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Inflation has caused a series of economic issues in recent years. Besides higher prices for groceries and gas, it has also resulted in higher interest rates and elevated costs for borrowers. 

But the news hasn’t been all bad. For savers, the interest rate climate of 2023 and 2024 has been a major boost to their finances. Returns on certificates of deposit (CDs) and high-yield savings accounts have surged over the last two years, with both accounts offering savers APYs of 4% or higher right now. 

CDs and high-yield savings accounts aren’t the same, however. The pros and cons of each vary, but there is one significant perk of opening a CD versus a savings account that’s particularly pertinent in today’s unique rate climate. Below, we’ll break down that advantage and a few others to opening a CD right now.

Ready to get started? See how much more you could be earning with a CD today.

One great perk of opening a CD versus a savings account now

Today’s rate environment is unusual because rate cuts are expected this year — but no one knows when or by how much. There was some hope that the first cut to the benchmark interest rate range — currently at a 22-year high — could come as early as March 2024. 

However, that was deflated after two consecutive reports showed inflation higher than many had anticipated. While rate cuts may still come, they’re now likely to come later in the spring or in the summer.

What does this have to do with opening a CD versus a savings account now? CDs have rates that are locked (and, they’re generally higher than the best high-yield savings accounts). Select savers may even qualify for an account with a 6% or 7% APY right now. 

And if they open the account now, whether the CD term is for a few months or a few years, that rate will remain the same even in the face of expected rate cuts. This is a major advantage in today’s rate climate in which rates are high now but expected to fall later in the year. 

By contrast, rates on high-yield savings accounts are variable, meaning that they’re subject to change as the rate environment evolves. So, while high now, they will fall when rate cuts are issued. 

But if you wait to open a CD when that happens the returns on CD accounts will also have been cut. It makes sense, then, to take advantage of the locked CD rate perk and open an account now while rates are still up.

Get started with a high interest-earning CD here.

Other CD perks to know now

While the locked interest rate is a major advantage, it’s not the only one. Here are two other CD perks to know now:

• Higher rates: While the best high-yield savings account rates are competitive, they’re generally not as high as the very best CDs. A simple search online will show that the returns on CDs right now are the best they’ve been in years. And compared to the 0.47% that a regular savings account comes with, you’re essentially losing money by not making the switch.
• Predictable returns: Because the rates on CDs are locked savers will be able to accurately predict the returns on these accounts. So, for example, a CD with a 5% interest rate and a $2,500 deposit will earn $125 after 12 months. A CD at the same rate with a $5,000 deposit will earn double that amount and so on. This predictability is a major advantage compared to high-yield savings accounts and it makes CDs a safe and smart way to save for a major expense in the future.

The bottom line

Both CDs and high-yield savings accounts are smart options to pursue in today’s rate climate but only one will have the enduring returns that savers can predict (and rely on). The locked nature of CD rates is a major perk compared to savings accounts in any rate environment, but especially now when rates are high but are expected to drop as the year evolves. As with all financial considerations, however, make sure you’re comfortable leaving your money untouched in a CD before opening one, otherwise you could get hit with an early withdrawal penalty.