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Why you should open a long-term CD this February

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Savers can earn hundreds of dollars by opening select, long-term CD accounts this February. Getty Images

While many savers may have felt like they missed a recent opportunity to earn a high rate with a certificate of deposit (CD) account, this week's interest rate news demonstrates that that's not the case. 

After issuing a series of cuts to the federal funds rate toward the end of 2024, the Federal Reserve this week issued a pause, maintaining the rate at a range of 4.25% to 4.50%. While that halt will undoubtedly trouble borrowers looking for lower interest rates, it opens a new window for savers to take advantage. 

One of the best ways they can do so right now is with a long-term CD, which comes with high interest rates and terms longer than 12 months. There are multiple advantages to opening a long-term CD this February, three of which we'll break down below.

See how much more you could be earning with a top long-term CD here.

Why you should open a long-term CD this February

Here are three reasons why savers should open a long-term CD this February:

Interest rates are on pause

The Fed rate pause gives savers some extra time to shop around to find the highest CD rates and best terms. In a climate where rates were being consistently reduced, as they were last fall, savers had less time to evaluate their options. But they can do so more effectively this February after rates were just paused. This gives them a bit more time to do their research and search for accounts online. And with no Fed meeting on the schedule for February, they can use the month to locate the most appropriate long-term CD for their financial needs and goals.

Get started with a long-term CD online now.

You'll earn more money

If your end goal for opening a CD is to earn the greatest return, then you can only do so by opening a long-term CD now, not a short-term one. Even though rates on short-term CDs are technically higher, the extended interest-earning potential available with a long-term CD easily negates that rate differential. 

Use a $10,000 deposit for an example. With a 6-month CD at a 4.61% rate you'll earn $230 but with a 3-year CD at 4.25% you'll earn $1,330 — that's more than $1,000 more, even with a lower rate. But that will be the case with most long-term CDs. Change the deposit, rates and terms to illustrate the difference. $1,000 in a 3-month CD at 4.50%, as another example, will lead to $11 earned while that same amount put into a 2-year CD at 4.15% will result in $84 — more than seven times the interest.

You'll secure extended protection

The long-term future of interest rates is unknown right now. Hope was high that the Federal Reserve would embark on an extended interest rate cut campaign when it began last September with a larger-than-expected 50 basis point cut to the federal funds rate. But as inflation rose in the fall, the Fed spoke of limiting cuts in 2025 and, in Wednesday's meeting, they did just that. Now, a rate cut may not come until May, if it even does at all. 

Understanding this developing dynamic, then, savers should look for extended protection for their money to weather any rate volatility. And a long-term CD, unlike a short-term one that will mature in just months, or a high-yield savings account that has a variable rate subject to change, can provide that much-needed protection right now.

The bottom line

While each saver's financial preferences are different, for many, now marks a smart time to consider a long-term CD. With interest rates frozen, savers can utilize February to shop for the highest-rate CDs and without another meeting slated for the month, they can take the time to precisely determine how much to deposit to avoid a potential early withdrawal penalty. More fundamentally, they'll also earn more than they would with a short-term CD and, perhaps most importantly, they'll lock in extended financial protection to weather what now appears to be an uneven interest rate climate. 

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