Banks are advertising certificates of deposit with the kind of enthusiasm usually reserved for new phones.
A five-year CD paying north of 4% has become the go-to pitch for anyone nervous about the stock market.
It sounds like free money with a government guarantee.
It isn't free, and the guarantee only covers part of the story.
Start with the headline number and then subtract.
If a one-year CD pays around 4.5% and inflation is running near 3%, your real return is roughly 1.5%.
That's not nothing, but it's not the windfall the ads imply.
Lock your money in for five years at 4%, and you're betting that inflation keeps cooling for half a decade.
The banks know exactly what they're doing.
They need deposits, and they'll pay up when they're short.
The best rates almost always come from online banks and smaller institutions trying to buy market share, not from the branch on the corner.
That's fine, as long as you understand the deal runs one direction: they get your cash cheaply for a set term, and you get a rate that may look mediocre in 18 months if the Fed cuts again.
There's also a trap buried in the fine print.
The national limit on federal deposit insurance is $250,000 per depositor, per bank, per ownership category.
Spread a large balance across too few institutions and you're trusting a balance sheet, not the government.
Most people won't hit that ceiling, but anyone rolling over a home sale or an inheritance should count carefully before signing.
Then there's the liquidity problem nobody mentions in the ad.
Money in a CD is not money in a savings account.
Withdraw early and you typically forfeit several months of interest, sometimes more.
If your emergency fund is sitting in a 12-month CD and your car dies in month three, you just paid a penalty for the privilege of being organized.
Compare the best nationally available rates, check whether a high-yield savings account pays nearly as much without the lockup, and ladder maturities so you're not stuck if rates climb.
Keep enough cash liquid that you never have to break a CD at the worst possible moment.
And ignore anyone who tells you this is a sure thing.
Nothing paying a fixed rate is ever truly risk-free once inflation gets a vote.
The real question isn't whether today's CD rates are good.
Final Thoughts
It's whether they're good for you, after taxes, after inflation, and after you account for the fact that you can't touch the money.