What to know about CD accounts this January
When it comes to saving money – and where you decide to save it – the timing is critical to get right. For example, many savers benefited by keeping a portion of their funds in a high-yield savings account in recent years. Interest rates on these accounts were elevated and, because of the way the account is structured, savers maintained access to their funds in a way they wouldn't have if they locked the money into a certificate of deposit (CD) account.
CDs, meanwhile, have also had high rates for much of the last two years, even if, like savings accounts, those rates have declined slightly in the past few months. But because rates on these accounts are fixed and because savers would need to pay an early withdrawal penalty to regain their access, the timing surrounding an account opening is critical to get right. If savers aren't careful, they could get locked in at a lower rate for a long CD term, reducing the benefits of these unique account types.
To that end, in the developing economic climate of 2025, there are some important things prospective CD account holders should be aware of this January. Below, we'll detail three of them.
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What to know about CD accounts this January
Here are three timely items both prospective account holders and those who currently have CDs should keep in mind this month:
Rates will stay high for the month
The next Federal Reserve meeting won't be held until January 28, giving potential CD account holders peace of mind knowing that any rate actions that can influence what they can earn with an account won't occur until then. But, most likely, rate cuts won't be issued in that Fed meeting anyway. With the CME Group's FedWatch tool listing a rate cut probability at just a 2.7% chance now, it makes sense for savers to start exploring and potentially open a high-rate CD now, while they're still readily available.
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Rates could start dropping again in the spring
While rate cuts in 2025 aren't expected to maintain the same pace as the final months of 2024, additional cuts are expected for this year. That could happen in March or, more likely, after the Fed's May meeting. Waiting for this to occur, then, would be a mistake. And it would also lead to lost interest-earning opportunities in the first quarter of 2025. Additionally, lenders don't need to wait for a formal Fed rate action to start adjusting what they offer savers. If additional rate cuts appear inevitable, banks may start reducing their CD rates in advance, potentially limiting your window of opportunity further than it seems.
Long-term accounts are more valuable
Because interest rates will remain high for the rest of this month and perhaps a few months after – and because rates seem poised to drop later this year – it makes sense to act promptly and smartly. And that means opening a long-term CD over a short-term one, even if the latter technically has a higher interest rate. Using a $10,000 deposit as an example, you'll earn around $230 with a 6-month CD at a 4.61% rate and around $1,300 for a 3-year CD at a lower rate of 4.25%. So, if you can afford to keep your money untouched for the long term (an important consideration to avoid having to pay an early withdrawal fee), a long-term CD account is generally more valuable right now.
The bottom line
Rates on CDs are still high and will remain so for most of January, based on most economic projections. What happens after that point, however, is less clear, making a long-term CD more beneficial for most savers than a short-term counterpart. Every saver's individual circumstances are different, however, so it's important to carefully consider all of your CD account options before acting. Just don't wait too long, either. Today's CD rates are already a bit lower from where they were in 2024 so it won't be advantageous to wait for them to fall even further.
