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

With more interest rate cuts expected starting November 7, today’s CD rates are the best we can get. Some see this as a sign that they should hold these rates steady while they still exist, but I have different plans for my money.

APY isn’t the only factor to keep in mind

If you hope to guarantee a high interest rate on your bank account funds in the near future, opening a CD is your best option. Savings accounts do not lock in your interest rate. This is good news when interest rates are rising, but bad news when interest rates are falling, as they are now.

You’ll probably find that 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 significantly less interest on a high-yield savings account this year than you did last year.

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Capital One 360 ​​Performance Savings APY 4.00% Price information Check the Capital One website for the most up-to-date prices. Declared Annual Percentage Return (APY) is variable and accurate as of October 23, 2024. Rates may be changed at any time before or after account opening. Member FDIC.	APY 4.00% Price information Check the Capital One website for the most up-to-date prices. Declared Annual Percentage Return (APY) is variable and accurate as of October 23, 2024. Rates may be changed at any time before or after account opening.	Min. to win $0
American Express® High Yield Savings APY 4.00% Price information 4.00% annual return as of October 28, 2024 Member FDIC.	APY 4.00% Price information 4.00% annual return as of October 28, 2024	Min. to win $0
CIT Platinum Savings APY 4.70% APY on balances of $5,000 or more Price information 4.70% APR on balances of $5,000 or more; otherwise 0.25% APY Min. to win $100 to open account, $5,000 for maximum APY Member FDIC.	APY 4.70% APY on balances of $5,000 or more Price information 4.70% APR on balances of $5,000 or more; otherwise 0.25% APY	Min. to win $100 to open account, $5,000 for maximum APY

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

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

For this reason, CDs are not a good fit for your emergency fund or for money you plan to spend before the CD term ends. That’s why I choose to keep my money in a Discover® Online Savings account. If you’re looking to earn nearly nine times the national average savings account rate, take a look.

I don’t keep my long-term savings in CDs either. I have brokerage and retirement accounts for that. While there is a risk in investing my money, the potential return is much greater than the 4.00% I’ll be lucky to earn on CDs over the next few years.

Choosing the right one for you

However, for some people, a CD may be the right choice. If you have extra money outside of your emergency fund and short-term savings that you’re not comfortable investing, a CD can be a solid option.

To choose the right one, you must first ask yourself how comfortable you are with locking it to a CD. Although rare, some banks require minimum deposits as high as $2,500. Eliminate banks that require more money than you need to handle.

Next, consider how long you want to lock your money. If you only plan to open a single CD, consider opting for a long-term option now. If you opt for a short-term CD, you’ll be able to regain access to your cash sooner, but you’ll likely have to settle for a much lower rate when you go to rollover. If you’re not comfortable with a long-term option, consider a medium-term CD of one to three years.

No matter which CD you choose, you’ll need to act quickly if you want to lock in your rate before it drops even further. Compare some of the best CD prices on the market todaythen choose the one you like and apply for the account online.