CD bullet strategy, your reason for opening a CD matters more than the state of the economy. But that doesn't mean interest rates don't play a role. While economists expect rates to hold for now and fall by year's end, uncertainty in the economy could lead the Fed to pause rate cuts. If you think rates will rise, keeping your money in shorter-term CDs lets you reinvest at higher yields later. If you expect rates to drop, you might get a better return by locking in a long-term CD that matures right when you need the funds—whether for a home purchase, tuition, or another goal."

The bottom line

The best CD strategy for you likely depends on where the economy is headed, your financial goals and how much risk you're comfortable with. If your risk tolerance level is high, a traditional CD ladder may make sense. 

"Your best bet is to have a traditional CD strategy and lock in current rates with the dollars you have available to save," says Alex Beene, financial literacy instructor at the University of Tennessee at Martin. "Most rates are hovering in the 4% to 4.5% range, and while it's always possible they could move up, with our current economic picture, it seems increasingly unlikely."

However, if you prefer a more conservative approach other strategies may be a better fit. As Beene points out, "Any CD strategy other than a traditional one—like bullet or barbell that lean in favor of savers dividing up the sums they put in over time or in different CDs—may still have a place, but they'll be more for those who are looking to set aside money over time and averse to the risk of other financial products."