Thanks to payouts of 4% or more, the humble CD is making a comeback. Should you get one?

Google searches for CD rates have jumped considerably in the past year. And no wonder: As the Fed keeps hiking interest rates, payouts on CDs have been looking up, and up, and up some more. “If you’re shopping around for the top-yielding CDs, you’re seeing yields of 4% to 4.75%, depending on maturity, that are available nationwide. These are levels unseen since the great financial crisis in 2008,” says Greg McBride, chief financial analyst at Bankrate. See some of the best CD rates you may get now here.

Certificates of deposit, also known as CDs, are a type of savings vehicle that pay a guaranteed interest rate on a fixed sum of money for a set period of time. The downside? CDs effectively tie your money up for anywhere from a few months to years; withdraw the cash before the CD matures and you get hit with a penalty fee.

And if you’re not shopping around, you may be looking at a yield that isn’t all that different from pre-pandemic levels. “The reason for the disparity is that most banks, especially bigger banks, have been dragging their feet about raising CD yields in a meaningful way but the most competitive banks and credit unions have kept pace as the Fed continually raised benchmark interest rates,” says McBride. See some of the best CD rates you may get now here.

The latest CD rates

Below are the latest average rates on CDs, according to data from Bankrate released on February 1, and then we chat with experts about how much you should be saving (yes, even in this high-inflation environment), where to put the money, and more. 

Account	Average APR/Yield
1 Year CD	2.36%
2 Year CD	2.47%
3 Year CD	2.67%
4 Year CD	2.56%
5 Year CD	2.78%
6 Month CD	1.82%
9 Month CD	2.49%

What should you use CDs for? 

When it comes to savings, experts say you likely have a few buckets to consider. You’ll need an emergency fund that is stuffed with 3-12 months of essential expenses. Put that somewhere safe and easily accessible, like a high-yield savings account. These are now paying more than they have in a decade, and you can see the best rates you may get now here.

Meanwhile, for other goals that you might need money for in 2-5 years — like buying a home, for example — consider that “something like a CD or Treasuries … could provide more yield than a savings account but maintain relative safety,” says certified financial planner Zack Hhubbard at Greenspring Advisors.

Risk-averse investors or anyone only looking to invest money for the short-term should also consider CDs, as they can be useful in terms of protecting principal, while still allowing for interest to be earned. A CD is often one of the best savings tactics if you’re saving with a specific goal in mind, as you’re guaranteed to earn a return. 

For those with larger cash savings accounts who want to stay conservative, but wouldn’t mind earning a little more interest, Mamie Wheaton, financial planner with LearnLux, says it’s worth considering investing a portion in CDs. “CD rates tend to be higher than high yield savings accounts because you’re locking up your money for the term of the CD. Consider a CD ladder, where different amounts come due at different times,” says Wheaton.

See some of the best CD rates you may get now here.

What to know before opening a CD

Before getting a CD, experts say it’s important to understand the terms of the deposit and to make sure you’re okay with not being able to touch your money for whatever fixed time period you’ve agreed upon to avoid the penalty. It’s also wise to familiarize yourself with the early withdrawal penalty fee in case you find yourself needing to withdraw funds before the CD matures.

“Shopping around for top rates on federally-insured CDs and savings accounts can at least minimize the impact of inflation,” says Ken Tumin, founder and editor of DepositAccounts.com. And, adds McBride, make sure you “get it directly from a federally insured bank or credit union and fully understand the penalties for early withdrawal,” says McBride.