Hurry! Open Your Next CD Before June 11 to Get a Great Rate

I don't know about you, but I love the idea of getting to earn a risk-free 5% on my money, which is something certificates of deposit (CDs) allow for today.

Sure, the stock market has historically paid more. But with stocks, I'm running the risk of losing money. With a CD, my principal deposit is fully protected as long as I stick to an FDIC-insured bank and limit my balance to less than $250,000. And, well, let's be real -- most of us don't have anywhere close to that amount of money in the bank.

Meanwhile, many CDs today are paying somewhere in the ballpark of 5% for shorter-range products -- meaning 12-month terms or less. So to me, opening a 12-month CD is an easy call if you have the cash. Why not score a risk-free 5% for the next year and then reevaluate your options once it matures?

But if you're interested in opening a CD, I would highly suggest doing so before June 11. Beyond that point, you may not get the great CD rate you can snag today.

Why it pays to open a CD before June 11

June 11 is when the Federal Reserve is next set to meet. And in the course of its two-day meeting, the Fed may decide that it's ready to start lowering interest rates.

You may be thinking, "Who cares? Let the Fed do what it wants." But one thing you should realize is that the whole reason CDs are paying what they are today is due to the Fed's 11 rate hikes between 2022 and 2023.

The Fed has signaled that it plans to start cutting rates this year as inflation cools. The latest Consumer Price Index puts annual inflation at 3.4%, which is above the 2% inflation rate the Fed likes to target. But the central bank may decide that enough progress has been made in slowing inflation to allow interest rates to come down.

Interest rate cuts can benefit borrowers in a really big way. Once rates come down, personal loans and mortgages, for example, could get less expensive to sign. But interest rate cuts on the Fed's part could also drive rates on savings accounts and CDs downward. So if you're eager to snag a fantastic rate, don't wait -- open your CD before the Fed meets next.

Make sure it's a good idea to tie up your money

CDs don't offer the same flexibility as savings accounts for accessing your money. If you cash out a CD before its maturity date, you'll generally face a penalty, the exact amount of which will depend on your bank and CD term.

So while you may be eager to lock in a great CD rate now, first make sure you don't need your money for another purpose. For instance, if you don't yet have cash for at least three months' worth of bills in your emergency fund, then it's probably best to hold off on opening a CD and instead reserve your spare cash for unplanned expenses or a potential period of unemployment. And if you're not sure whether you'll be in a position to buy a house in the next year, but you think it may be possible, then you don't want to tie up your down payment funds for 12 months.

But if you have the money to spare, definitely spend a little time comparing CD rates from different banks and open one in the next few weeks. That way, you won't have to worry about what the Fed decides to do in mid-June.