From Time Inc.:

Interest rates on deposit accounts such as CDs have increased due to the Federal Reserve’s rate hikes. Annual percentage yields for CDs have significantly risen, with some offering rates over 5%. While short-term CDs have higher APYs compared to long-term CDs, investors should consider their investment horizon, liquidity needs, and the risk of reinvestment. It’s important to choose a CD that aligns with your financial goals, rather than basing the decision solely on the Fed’s actions.

Stashing your money in a high-yield savings account or a certificate of deposit (CD) has become more lucrative, with rates surpassing 5%. The increase is a result of the Federal Reserve’s rate hikes. However, choosing between a short-term or long-term CD depends on your investment horizon, risk tolerance, and liquidity needs rather than solely focusing on the Fed’s interest rate decisions.

With the Federal Reserve’s rate hikes, the national rate on a 12-month CD has increased from 0.25% to 1.86%, a more than sevenfold increase. Online banks typically offer better APYs than brick-and-mortar banks, with some institutions offering APYs of above 5% for 1-year CDs and 4% for 5-year CDs. Investors need to carefully consider their investment horizon, liquidity needs, and reinvestment risk when choosing between a short-term or long-term CD. Despite the likelihood of the Fed reducing rates, investors’ decisions should be based on their financial goals, risk tolerance, and time horizon rather than focusing solely on the Fed’s actions.



Read more: Short-term CDs are offering higher rates than long-term CDs