Long-term CDs: Know the pros and cons

Following the decision of the Federal Reserve Stop raising federal interest rates For the first time since last March, Long term CD has become much more attractive to savers. Although we cannot predict the future, Some experts believe Today’s rate may be close to the maximum that banks will offer on deposit products. Plus, even if federal rates stay high for a while, they will inevitably fall again in the future.

There is a Certificate of Long Term Deposit (CD) may be useful. These multi-year fixed-rate accounts allow you to lock in a higher interest rate today and continue earning that APY on your principal until the account matures.

Before you open a new long-term CD account, though, it’s important to understand all the details of how you can benefit.

Compare today’s top CD rates right here and start earning more from your savings.

Advantages of long-term CDs

Some of the best reasons to lock in long-term CDs now are:

Lock in a great interest rate

Today’s long-term CD rates are much better than they were a few years ago Highest earning online account Offers APY over 4% and even up to 4.5%. If you believe that interest rates are likely to decrease in the near term, you can Lock in a great rate today To maintain solid earnings on your balance over time.

Say you deposit $10,000 into a five-year CD today earning a 4.30% APY. When that CD matures, you’ll have a total of $12,343, earning over $2,000 in interest.

Here are some examples of great long-term CD rates are now available:

• Popular Straight 5-Year CD: 4.53% APY
• Barclays 5-year CD: 4.35% APY
• Bread Savings 5-year CD: 4.25% APY

Check today’s top CD interest rates right here!

Good returns with security

Not only can you get a great rate with a long-term CD today, but you can also guarantee it Your deposit is safe.

Deposits you make on certificates of deposit are FDIC-insured up to a limit of $250,000 per depositor and per institution. If you have more than that amount, you can also choose to spread your balance across different accounts and different banks.

FDIC insurance protects your money against bank failure. Also, such deposit accounts are not subject to market fluctuations. With fixed rates and fixed terms, you can plan ahead and know exactly How much will you earn? With your long-term CD over the life of the account.

Disadvantages of long-term CDs

Locking in a long-term CD isn’t the right choice for everyone. There are a few drawbacks to consider here as well.

Limited access to your cash

When you open a long-term CD, you should be sure that you are willing to part with your cash Length of whole term.

CD carries Early withdrawal penalty, which can cost you a portion (or even all) of the interest earned. In addition, you will be required to withdraw the entire balance from your account, forfeiting any potential interest you may have earned for the remainder of the term. there is something No-penalty CD Those that do not charge this fee, however, are generally not available at long-term lengths

If you know you may need to access your savings soon, consider one Short term CDs With a word length that better fits your goals High Yield Savings Account With the flexibility to withdraw at any time.

Not the highest income CD

Historically, long-term CDs have offered the highest rates of any CD option – but that’s not always the case today. Thanks to the unique economic environment we’re in, you get the absolute Maximum yield Among short-term CDs. Some offer 5% to 5.25% APY for six-month or one-year terms.

However, long-term CDs may offer a better deal depending on how rates move in the future. If they’ve been high for a while, you can lock in a great short-term CD today and renew the CD at the same rate in a year. But if rates fall, short-term CD rates will follow. Long-term CDs offer more guarantees no matter what the overall rate environment looks like.

Find out how much you can earn with today’s best CD rates here.

Bottom line

If you’re debating whether to lock in a long-term CD for a few years at today’s high interest rates, your personal goals and circumstances can help you decide. If you believe interest rates are near the top — or you’re satisfied with what you can earn on a long-term CD today — you may be ready to open your account and start building interest. Just make sure you understand the limits on your deposits and the potential opportunity costs compared to other account options.

Start growing your savings with a CD and compare the best rates available now.