If you have cash sitting in a regular savings account earning next to nothing, this is one of those moments worth a second look.
Certificates of deposit are still paying north of 4% at a number of banks and credit unions, even after the Federal Reserve's rate cuts cooled things down.
That is real money for anyone parking an emergency fund or a chunk of savings they will not touch for a while.
The catch, as always, is that you have to shop around.
The national average for a one-year CD sits closer to 1.8%, which is a far cry from the best offers on the board.
The gap between a lazy CD at your everyday bank and a competitive one is often two full percentage points or more.
On $10,000, that difference is roughly $200 over a single year.
Mostly at online banks, smaller community institutions, and credit unions that do not carry the overhead of a branch network.
Several nationally available online banks have been advertising 12-month CDs in the 4.25% to 4.75% range.
Some promotional offers push higher, but they usually come with a minimum deposit, a shorter term, or a requirement that you also open a checking account.
Term length matters more than most people think.
Locking money up for five years at today's rates means you are betting that rates fall and stay down.
Locking it for six months means you may be renewing into a lower rate next spring.
A common approach is a ladder — splitting your cash across three, six, twelve, and twenty-four month CDs so you always have something maturing and can reinvest if rates move.
Before you commit, check the early withdrawal penalty.
Some banks charge three months of interest, others charge a full year's worth.
If there is any chance you will need the money for a car repair, a medical bill, or a layoff, a penalty can wipe out most of what you earned.
High-yield savings accounts are paying close to 4% too, and they let you pull money out whenever you want.
Also watch for the fine print on promotional CDs.
Some require new money that is not already at the bank.
Others automatically renew into a much lower rate when the term ends, and you only have a short window to move the funds.
Set a calendar reminder a week before maturity so you are not stuck.
CD interest is taxed as ordinary income, so a 4.5% CD in the 22% bracket nets closer to 3.5% after federal tax.
That still beats most savings accounts, but it is worth knowing the real number before you decide. **The bottom line:** Rates will not stay here forever, and the Fed's next moves are already priced in.
If you have idle cash you will not need for six to twelve months, comparing a few CD offers today takes twenty minutes and could earn you a few hundred dollars.
Final Thoughts
Just keep enough in an accessible account so you never have to break a CD early.