Interest rates may peak. Here’s why you should open a CD now.

Federal Reserve Raised interest rates Again earlier this month, their tenth such hike is in March 2022. Benchmark rates now range between 5.00% and 5.25%, making borrowing more expensive for many Americans. That said, rate hikes may end for some time as the Fed monitors its intended impact on inflation.

In announcing the hike on May 3, the Federal Open Markets Committee noted that further hikes may be off the table. They cut a nod to “future growth” that was in the previous statement and simply noted that “tighter credit conditions for households and businesses could weigh on economic activity, employment and inflation.”

While the rate hike hurt potential homebuyers and those looking to refinance their existing homes, the news wasn’t all bad. For example, it has significantly improved the application of deposit vehicles High yield savings And Certificate of Deposit (CD) Both accounts now have faster interest rates than they did just a few years ago. That said, with rates likely to peak, savers should prepare accordingly. This is a particularly beneficial time to open a CD.

Start by exploring your CD options here to see how much interest you can earn

Why should you open a CD now?

While opening a high-yield savings or CD account can be advantageous in today’s high-rate environment, only one would be a better choice should rates remain constant or low. In this case, CD is the preferred option. Here’s what to know:

CD interest rates are locked

In contrast to the annual percentage yield (APY) on a high-yield savings account, Interest rate on CDs Being locked in means you’ll earn interest at the rate you opened the CD for the entire term you hold it — regardless of what’s happening in the broader economy.

Let’s say you open a six-month CD this month at 4% interest. The Fed could keep rates steady in June and July and cut them in August and September. But because you’re locked in to that 4% rate, you’ll still earn interest on your deposit, despite what might happen in a higher rate environment.

Just be aware that the money in your CD will usually be inaccessible duration Expired (or unless you opened a No-penalty CD) That said, it makes sense if you’re comfortable keeping a certain portion of your money locked away. Now open a CD When rates are high and long-term forecasts for future rate increases are uneven.

Start here now.

You are (probably) losing money

Simply put: if a portion of your funds aren’t in a high-yield savings or CD account You are losing money. It really is that basic. Just look at the average interest rate offered with regular savings accounts. According to FDIC, which currently stands at 0.40%. But the rate on CD is between 3.5% to 5%. That’s a lot of money to earn simply by transferring funds.

And how much money? See a $5,000 deposit for reference. Deposit that into a regular savings account and you’ll have $5,020 after a full year. But if you put it in a 12-month CD at 3.5%, you’ll increase your bottom line to $5,175. And that at 3.5%! Chances are good that you can Find an account with a higher rate With little to no penalties and fees that would otherwise eat into your earnings.

So start shopping for a CD account now and earn more interest before the Fed makes another move.

Bottom line

When it comes to personal financial decisions, timing is everything. For those looking to earn more interest on their savings, opening a CD couldn’t be a better time. Given the Fed’s recent activity — and the possibility that future rate hikes may be off the table — it makes sense to open a CD while you can still lock in higher rates, regardless of where the economy is headed in the coming months.