‘You may want to think about a CD.’ Some CDs pay 4.5% or more right now. Should you get one?

Certificates of deposit certainly don’t make headlines like, say, certain stocks do, but right now they maybe should. Indeed, many CDs — a type of savings vehicle that pay a guaranteed interest rate on a fixed sum of money for a set period of time — are offering a guaranteed return of 4% or 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 the highest CD rates you may get now here.

While earning a higher interest rate sounds appealing all around, it’s important to note that CDs effectively tie your money up for anywhere from a few months to several years. What’s more, withdrawing cash from one before it matures can result in a cumbersome penalty fee.

One more thing to consider: While some of the CDs you’ll find today have the best yields in nearly 15 years, 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 the highest CD rates you may get now here.

The latest CD rates

Below are the latest average rates on CDs, according to February 8 data from Bankrate, 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 rate paid
1 Year CD	2.33%
2 Year CD	2.44%
3 Year CD	2.64%
4 Year CD	2.52%
5 Year CD	2.74%
6 Month CD	1.80%
9 Month CD	2.46%

What to know before getting a CD

When it comes to savings, experts say you likely have a few buckets to consider. You’ll need an emergency fund, which should have 3-12 months of essential expenses in it. That should be put 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 like buying a home or taking a fabulous vacation in a few years, you may want to think about a CD. “Cash needed in 2 to 5 years could be invested in something like a CD or Treasuries that could provide more yield than a savings account but maintain relative safety,” says certified financial planner Zack Hhubbard at Greenspring Advisors.

A CD might be the right move for you if you need cash at a specific time in the future, you’re looking to generate income in retirement or you need a way to diversify a broader investment portfolio. “Be sure to shop around for the best yielding CDs, get it directly from a federally insured bank or credit union and fully understand the penalties for early withdrawal,” says McBride.

Risk-averse investors or anyone only looking to invest money for the short-term should think about CDs as a useful way to protect principal, while still allowing for a some interest to be earned. Indeed, CDs typically offer better interest rates than savings accounts, but it’s important to keep in mind that putting money into a CD really only makes sense if you’re able to keep it there until it reaches maturity. That’s typically between a few months and five years — otherwise, you’ll be on the hook for a hefty penalty.

Experts also say that CDs are often one of the best savings tactics if you’re saving with a specific goal in mind because you’re guaranteed to earn a return. Also, consider a CD ladder, where different amounts come due at different times,” says Mamie Wheaton, financial planner with LearnLux.

Before getting a CD, 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. 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. And, of course, you’ll want to shop around for the best rates and. terms.