News last week thatwas welcome for millions of borrowers. After all, higher inflation has led to elevated interest rates. That’s caused to hit their highest rate since 2000 while the overall benchmark interest rate range remains at a between 5.25% and 5.50%. But if inflation continues to come down and eventually hits the Federal Reserve’s target 2% rate goal, interest rates will likely tumble down, too.
With that context in mind, savers may be wondering about the benefit of opening some specific account types right now. For example,and have been earning significantly higher interest rates than just a few years ago. But with inflation seemingly on the right track, is a CD still worth it? Or are savers better off exploring alternatives?
Is a CD still worth it with inflation cooling?
A CD account is considered aand way to protect and grow your money. And even with inflation cooling currently, it can still be worth opening for many people. Here’s why:
Rates are still high
Sure, inflation looks to be heading in the right direction but it’s going to take time for that to equate to lower interest rates and, thus, lower returns on CD accounts. So it makes sense to open a CD now while rates are still elevated. It’s not difficult to find a CD with an APY ofor higher today. Some savers may even qualify for a . No matter where you look for a CD ( is generally better) or which you choose, the returns you can get on account today are still attractive for many.
But they won’t stay this high forever and almost assuredly will come down a bit if the fight against inflation remains successful. So open a CD with a high rate now while you still can.
You can lock in a high rate long term
One of the great things about CDs — unlike high-yield savings accounts — is that the rate you open the account with will be the same one the CD expires with. So even if rates drop during your CD term, you’ll still earn that higher interest rate.
Compared to the variable rates that high-yield savings accounts come with, a CD is the better choice for those who want to earn interest at today’s rate long into the future. Withfor multiple years currently, it makes sense to lock in one of these high rates now before they possibly drop in 2024.
Other accounts aren’t as competitive
Have you checked the interest rate on your regular savings account currently? Chances are that it’s low. In fact, the average savings interest rate right now is just 0.46%. So if you have some or all of your money in one of these account types, you’re essentially by not transferring a portion into an account with high returns.
That doesn’t mean you need to put all of it into a CD (nor should you). But even a It’s easy to find a CD with a rate of 5.5% now.or deposit is better than nothing, which is essentially what you’re getting by leaving your funds untouched in a regular account.
The bottom line
While the window of opportunity for savers to open large interest-earning CDs may be closing, it hasn’t closed yet. As such, a CD can still be worth pursuing now. Due to its currently elevated rates — and the fact that that rate will be locked in long-term, regardless of the overall rate environment — a CD is valuable now. Compared to the other savings options on the market, however, you’re likely losing money by not moving some portion of your savings into one of these accounts. Just make sure to crunch the numbers and understand the CD restrictions before acting. Otherwise, you could risk anif you need to take out your money before the account term has run out.