​​3 Reasons You'll Regret Not Opening a CD in 2024

For savers who want a guaranteed interest rate on a relatively safe bank account, there's perhaps no better place to store your money than in a certificate of deposit (CD). Over the last two years, rates on short-term CDs have skyrocketed from a meager average of 0.73% in March 2022 to so many 5.00% CD offerings in 2024, it's hard to even choose which one to open.

Of course, even though CD rates have almost hit two decade highs, you might still feel hesitant to dump your money in one. After all, CDs aren't like savings accounts. You can't withdraw money freely, at least not without paying a penalty that could cost you whatever interest you've earned. Plus, since CD rates have gone up, who's to say they won't climb higher? Who knows -- maybe waiting a bit longer could mean scoring a better rate.

In truth, it's unlikely CD rates will climb much higher than they are now. In fact, if you're interested in opening one, there's perhaps no better time to do so than now. Here's why.

1. CD rates are dropping

CD rates might be high right now, but there's no telling how long they'll stay this competitive. In fact, there are some signs that CDs rates have already started to fall.

For example, at the end of February, I wrote about three CDs from TotalDirectBank: a 3-month CD with a 5.51% APY, a 6-month CD with 5.50%, and a 12-month CD with a 5.50%. It's now April 15, and those same CD terms are now 5.42%, 5.45%, and 5.35% respectively. Likewise, I also wrote about a 6.50% 8-month CD from Financial Partners Credit Union at the end of January. While Financial Partners still offers the 8-month CD special for new members, it's APY is now 6.00%.

These are small changes. But they could take more drastic leaps if the Federal Reserve decides to cut the federal funds rate later this year, which largely sets the pace for CD rates. While hotter-than-expected March inflation has made it less likely that it will cut rates at its next meeting, many experts are still forecasting some rate cuts in 2024. Even if the central bank doesn't cut the federal funds rate significantly this year, any sign that it's ready to drop it back into a lower range could influence banks to cut their CD rates by a much larger percentage.

All this to say, it's still unlikely that CD rates will go up. If you're interested in a CD, then, you might regret later not snagging a great rate while you still have the chance.

2. Variety of CD terms to choose from

The problem with CDs is that you'll restrict access to your money. Unless you have a no-penalty CD, you'll pay an early withdrawal penalty, usually equal to several months' worth of interest, to gain access to your savings prior to the end of the CD's term. This makes building a CD ladder an appealing choice for long-term savers. With a CD ladder, you can combine short- and long-term CDs to give you both flexibility and an above-average rate of return.

In the past, you typically had to add a very long CD term -- like five to 10 years -- to your ladder to get an even remotely decent APY. These days, however, you can add any number of CD terms, from one month to 10 years, and snag an APY that will grow your money at a generous pace. That makes now a great time to build a long CD ladder, while rates are still elevated.

Just watch that you can meet the minimums. Some banks have excellent rates on short- and long-term CDs but high minimums that could leave your ladder shorter than you want. One way around this is to get CDs through the financial platform Raisin. Raisin isn't a bank, but it can connect you with top CD providers. Your CD accounts will have FDIC insurance, and you only need to deposit $1 to get started.

3. No-penalty options also available

No-penalty CDs let you liquidate your CD early without paying a penalty. They can be a good option if you're afraid of losing money in a regular CD, but also don't want to miss out on earning interest at today's great CD rates.

Traditionally, no-penalty CDs weren't worth it because their APYs were so darn low. But, with today's rates, you can find many no-penalty CDs that are on par with standard CD contracts. Again, Raisin has some great no-penalty options with a variety of terms that could help you build a no-penalty CD ladder.

All in all, CD rates may not stay this high for much longer. In fact, the day may not be far off when CD rates return to pre-2022 levels, which were earning less than a penny on the dollar even at some of the highest rates. If you're interested in CDs, take a look at the best rates available now and see how much interest you could earn in 2024.