Why you should open a CD in 2024

The Federal Reserve has increased interest rates 11 times since early 2022, and while that's meant higher mortgage rates, credit card rates and other lending products, it's also come with an upside: Much higher rates on certificates of deposit (CDs).

In fact, some banks currently offer CDs with rates of 5% or above — the highest rates seen in over a decade. And, with a CD, you lock in the same rate for the entire CD term, meaning that you can get consistent, reliable interest returns on your money. 

So, if you're looking for a way to boost your savings, CDs just may be the way to do it. 

Explore today's top CD options online here.

Why you should open a CD in 2024

Here are a few reasons why you might want to open a CD in 2024:

To lock in higher interest rates

The most obvious reason to open a CD in 2024 is the high interest rates these accounts are offering — particularly compared to regular savings accounts and big bank savings accounts. While some CDs carry APYs of 5% or higher, the average savings account currently has just a 0.46% rate.

"CD rates are currently much higher than those of regular savings accounts, allowing you to earn more on your savings," says Jeff Rose, a certified financial planner and founder of GoodFinancialCents. 

Even better, CDs let you keep those rates for extended periods — anywhere from one month to several years.

"These levels have not been seen in over a decade," says Ariel da Silva, director of fixed income at Wealth Enhancement Group. "They allow investors to lock in these rates for the period designated — regardless of whether interest rates go up or down during that time."

Find out how today's CDs could help you meet your financial goals.

To hedge against a potential market decline

Since CDs come with a guaranteed return, they can also be a good way to safeguard against economic struggles or market declines, particularly when geopolitical tensions are high — as they are today.

As Terry Turner, a financial wellness facility at Annuity.org, explains, "They offer a reliable avenue to preserve your capital and grow your savings — especially if you're a risk-averse individual seeking stability from economic fluctuations."

For a safe store of value

Inflation has been high for the last few years, and as of the most recent inflation report, it hovered at 3.2% — above the Federal Reserve's long-held goal of 2%. Fortunately, most CD rates are higher than that, making them "a solid hedge against inflation," Turner says, allowing you to safeguard your wealth — and even grow it — despite economic headwinds.

"It's a low-risk option for preserving and growing your savings," he says.

To diversify your investments

CDs can also be a smart way to diversify your portfolio and reduce the overall risk to your wealth. If you're heavily invested in real estate or the stock market, for example, a downturn in one of these sectors could mean a serious loss to your wealth. Putting some of your cash into CDs, though — especially those with different terms — can help offset that risk and balance your portfolio better.

"CDs can be a great option for people who want to save and grow their money without worrying about the ups and downs of the stock market," Turner says. "They offer a safe and reliable way to preserve your capital — and earn interest."

To boost short-term savings

Finally, if you have short-term savings goals in mind, you might also consider opening a CD in 2024. According to Kendall Meade, a certified financial planner at SoFi, CDs are best if your financial goal is within three years or less.

"This is such a short time period that you don't want to take the risk of investing this money," Meade says. "But you still want it to grow."

Just make sure you won't need the cash you put in a CD earlier than the maturity date or it could cost you. As Meade puts it, "You'll owe a penalty if you have to take the money out sooner."

How to get the best CDs

If you're set on opening a CD, be sure to shop around, as rates can vary quite a bit between banks. You should check your main bank, online banks and credit unions, and see which ones offer the best rates.

You should also look at other factors, like early withdrawal penalties and minimum balance requirements. 

Finally, think about employing a CD ladder when opening your accounts. With this strategy, you open several CDs in varying lengths. Then, when the first one comes to maturity, you have the option to cash out and use the funds as needed or reinvest them into a new CD, possibly taking advantage of even higher rates at that time.

"It's hard to predict if interest rates will go up or down," Turner says. "Things like changes in the economy or sudden inflation spikes could cause them to change. To be safe, it's a good idea to diversify how you save your money — put some of your money into shorter-term CDs and some into longer-term CDs. This way, you can take advantage of high rates now, while still being flexible in case rates go up in the future."