Should you open a CD before the next Fed rate hike?

Interest rates may headline later pause In June. At least, that What it appears like Ahead of the Federal Reserve’s next meeting later this month.

In particular, released minutes from the Fed’s June meeting noted that some officials then supported raising rates, by one-quarter of a percentage point. Although that sentiment was ultimately overruled by the 11 voting members of the Fed’s interest-rate-setting committee, the prospect of leaving rates untouched in July appears slim. In fact, many experts expect the Fed to raise rates at least twice in 2023.

While higher rate credit cards make mortgage refinances more expensive, they do have one advantage: higher interest rates on savings vehicles such as High yield savings And Certificate of Deposit (CD) account. Rates on these accounts are now higher than they have been in years, making them an attractive option in an otherwise uneven economic climate

But with another Fed rate hike, should you open a CD now, or should you wait? Start by exploring your CD options here to see how much interest you can earn

Should you open a CD before the next Fed rate hike?

As most experts will tell you, timing the market is difficult, if not impossible. And timing the Federal Reserve’s planned actions is equally difficult. If you think you can possibly earn a higher API In a CD awaiting the Fed’s next rate hike, it may make sense to wait for that decision. But if you wait until then, you definitely will lose money In the interim.

Interest rate on CDs Now ranges from 3% to 5% or more, depending on which lender you choose. While you may be able to secure a slightly higher rate after the Fed’s next shock, you’ll also lose any interest you earned by opening a CD before then. And if the Fed decides to keep rates as they are, you won’t be waiting for any appreciable benefits.

That’s why it can mean Now open a short-term CD. This is the range of CDs Conditions From three to 12 months, can capitalize on the high-rate environment and still give you the flexibility to move your money to a higher-income account in the near future.

You don’t lock your money in a place where you can only access it once rates drop. At the same time, at least you will earn interest at the prevailing high rate. That’s still exponentially better than leaving it in a regular savings account, which earns 0.42% APY, according to the latest FDIC the number

In short: Yes, you may be able to earn higher interest rates by waiting for the Fed’s next hike. But you’ll lose money by not putting at least some of your funds in high-rate CDs now. So you are best served by opening a short-term CD now Your funding ladder So they probably end up opening a new CD at a higher rate.

Explore your CD account options right here and start earning more interest today!

Other reasons to open a CD now

While a high interest rate now – and a potentially higher one in the future – is a compelling reason to open a CD, there are other benefits to opening a CD. Here are two other reasons you might want to consider opening a CD now:

Rate locked

A CD not only comes with a higher rate now, but it will maintain that rate for the term of the CD, regardless of any changes in the Fed or the broader economy. dislike High yield savings account ratesWhich is adjustable and changes daily, the CD rate is locked in until the CD matures, providing savers some predictability and security in an otherwise volatile rate environment.

Your money is protected

Not only a CDs are FDIC-insured Up to $250,000 per account per institution – it’s also protected against any withdrawals or uses you might otherwise have to access your savings. If you withdraw the funds before the expiry date, you will face Early withdrawal penalty.

It can be tempting to tap into readily available funds for expenses you can do without. By keeping that money in a CD, you won’t be able to use it for unnecessary purchases, thus letting your money grow at a higher rate, undisturbed by the daily temptation to use it.

Learn more about your CD options here now.

Bottom line

While it may be tempting to wait for the Fed’s next potential rate hike to open a CD, now is a great time to do so. Opening a short-term CD, in particular, gives savers the ability to immediately take advantage of today’s high rates and start earning interest and the flexibility to transfer that money to a higher-rate CD when it matures in the next few months.