The decision to open a CD isn’t one to take lightly. You don’t have to put as much thought into making a deposit to your savings account, because you can withdraw money from savings at any time. But with a CD, there can be costly penalties for taking an early withdrawal. You need to make sure you’re comfortable with the amount of money you’re putting into a CD, and the length or term you’ve chosen.
That said, September 2024 happens to be a great time to open a CD. If you’ve been thinking about doing so, you may want to take action — specifically before the midpoint of the month. And there’s a big reason why.
Lock in that 5% CD while you can
The reason CD rates are up today is because the Federal Reserve’s benchmark interest rate is sitting at a 23-year high. The Fed began raising that benchmark interest rate, known as the federal funds rate, in 2022, to combat soaring inflation.
Since then, inflation has cooled. So following a series of rate hikes in 2022 and 2023, the Fed says it’s now ready to start lowering its benchmark rate. Once that happens, CD and savings account rates are likely to start falling. It pays to get ahead of that by opening a CD while rates are still at their strongest.
Our Picks for the Best High-Yield Savings Accounts of 2024
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Capital One 360 Performance Savings 
APY 4.25%
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APY 4.25%
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Min. to earn $0 |
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CIT Platinum Savings 
APY 4.85% APY for balances of $5,000 or more
Min. to earn $100 to open account, $5,000 for max APY
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APY 4.85% APY for balances of $5,000 or more
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Min. to earn $100 to open account, $5,000 for max APY |
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American Express® High Yield Savings 
APY 4.25%
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APY 4.25%
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Min. to earn $0 |
Why the rush to open a CD by the midpoint of the month? The Fed’s next opportunity to lower rates is at its Sept. 17-18 meeting.
Some banks have already reacted to the Fed’s anticipated rate cut by lowering their CD rates preemptively. But you might still be able to lock in a 5% CD if you act quickly enough.
Make sure a CD is right for you
While September is a great time to open a CD, you also want to make sure you’re not making a mistake by committing to one. Ask yourself these questions:
- Will opening a CD still leave me with an adequate emergency fund? You want enough cash on hand to cover at least three full months of essential bills.
- Do I have large expenses on the horizon? If you’ve been putting off a home or car repair, you may want to hang onto more of your cash and wait on a CD, even if it means missing out on today’s rates.
- Am I saving for a goal that’s more than five years away? If so, you should skip the CD and invest your money instead. You’re likely to earn a much higher return in an investment portfolio over time than with CDs.
But if you’re confident that a CD is right for you, shop around for rates in the next few days and take that leap. And if not, don’t sweat it. While the days of 5% CDs may be numbered, it’s not as though CD rates are going to go from where they are today to 2% overnight.
There’s a good chance CD rates will still be appealing well into 2025. Don’t feel bad if September isn’t the right time to commit to a CD. You’re better off waiting a few months if necessary than rushing into a decision you ultimately regret.
