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Certificate of Deposit (CD) Deposit accounts have been a smart and effective way for savers to offset the negative effects of inflation in recent years. inflation jumped and borrowing costs With it, savers were able to take advantage of high interest rates on CDs and similar products, such as high yield savings accounts.
However, inflation has cooled considerably (it dropped in April, May and June) and a federal funds rate reduction seems imminent for September, perhaps by half a percentage point. But CD Rates Interest rates don’t necessarily have to go down when the Fed officially cuts rates. Lenders may start to reduce their offerings in anticipation of that decision. So time is running out to take advantage of the attractive yields on current CDs. And one of the best ways to do that is to specifically look for a long-term CD. Below, we’ll explain why.
Start by seeing how much interest you could earn with a top-rated long-term CD here.
Why You Should Open a Long-Term CD in August
Is it better to opt for a short-term or long-term CD right now? Here are three main reasons why it’s better to opt for the long-term option this month:
Long-term CD rates are currently high
You can secure a rate of around 5.75% on a 3 year CD right now and slightly lower on a 2 year version. And if that’s too long a financial commitment to make now, 18-month CDs come with rates between 4% and 5%. generating big winnings on a moderate deposit of $5,000.
Depending on the amount you are willing to deposit, the rate and term (or length) of your CD, you can position yourself strategically to win hundreds and potentially thousands dollars with the right long-term CD rate now. But you’ll need to be proactive because those rates could soon drop, perhaps significantly.
Get started today with a premium long-term CD online.
Rates will be frozen
Aside from the high interest rate, perhaps the most appealing aspect of a CD is the rate-locked nature of the account. In other words, the interest rate at which you open the account will remain the same until the account matures. This is a major advantage as interest rates begin to decline.
But by locking in a high rate with a long-term CD, savers will be protected from that volatility. This locked-in nature also allows savers to determine precisely what they will earn after the term of their CD, a feature not available with similar types of savings accounts.
Alternative yields will soon fall
The locked-in rates on CDs are a distinct advantage over other solutions in today’s changing rate environment. High-yield savings accounts, for example, also have high rates now, but these rates are variable and can (and probably will) easily go down when the federal funds rate does.
It is the same for money market accounts and even high yield checking accounts. All three products have high interest rates today, and those rates are expected to decline in the weeks and months ahead. CDs won’t have this problem, however, and today’s high rates could produce significant returns in the years to come, depending on the term a saver chooses.
The essential
Savers looking to take advantage of the current high-rate environment before they are significantly adjusted downward should be aggressive and look to a long-term CD account in August. Rates on these accounts are both high and fixed, allowing for predictable returns as long as the CD is active. And since rates on popular alternatives are variable and likely to start falling in the coming weeks, a long-term CD becomes the obvious choice for those who want to earn a high yield now — and hold it as interest rates fall and the economic climate changes.
Have more questions? Learn more about your long-term CD options today.
