CD Rates Are Already Dropping. This Could Be Your Last Chance to Lock In 4.00%+ APY

Since the Federal Reserve lowered its policy rate in September, many banks have quietly trimmed their CD APYs or discontinued splashy promo CDs. And with more rate cuts expected this year, APYs might continue to slide.

Some of the most exciting CD offers have already vanished -- but not all of them. Should you open a CD while the getting is good?

Why opening a CD now could be smart

Protection from interest rate cuts

A CD opened today keeps its APY even if new CD rates drop next month. You can lock in today's best yields for 3 months to 5 years, no matter what the Fed does next.

Safety and certainty

CDs are simple and low-risk. They have a fixed term, a fixed APY, no risk of market losses, and FDIC/NCUA insurance up to $250,000 per person, per bank.

Good reasons to open CDs

Saving for a near-term goal

If you're setting cash aside for a big purchase within the next few years, then a CD might be the perfect place for it. Choose a term that ends around the time you'll need the money, and until then you'll enjoy a solid, fixed return.

Protecting your wealth (not growing it fast)

CDs are also a great choice for the more conservative part of your portfolio. On their own, they won't grow fast enough to make the average person's financial dreams come true. But they will keep some money safe from market downturns.

In particular, people who are in or near retirement might want to put some of their nest egg in CDs.

What to know before you buy

Short-term CDs pay more now

When rate cuts are likely, shorter terms often pay the most, because banks don’t want to overcommit. Right now, CDs with terms between 3 months and 12 months tend to have the highest APYs.

Long-term CDs could be a smart bet, too

Some Fed leaders expect interest rates to decline through 2027 and beyond. In that case, locking in today's rates could pay off bigtime.

You really don't want to cash out before the CD matures

Most CDs -- especially the ones with the highest APYs -- charge an early-withdrawal penalty if you cash out before the maturity date. This can cost you 3 to 18 months' worth of interest -- or even more in some cases.

If there's a decent chance you'll need your money back soon, then you're better off putting it in a high-yield savings account. Your APY might fluctuate, but you'll always be earning interest -- never giving it up just because you need to withdraw some cash.

If you're ready to buy, don't wait

CDs aren't right for everyone -- but if they're right for you, then I would act fast. Many banks have already lowered their rates, and more are likely to follow soon. You might find yourself enjoying a high APY while other savers' rates drop…and drop some more.