Why you should open a 6-month CD this May

For the last few years, issues with inflation have been putting the squeeze on millions of Americans. While today's inflation rate of 3.5% is significantly lower than it was at its peak in mid-2022, the reality is that the costs of everything from groceries to gasoline are still climbing. In turn, many households have found their budgets stretched increasingly thin. 

To try and combat inflation, the Federal Reserve has kept its benchmark rate paused at a 23-year high following an aggressive campaign of interest rate hikes. This, in turn, raised borrowing costs at the fastest pace in decades, further adding to the issues that many people are facing with their budgets. But while today's high-rate environment has put the brakes on certain sectors of the economy, one silver lining is that it has sent deposit rates soaring. And for savers and those looking to earn a return that outpaces inflation, these higher interest rates present an opportunity.

For example, it's a great time to take advantage of the elevated interest rates being offered on savings products like certificates of deposit (CDs). And while CDs come in a wide range of terms, for many savers, a 6-month CD could be the ideal choice this May. Below, we'll break down why.

Find today's best CD accounts online now.

Why you should put money in a 6-month CD this May

While longer-term CD accounts, like 5-year CDs, can offer some unique benefits in today's rate environment, locking your money up for an extended period could prove to be problematic over time. That's where 6-month CDs come into play. These CDs offer an optimal balance between competitive rates and liquidity for many types of savers. 

Here are a few reasons why you may want to put some money in a 6-month CD this May:

6-month CD rates are very high

At many banks and credit unions, 6-month CDs are offering annual percentage yields (APYs) north of 4% and even 5%. These are some of the most competitive rates available in the broader deposit landscape right now. 

For example, the 6-month CD from Shoreham Bank offers a 5.50% APY currently, which outpaces today's inflation rate — and is significantly higher than the average 0.46% rate you'd earn by putting your money in a regular savings account. And, when you open a 6-month CD, you're locking that high rate in, guaranteeing that you'll earn the same high rate until your CD account matures. 

Find the right CD account for you online now and start earning more interest today.

The rate environment is uncertain

In early 2024, many experts were predicting that the Federal Reserve would begin slashing rates by mid-year. But, with recent inflation reports coming in higher than expected, those rate-cut predictions are on pause. And, if inflation proves to be stickier than anticipated in the months to come, there's a chance that the Fed could raise rates at some point later this year.

If that happens, you don't want to miss out on earning a higher APY on your CD. But you also don't want to waste time waiting for rate hikes that may or may not pan out, either. 

In many cases, you'd be better served by locking in a high rate today on a 6-month CD and then reevaluating your CD plans when your account has matured. That way, you'll start to earn the returns now but be well-positioned to capture any potential future rate increases during the end of the year.

A shorter CD term offers flexibility

While longer-term CDs may appear appealing because you'll lock in your high APY for a longer term, there is a substantial risk of getting stuck with an unfavorable rate should conditions change over the next few years. With a 6-month CD, though, you won't have to worry about your money being tied up for an extended period. When the CD matures, you can choose to renew for another term, switch to a different account type or withdraw your funds entirely if needed.

It's a simple way to meet short-term money goals

Beyond just earning a return on your cash, opening a 6-month CD can also be an effective strategy for reaching tangible savings goals you've set for yourself. By putting money aside in a separate account like a CD, you create a purposeful allocation while still maintaining relatively easy access to your funds.

Let's say you're saving up for an upcoming vacation, a down payment on a car or even just building an emergency fund. A 6-month CD can provide the discipline and dedication needed to make consistent progress toward that goal. You commit to funneling funds into the CD over the 6-month term, knowing that your hands will be partially tied in preventing you from easily accessing that money for other purposes. Then, when the CD matures, your financial objective will be fully funded.

You'll get a safe, predictable return

In today's unusual rate and economic landscape, CDs offer the same level of principal protection and guaranteed returns they always have. Your deposit is insured by the FDIC or NCUA, and you know exactly what interest rate you'll earn since the APY is fixed when you open the account. For risk-averse savers, this peace of mind can be invaluable.

The bottom line

Whether you're looking to finally tackle a savings goal you've been putting off, park cash in a safe place while earning a competitive return or just want to make the most of your funds, a 6-month CD is hard to beat right now. With rates elevated but the term short enough to allow for near-term access and flexibility, this type of deposit account checks a lot of boxes for many savers' situations.

Of course, periods of high interest rates never last forever. By opening a 6-month CD this May, you can take advantage of today's favorable rate climate and earn some extra interest income, all while buying yourself time to monitor how conditions evolve. And, when your CD matures later this year, you'll be able to evaluate your options for what to do next with a fresh set of rates and economic data.