Savings account rates have been sliding for months, but certificates of deposit are holding up better than most people realize.
Top-yielding 12-month CDs are still paying north of 4% APY at federally insured banks and credit unions, even after the Federal Reserve's recent rate cuts rippled through the rest of the deposit market.
The average savings account pays roughly 0.4% APY, according to FDIC data.
On a $10,000 balance, that's about $40 a year versus $400 or more in a competitive CD.
The catch, of course, is that you give up access to your money for the term.
A 6-month CD might pay around 4.3%, a 1-year near 4.2%, and a 5-year closer to 3.8% at the best institutions.
Notice the curve: shorter terms are paying more than longer ones right now.
That's an inverted yield curve on the consumer side, and it tells you banks expect rates to keep falling.
If you have cash you won't touch for six to twelve months — an emergency fund buffer, a tax payment you're setting aside, money for a car or home repair — a short-term CD locks in today's rate before it disappears.
Waiting for a better offer is a bet that's been losing for most of this year.
First, confirm the institution is FDIC-insured (banks) or NCUA-insured (credit unions), which protects deposits up to $250,000 per depositor, per institution.
Second, check the early withdrawal penalty.
Some online banks charge three to six months of interest; others hit you harder.
Third, watch for promotional rates that require a minimum deposit or a linked checking account.
One more thing worth flagging: those eye-popping 5%+ CD rates from 2023 and early 2024 are mostly gone.
If you're holding one that's about to mature, don't let it auto-renew into a lower rate without shopping around first.
Banks count on inertia, and renewal rates are often well below what new customers get.
For anyone with a lump sum sitting in a low-yield savings account, the math is simple: a few minutes of comparison shopping can be worth hundreds of dollars over a year.
Just don't lock up money you might need — the penalty for breaking a CD can wipe out the advantage entirely.
Our take: CDs aren't exciting, and they're not supposed to be.
They're a parking spot for cash you want safe and working a little harder than a savings account.
Final Thoughts
With rates still elevated but trending down, the window for locking in a solid short-term yield is narrowing — and for disciplined savers, that's reason enough to act sooner rather than later.