Forget CDs, Even With Rates Over 4%. Here's Where I'd Put My Money Now
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With interest rates on the decline, certificates of deposit (CDs) might seem like a smart place to stash your money. But the truth is that there are better ways to earn more on your cash -- and in some cases, you don't have to lock up your money to do it.
If flexibility and long-term growth matter to you -- or if you're fighting off high-interest debt -- there are much better uses for your cash. Here are three places to look before opening a CD.
1. Paying off debt: A top priority
First, if you're carrying high-interest debt -- say, on a credit card -- even the best CDs won't be able to help.
Right now, the average credit card APR is about 21%, according to the Federal Reserve. You could think of paying off credit card debt as a guaranteed 21% return, which CDs -- or most other investments, for that matter -- can't match.
That means saving with a CD while carrying high-interest debt is always a losing bet.
Make sure to pay off any and all debt before you think about investing. Then, once your debt's gone and you've built up an emergency fund -- about three to six months' worth of expenses -- you can start thinking about CDs.
Looking for an easier way to pay off debt? A balance transfer can help you do it. Check out our picks for the best balance transfer cards available now.
2. High-yield savings accounts: Similar returns with more flexibility
Looking for a place to keep your emergency fund? Consider a high-yield savings account (HYSA).
Right now, the best HYSAs are paying APYs that rival top CDs -- and you won't have to lock up your money to earn them. Just like traditional savings accounts, HYSAs let you access your money anytime.
They're also FDIC-insured up to $250,000, so your money's just as safe. Plus, the best HYSAs don't charge monthly fees or have account minimums. In short, they're a great way to earn more and pay less while keeping total access to your cash.
Want to earn more on your savings? Take a look at our full list of the best high-yield savings accounts.
3. Stocks: Stronger long-term growth
Finally, for any money you want to invest for the long haul, a CD isn't a great option either.
That's because over the last 30 years, the average return of the U.S. stock market was 9% per year, as measured by the S&P 500 Index. That's more than double the rate of the best CDs today.
The guaranteed return of CDs might sound nice -- but on the other hand, that return is limited. Over the long run, a simple S&P 500 index fund will almost definitely win out.
Want to start your investing journey today? See our list of the best online brokerages now.
Our Research Expert
Ryan Wilcox is a full-time Personal Finance Writer at Motley Fool Money, covering credit cards, bank accounts, investing, auto insurance, and other personal finance topics. Ryan has been writing about credit cards and savings since 2022. Before joining Motley Fool Money, he was a full-time writer at The Points Guy, where he focused on maximizing credit card rewards and travel strategies. He holds a bachelor’s degree in English and American History from the University of North Carolina at Chapel Hill, where he also spent four years reporting for The Daily Tar Heel. With a background in both journalism and consumer finance, he brings a clear and thoughtful voice to money topics. Outside of work, Ryan is likely reading, writing, or updating his Letterboxd account.