Are you considering your next financial move for 2024? If you are, you should give some thought to opening a CD. A CD, or certificate of deposit, is a type of bank account where you deposit an amount of money for a specific length of time and agree not to withdraw the money during that period (a.k.a. the CD term). In return, you earn a fixed interest rate on your money. CD rates rose steadily in 2023 to some of the highest rates seen in years. A CD can be a great way to help you achieve your savings goals.
Here are 3 reasons why now might be the right time to open a CD:
- Even Short-Term CD Rates are Competitive Right Now
Historically, you generally had to commit to a relatively long CD term in order to take advantage of the highest CD rates. For example, a 3 Year CD would traditionally provide a higher rate than a 1 Year CD. In today’s market however, that is no longer the case. In fact, the opposite is currently true. Right now, many financial institutions are offering their most competitive rates on their shortest CD terms. This can be good news for you if you’re looking to make some quick interest gains without freezing up your funds for an extended period of time.
- You Can Lock in a Great Return Before Rates Drop
While CD rates climbed throughout 2023, many financial experts predict that they will fall in 2024. By opening a CD now, you can lock in today’s rates for the duration of your CD term. If the CD’s rate falls after you open it, you’ll still be earning the rate you locked in when you opened your account.
- CDs are a Safe Investment Option in an Unpredictable Market
Many experts predict that the economy will slow in 2024, which could result in a recession. During a recession, stock prices typically go down, which could mean lower returns on traditional investment options. Unlike investment vehicles like stocks, bonds, and mutual funds, where returns can fluctuate and are not guaranteed, a CD is a safe investment option with a fixed return. Furthermore, while traditional investments like stocks, bonds, and mutual funds are not insured, CDs are typically covered by FDIC insurance, as long as they are opened at an FDIC member bank. FDIC insurance typically protects a customer’s deposits at an FDIC-insured institution up to $250,000, but some banks like Bank5 Connect offer additional protection as well. As a DIF-member bank, all deposits at Bank5 Connect, including CDs, are protected 100%, even if they exceed the FDIC’s dollar limits.
Before making any changes to an existing investment strategy it’s always a good idea to discuss your plans with a tax professional or investment advisor, but in today’s market a CD could be a sound investment choice for many.
Before opening a CD, just be sure to evaluate which term length works best for you, as you usually won’t be able to withdraw your funds before the term is over without having to pay an early withdrawal penalty. You should also give some thought to the amount of money you’d like to deposit, as traditional CDs do not allow you to add additional funds after account opening. One exception to that rule is what’s called an add-on CD. With an add-on CD you can continue making deposits throughout the CD term, which can help you to achieve your savings goals faster.
If you’re interested in opening a traditional or add-on CD, visit our CDs page for current rate information and don’t hesitate to contact us or apply online today!