A few months ago, it wasn’t difficult to find certificates of deposit (CDs) paying an APY of 5.00%. But that changed virtually overnight when the Federal Reserve delivered an aggressive 0.50% rate cut on September 18. Now, you’re lucky if you can find rates above 4.50%, and even those are only available on short-term CDs.

With more rate cuts expected as early as November 7, today’s CD rates are the best we’ll get. Some see this as a sign that they should lock in these rates while they’re still available, but I have different plans for my money.

APY Is Not the Only Factor to Keep in Mind

If you’re hoping to secure a high interest rate on the funds in your bank account for the near future, opening a CD is your best option. Savings accounts don’t lock in your interest rate. It’s good news when interest rates are rising, but it’s bad news when rates are falling like they are now.

You’ll likely see your savings account interest rates drop quite frequently over the next year. It’s impossible to say where they’ll end up, but it’s a safe bet that you’ll earn a lot less interest on a high-yield savings account this year than you could have earned last year.

Our picks for the best high-yield savings accounts of 2024

Capital One 360 ​​Performance Savings APY 4.00% Pricing information Check the Capital One website for the most up-to-date pricing. The Advertised Annual Percentage Yield (APY) is variable and accurate as of October 23, 2024. Rates are subject to change at any time before or after account opening. Member of the FDIC.	APY 4.00% Pricing information Check the Capital One website for the most up-to-date pricing. The Advertised Annual Percentage Yield (APY) is variable and accurate as of October 23, 2024. Rates are subject to change at any time before or after account opening.	Min. earn $0
American Express® High Yield Savings APY 4.00% Pricing information Annual percentage yield of 4.00% as of October 28, 2024 Member of the FDIC.	APY 4.00% Pricing information Annual percentage yield of 4.00% as of October 28, 2024	Min. earn $0
CIT Platinum Savings APY 4.70% APY on balances of $5,000 or more Pricing information 4.70% APY on balances of $5,000 or more; otherwise, 0.25% APY Min. earn $100 to open an account, $5,000 for maximum APY Member of the FDIC.	APY 4.70% APY on balances of $5,000 or more Pricing information 4.70% APY on balances of $5,000 or more; otherwise, 0.25% APY	Min. earn $100 to open an account, $5,000 for maximum APY

But savings accounts offer something CDs don’t: easy access to your funds. You’re free to withdraw money whenever you need, although some banks limit you to six free withdrawals per statement cycle.

Still, it’s better than CDs. If you need to access your funds before the end of the CD term, you will have to withdraw all of your funds at once and you will likely pay a penalty equal to several months of interest payments for withdrawing your money before the due date. due date. .

That’s why CDs aren’t a great fit for your emergency fund or money you plan to spend before the CD’s term is up. And it’s also why I choose to keep my money in a Discover® online savings account. Check it out if you want to earn nearly nine times the national average savings account rate..

I also don’t keep my long-term savings in a CD. I have brokerage and retirement accounts for this. Although investing my money involves risk, the potential returns are much higher than the 4.00% I would be lucky to earn on CDs over the next few years.

Choose what suits you

That said, a CD might be the right choice for some people. If you have extra cash outside of your emergency fund and short-term savings that you’re not comfortable investing, a CD could be a solid option.

To choose the right one, you must first ask yourself how comfortable you are enclosing in a CD. Some banks require minimum deposits of up to $2,500, although these deposits are rare. Eliminate any banks that need more money than you have to put aside.

Next, think about how long you’re willing to lock up your money. If you’re considering opening a single CD, consider a long-term option now. If you opt for a short-term CD, you’ll have access to your money again sooner, but when you renew, you’ll likely have to settle for a much lower rate. If you’re not comfortable with a long-term option, consider a medium-term CD, between one and three years.

Regardless of which CD you choose, you need to act quickly if you want to lock in your rate before it drops even further. Compare some of the best CD prices available todaythen choose the one you like and apply for the account online.