By Andrew Shilling, MarketWatch, featuring Taylor Sutherland, CFP®, CIMA®, AIF®, Director of Portfolio Strategy/Senior Wealth Advisor
In the weeks that followed the Federal Reserve’s September decision to cut interest rates for the first time in four years, many banks and credit unions started to scale back their promised rates of return. That said, some CDs are still holding on to those high APYs — you can see some of the highest CD offers from Bankrate here.
“The top-yielding CDs still offer returns that should handily outpace inflation over a range of maturities,” says Bankrate chief financial analyst Greg McBride — adding that “being able to earn more than inflation in a federally-insured, fixed rate bank deposit is pretty rare.” But for how long?
Below, we’ll share details on what might happen with CD rates, how to pick a CD and the best-paying CDs, as well as the most attainable ones, you can get right now.
What’s ahead for certificate of deposit rates?
The central bank has two more meetings where it could make further changes to rates this year — Nov. 6-7 and Dec. 17-18. And after its latest 0.5% rate cut, its first reduction since the outbreak of the COVID-19 pandemic in 2020, experts in a recent Reuters poll suggest yet another 0.25% cut is likely.
“CD yields will continue to fall and at an accelerating pace now that the Fed has actually started cutting interest rates. With more rate cuts coming, this will be a consistent and ongoing slide so there is no benefit to waiting if you can lock in now,” McBride says.
Regardless of what happens, McBride says, savings rates among the top-earning CDs are continuing to outpace the rate of inflation, which dropped to 2.5% at the end of August, the latest government data show.
How to choose the right CD
Whether or not savings rates turn more sharply in the months ahead, just about all of the highest yielding CDs in this month are promising a fixed rate of 5% annual percentage yield or more. And while locking in right now could indeed ensure a handsome rate of return, doing so doesn’t come without risk, explains Taylor Sutherland, director of portfolio strategy and senior wealth advisor at Halbert Hargrove.
“Fortunately, when you lock in a CD, you lock in the rate promised over the duration of the holding period,” Sutherland says. “If you lock in a 5% yield on a 12-month CD, and the Fed cuts rates substantially over the next 12 months, you still earn your 5%. A downside is that in 12 months, you’ll have to put your money to work in the new, presumably lower interest rate market.”
Although securing funds right now would indeed be more beneficial in the event of further rate cuts, locking away any amount of money for a term of several months to a year or more might not be feasible for all savers, McBride says. “Be aware of the early withdrawal penalty or any penalty-free access that is available, and know exactly what your APY will be for the amount you are depositing,” he says. “There may be a tiered structure in place, with the highest yields being offered for larger deposits. You want to get the best return for the money you’re investing.”
10 of the best CDs rates of October 2024
Here are the 10 best rates for CDs in October 2024. All of these accounts are protected by either the Federal Deposit Insurance Corp. or National Credit Union Administration, unless otherwise noted. It’s critical to read all of the fine print before opening an account to learn about any potential restrictions or hurdles.
Since nearly all of the leading rates are found at credit unions with membership requirements that render most readers ineligible, we’ve also included a ranking of the five most accessible CD rates this month below.
Note: The article is provided for informational purposes only and should not be construed as a recommendation or endorsement of any of the products mentioned within the article.
