Is There Still Time to Get a Good Rate on a CD?

Written by Erin Gobler

Financial Expert

Edited by Kristin Marino

Managing Editor

Certificates of deposit (CDs) are a popular savings tool for consumers who want to earn more interest than they might in a traditional savings account. Fluctuations in interest rates can affect the rate you can earn on your CDs, and up until the Fed lowered rates in September, they were at their highest point in nearly 20 years.

Let’s discuss what’s happening with interest rates—historically and right now—factors influencing CD rates and how to leverage the latest interest rates.

What’s Happening With Interest Rates

People have been speculating for months about whether the Fed would drop interest rates in 2024, especially given the inflation rate finally coming down. At the Federal Reserve’s most recent Federal Open Market Committee (FOMC) meeting, interest rates were finally lowered, but it wasn’t a drastic cut.

Lower interest rates affect consumers in several key ways. On the plus side, lower interest rates make it cheaper for people to borrow money. If you’ve been putting off buying a house or a car because of high interest rates, a rate cut would be good news. Lower interest rates can also benefit the economy overall, as they encourage more consumer spending.

On the other hand, lower interest rates have some downsides. Notably, you would expect to see the return rates on things like bonds, high-yield savings accounts, and CDs drop. So, while you can borrow money more cheaply, you also won’t make as much on your savings.

Which Banks Have the Best CD Rates?

Hundreds of banks offer competitive rates on CDs. We’ve compiled a list of some of the best CD accounts to help you find the ones that best fit your financial goals.

CD Rate Trends: 2015-2024

CD rates have been relatively low for the past decade. In early 2023, rates topped 5% and have remained there. But when you zoom out, you can see that CD rates have sat below 2% — and often below 1% — for most of the past decade.

The table below shows how CD interest rates have trended at a few critical points in the economy throughout the past 10 years, according to data from the Federal Reserve Bank of St. Louis.

Rates remained relatively low and stable for the first few years of the past decade, followed by an increase starting in 2017. This corresponds with several rate increases by the Fed.

Fast forward to March 2020, and with the onset of the COVID-19 pandemic, the Fed cut interest rates to 0%, bringing CD rates down with it. However, the Fed began raising the interest rate again in 2022 to respond to rising inflation, and rates have remained high.

CD Rate Forecast: 2024 and Beyond

Predicting future CD rates is a bit more complex than analyzing past trends. However, it seems likely that CD rates will fall over the next year. If the Fed lowers interest rates again later this year or early next year, rates on deposit accounts, including CDs, will also likely fall.

Don’t worry—your CD rates probably won’t drop to their 2020 levels, but they are also unlikely to stay at the high rates of the past two years.

Factors That Influence CD Rates

Knowing the different factors that influence CD rates can help you better understand why they trend in certain directions and why they’re likely to go down later this year.

CD interest rates are heavily impacted by the federal funds rate, which is the benchmark rate the Fed sets and the rate at which banks lend each other money overnight. When the Fed increases the federal funds rate, CD rates often rise, and vice versa—when the Fed lowers the federal funds rate, CD rates are likely to fall.

The Fed raises or lowers the federal funds rate because of the economy. The Fed has a target for inflation and unemployment it wants to maintain. It generally wants to see job growth and inflation around 2%. If the economy is growing too sluggishly, evidenced by low inflation and job growth, the Fed may lower rates. When the economy grows too quickly, the Fed increases rates, as it did in 2022 in response to rising inflation.

Of course, CD rates also vary by bank and CD term. Because banks are anticipating interest rates going down, they’re offering the best CD rates on those with terms of 12 months or less. Meanwhile, CD terms of several years have lower rates. Additionally, banks may raise or lower their rates in response to other banks’ actions. If one bank raises its CD rates to attract customers, other banks may follow suit.

How to Leverage CDs with Falling Interest Rates

Of course, falling CD rates might be a disadvantage for consumers who are used to keeping their cash safe while earning some interest. The good news is you have a bit of advance notice that rates will likely drop. As a result, you can take advantage of this time to lock in today’s high CD rates. Here are a few things you can do:

Lock in Your CD Rates Early

It seems inevitable that CD rates are going to fall. You can take advantage of today’s high rates by locking one in as soon as possible. Once you’ve locked in a high CD rate, you’ll earn that amount for your entire CD term.

Shopping Around

Shopping around is critical to getting the best CD rates. Online high-yield CDs tend to offer the best rates, while traditional brick-and-mortar banks may offer much less. Use online tools to compare several banks to ensure you get the best rate on your money.

Compare Different CD Terms

CD terms can range from just a few months to several years. When shopping around, look at the rates offered on different terms. You can use a shorter-term CD for any money you’ll need soon, but consider a longer-term CD for any money you won’t need and earn a higher rate for even longer. You can often get the best rates on CDs with terms of 12 months or less.

Create a CD Ladder

A CD ladder can help you take advantage of higher CD rates without locking up all of your savings at once. With a CD ladder, you spread your money across CDs with different maturity dates. You earn a higher CD rate while ensuring some of your money will be accessible sooner.

Consider Alternative Savings Tools

CDs are just one savings tool available. You might feel more comfortable diversifying your savings across CDs and other accounts, such as high-yield savings accounts, money market accounts, or short-term Treasury securities.

So, just how much of an impact can these strategies have? Right now, earning up to around 5% in a one-year CD is possible. Let’s compare how much you can earn by locking in that rate today versus waiting until rates drop. The table below shows how much you can earn by putting $25,000 in a 12-month CD at various interest rates.

Get a CD Before Rates Fall Again

With interest rates expected to drop, now is the time to lock in the best CD rates available. Taking proactive steps can help you make the most of your savings before rates start to decline. Here’s a quick summary of the strategies to consider:

By acting now, you can protect your savings and ensure you’re maximizing returns before CD rates inevitably decline.

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