CD rates are holding up better than most savers expected this year.
After the Federal Reserve's recent moves, many people assumed certificate of deposit yields would crater.
Instead, several banks are still advertising rates north of 4% on terms ranging from six months to two years.
That gap between what you earn in a savings account and what a CD locks in is worth a closer look, especially if you have cash sitting idle.
The national average for a one-year CD sits around 1.8%, according to recent bank surveys.
It includes giant institutions that pay almost nothing.
The competitive end of the market looks completely different, with online banks and a handful of credit unions posting 4.25% to 4.75% on 12-month terms.
You hand over access to your money for a set period.
In exchange, the bank guarantees that rate even if the Fed cuts again.
Savers who chased the highest headline rate last year learned a lesson about fine print.
Some of the most eye-catching offers came from institutions with steep early withdrawal penalties or minimum deposits of $10,000 or more.
A few required you to open a checking account or make a certain number of debit card transactions to qualify.
Read the disclosure page before you move a dollar.
A rate that drops by a quarter point after the first month is not the deal it appears to be.
There is also a timing question worth thinking through.
If you believe rates will keep falling, a longer term locks in today's yield.
If you think they might tick back up, a short six-month CD keeps your options open.
Nobody knows the answer in advance, which is why many advisors suggest laddering: splitting your cash across several maturity dates instead of betting everything on one.
Treasury bills and money market funds are still competitive with many CDs, and they offer more flexibility.
A CD only wins if you are confident you will not need the money early.
For households with an emergency fund already in place, parking a portion of savings in a CD is a reasonable way to squeeze out extra yield without taking on market risk.
Just do not lock up money you might need for a car repair, a medical bill, or a job gap.
Our take: the best CD rates today are genuinely attractive compared to where they sat for most of the past decade, but the window may not stay open forever.
Final Thoughts
Compare at least three institutions, check the penalty terms, and match the term to when you will actually need the cash back.