Since CD rates are sitting at near-record highs, you may be thinking of opening one this September. And if so, you may be looking at a rate of around 5%. That’s pretty hard to beat in the context of CDs.
But when you open a CD, you commit to keeping your money in place for a preset period of time. And withdrawing money from a CD before its maturity date could result in a costly penalty that wipes out a good chunk of your earnings. So it’s important to choose the right CD term.
Here are some options to consider this month.
Consider a 12-month CD for the highest rate available
As mentioned above, some CDs are still paying 5% today. If that’s the rate you’re after, and your priority is to get the best rate out there, then a 12-month CD may be your best choice.
Our Picks for the Best High-Yield Savings Accounts of 2024
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Capital One 360 Performance Savings APY 4.25%
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APY 4.25%
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Min. to earn $0 |
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CIT Platinum Savings 
APY 4.85% APY for balances of $5,000 or more
Min. to earn $100 to open account, $5,000 for max APY
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APY 4.85% APY for balances of $5,000 or more
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Min. to earn $100 to open account, $5,000 for max APY |
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American Express® High Yield Savings 
APY 4.25%
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APY 4.25%
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Min. to earn $0 |
Another benefit of a 12-month CD is that you’re not making too long a commitment. If your life takes an interesting turn during 2025, by the time you’re possibly ready to make a major financial change, your money might very well be free.
Look at a long-term CD to capitalize on strong rates for longer
While you’re likely to snag a higher interest rate on a 12-month CD than a 48- or 60-month CD, there’s a benefit to going with one of these longer terms. With a 12-month CD, you’re only guaranteed a great rate for the next year. With a 48- or 60-month CD, you might end up making more money in interest all in despite having a lower rate to start with. That’s because you’re locked into that rate for a longer period.
Of course, one thing to consider is that 48 or 60 months is a long time. And a lot can change during a period that long.
You could meet someone, get engaged, and end up needing your money to pay for a wedding. You could switch careers and decide to go back to school, which could make it so you need your money in three years to pay tuition or cover costs like rent while you stop working to pursue a degree.
So you may want to avoid locking your money up for 48 or 60 months unless that timeline fits with a specific goal you already have in mind. For example, if you’re new to working in finance and you want to apply to business school after getting five years of experience, you may decide that a 60-month CD is perfect.
Investing your money in stocks is dangerous if you only have a five-year window, because that’s not much time to ride out a market downturn. Locking in a decent CD rate for five years could be a great solution, though.
Ladder your CDs for more flexibility
If you’re not sure which CD term to choose this month, why limit yourself to a single CD? Instead, set up a CD ladder to get the best of all worlds.
Let’s say you have $10,000 to put into a CD. Maybe you like the idea of not tying up your money for too long, but you also like the idea of locking in a decent guaranteed rate for more than a year.
What you could do is open five separate $2,000 CDs with the following terms:
- 12 months
- 24 months
- 36 months
- 48 months
- 60 months
This way, a portion of your money frees up every year. And meanwhile, you get the benefit of a higher interest rate on a 12-month CD, but the peace of mind that you’re guaranteed a good rate for a longer term, too.
No matter what strategy you land on this month, take the time to think through your options. That way, you’re more likely to end up happy with your decision to open a CD this September.
