Why you should put $5,000 into a long-term CD now

September is finally here and, with it, the likely first cut to interest rates since 2020. 

While that's going to provide major relief for millions of American borrowers, it won't be nearly as advantageous for savers who've been able to earn high returns on select savings vehicles since 2022. For those savers and those who have yet to take advantage, the opportunity to do so could soon be unavailable. This is especially true for adults who have considered opening a certificate of deposit (CD) account in recent years but have failed to do so.

Fortunately, there's still (some) time left to act. And there's a compelling case to be made for opening a long-term CD (more than 12 months) right now. Below, we'll break down three reasons why you should consider putting $5,000 into one of these accounts while it's still beneficial.

See how much more money you could be earning with a top CD here now.

Why you should put $5,000 into a long-term CD now

Still not sure if a $5,000 deposit into a long-term CD is the right move? Here are three major reasons why you should consider acting now:

It could be your last chance to lock in a high interest rate

Inflation is cyclical and bound to return at some point in the future. But as this inflation cycle cools and comes to a close, the window of opportunity for savers to take advantage will soon close as well. Right now could be your last chance to lock in a high interest rate on a CD while they're still readily available. 

Remember that rates on these same accounts were just around 1% in 2020 and 2021 (they're in the 4% to 5% range now). So today's rates are a bit of an anomaly. No one knows when they could return or what could spark them to rise again. So by locking in a long-term CD rate now, you could earn today's high returns for years to come, even as the larger rate climate cools back down.

Get started with a high-interest-rate CD while you still can here.

The alternatives are not as beneficial right now

For much of the last two years, savers had attractive alternatives to CDs. For those who didn't want to lock their money away in a CD, both high-yield savings and high-yield checking accounts offered ways to earn elevated rates while still maintaining access to your funds. But those alternatives are not as beneficial right now with rate reductions looming. Interest rates on both are variable, meaning they're designed to change as the interest rate climate does. 

While that's a pro when rates are heading upward, it's a detriment now as rates come back down. And while you may be able to get a comparable rate to a long-term CD if you open it today, that rate is likely to be much different a year from now versus the long-term CD, which will still be earning high, predictable interest on your money each month.

The deposit amount won't be prohibitive

A $5,000 CD deposit, while not small, won't be as prohibitive as a $10,000 deposit or higher. In other words, it'll be easier to part with $5,000 for 18 months or longer than it would be for $10,000 or $20,000. But you'll still earn hundreds and possibly thousands of dollars worth of interest with that manageable deposit. 

For example, a $5,000 deposit into a 5-year CD with a rate of 4.35% (available right now) will result in a $1,186.32 profit upon maturity. And you'll still be able to invest your money in other accounts or keep it liquid without locking it all away in a CD.

The bottom line

Speculation over interest rate cuts could soon become moot if the Federal Reserve issues a cut to the federal funds rate when it meets again this month. Savers who have yet to take advantage of the high interest rates of 2022 and beyond, then, should strongly consider rectifying that inaction by depositing $5,000 into a long-term CD now. By being proactive, they can still take advantage of this opportunity while it exists and they can do so as rates on alternative accounts start to dwindle. And considering that the deposit amount won't be prohibitive, savers will still be free to explore other options in the interim — while still earning today's high CD rates for multiple years ahead.

Have more questions? Learn more about your current CD options here.