3 Reasons Not to Open a CD in May 2025 -- Even With Rates Over 4%

Certificates of deposit (CDs) might seem like a great use of your money, with rates over 4.00% right now. But the truth is, numerous options provide similar or even better returns, which is why you might want to consider the following three reasons to avoid opening a CD in May 2025.

1. High-yield savings accounts offer similar rates and more flexibility

Some of the best CDs are offering up to 4.65% APY now, a great rate of return. But high-yield savings accounts (HYSAs) are offering up to 5.00% APY -- and you don't have to lock up your money to get it.

Unlike CDs, high-yield savings accounts allow you to make withdrawals whenever you need to, operating just like other savings accounts. Most accounts also have no monthly fees and offer FDIC insurance up to $250,000.

2. The stock market is a better place for long-term investment

When it comes to short-term savings, the flexibility of HYSAs make them a better pick than CDs. And when it comes to long-term investment, chances are you'll get a better return in the stock market.

Over the last 30 years, the average stock market return was 9% (as measured by the S&P 500 Index), almost double the rate of the highest HYSAs. Past performance doesn't guarantee future success, but the stock market is still widely considered one of the best places for long-term investment.

Just getting started with the stock market? Consider opening an IRA and buying an S&P 500 index fund. You'll be able to invest in 500 of the largest U.S. companies without needing to pick out individual stocks on your own.

3. If you have high-interest debt, your money's better spent elsewhere

If you're carrying high-interest debt -- like debt from a personal loan or a credit card -- locking up your money in a CD won't do you any good. That's because earning 4% or more on a CD doesn't come close to the interest or more you'd have to pay on your debts.

The average credit card APR is nearly 22%, according to the Federal Reserve. That means if you still owe money on your credit card at the end of your billing cycle, then investing in CDs is a waste of money. No CD or HYSA will earn you more than the money you're paying in interest.

Only after you've paid off your high-interest debts -- and built up an emergency fund -- should you start exploring options like CDs, HYSAs, and the stock market.