The 6% CD has arrived.  Should you bite?

Thanks to rapidly rising interest rates, many reputable banks and credit unions are now offering certificates of deposit with impressive rates above 4%. And in at least two cases, we’re seeing CDs at 6%. But these have some big catches that mean you may be far better off with a high-yield savings account (some are paying 4.5% or more) or high-paying CD with less red tape. (See some of the best high-yield savings account rates here and best CD rates here.)

Security Plus Federal Credit Union offers an 11-month, 6% APY CD with a minimum $1,000 deposit and maximum $50,000 deposit to Baltimore City residents. Meanwhile, Frontwave Credit Union offers 6% on an 18-month CD for residents of Riverside, San Bernardino and San Diego Counties, California who can pony up a minimum deposit of $1,000. “These 6% CDs are primarily local deals, not everyone in the nation will be able to be eligible to join these credit unions,” says Ken Tumin, founder and editor of DepositAccounts.com. Indeed,

“One more thing to note is that these 5% to 6% CDs will likely be short-term CDs with a maturity length of 18 months or shorter. This is a similar situation that we see with Treasury yields which is due to expectations that rates will fall in 2024 and 2025. If those expectations change, we could see 5% long-term CDs,” says Tumin. See the best CD rates you may get now here.

Sigh, you might be saying — that 6% isn’t in my future. But the good news there is that it may soon be. Morgan Stanley analysts predict that rates on CDs could reach 5.5% later this year, as reported by CNBC. “We saw a reacceleration of CD rate increases over the past two weeks, likely reflecting the higher probability that bank management teams are now assigning to a higher-for-longer rate environment,” Betsy Graseck, managing director at Morgan Stanley, told the publication. 

Other pros think that rate is likely too. “On a nationally-available basis, we’ve got a good shot at seeing 5.5% on a 1-year CD or a 6-month CD between now and summer. An online bank, a community bank or a credit union would be the most likely candidates,” says Greg McBride, chief financial analyst at Bankrate.

If you’re looking for a safe place to park some cash and you’re amenable to having your money tied up for some time, a CD can be a lucrative way to earn interest. To qualify for a 5.5% rate on a CD, Chanelle Bessette, banking specialist at NerdWallet, says, consumers should make sure they’ve done their research to find the best interest rate that’s available to them as well as a term length that matches the timeline of their financial goals. “You can usually open a CD online directly with a bank or credit union but make sure you can meet the minimum opening deposit requirement for the CD you want and if you’re looking to open a CD with a credit union, check to make sure you qualify for that credit union’s membership,” says Bessette. See the best CD rates you may get now here.

Another thing to note is that to obtain these 5%-plus CDs, you’ll likely have to open new online accounts. “There may be a few local credit unions offering 5% or 6% and in those cases, you may be able to open them at a brick-and-mortar branch,” says Tumin.

That said, McBride suggests that being a credit union member and actively shopping around among the top-yielding, nationally available accounts will increase your odds of finding the best returns and being able to take advantage of them. “If CD yields reach 5.5%, they may not last long so be prepared to lock it in quickly when the time comes,” says McBride.