Three Crucial Instances Where Opening a CD is Ill-Advised

Three Signs You Shouldn't Open a CD, Even With Rates at 5.5%

The best CD rates are sky high, making CDs an appealing investment in 2024. But here are three times you should never put your money in a CD.

Certificates of deposits (CDs)

CDs can be a great choice when you want to maximize the interest you earn on your savings. With a CD, you agree to keep your money in the bank for a specific amount of time, known as a term. Because you're agreeing not to touch your money during the CD term, you can often earn more interest than you'd get with a high-yield savings account. Some of the best CD rates we've seen lately are as high as 5.50%. Plus, CDs are extremely low risk because they're covered by the Federal Deposit Insurance Corporation (FDIC) for at least $250,000 per institution per depositor.

When does a CD make sense?

A CD is a good choice for your money when you don't have high-interest debt, you have an emergency fund, and you're already investing for retirement in a tax-advantaged account like a 401(k) or individual retirement account (IRA). It can be an especially good choice for medium-term goals, like if you've set aside money for a down payment but don't plan to buy a house for over a year. Before you commit your money to a CD, though, make sure you understand what the early withdrawal penalty is and are comfortable letting your bank hold onto your money for the entire term.