CD Rates Are Already Dropping. Should You Lock in a High APY While You Still Can?

After a long stretch of strong certificate of deposit (CD) yields, a shift may be in the air.

Banks including Marcus, Brilliant Bank, T Bank, Bread Savings, and others have recently lowered their CD rates. And the Federal Reserve is expected to cut the federal funds rate later this year, which would likely mean further CD rate decreases.

Here's what we know about the future of CD rates, and why now might be the time to lock in a high APY.

Rate cuts could be on the horizon

While the Federal Reserve has yet to make a move, it has signaled that it will likely reduce rates later this year. Most analysts aren't expecting the Fed to announce rate cuts at its meeting next week, but many see the first cut happening as early as June.

CD rates tend to follow the federal funds rate pretty closely. And even if the Fed hasn't acted yet, banks may already be adjusting their rates in anticipation.

Now may be the time to lock in a high APY

If CDs make sense for your financial plan, now looks like a good time to open one. Rates are already falling at some banks, and more cuts may come this summer.

CDs are great at a time like this, because -- unlike high-yield savings accounts (HYSAs) or the stock market -- they give you a guaranteed return on your money for an agreed-upon length of time. They're also insured by the FDIC up to $250,000. And they encourage discipline in users -- if you cash out your CD before the maturity date, you could be subject to early withdrawal penalties.

With that in mind, you'll want to spend some time figuring out what term works best for you. Right now, shorter-term CDs (with terms of less than a year) are offering slightly higher rates, but longer-term CDs may be a smarter play given the looming rate cuts.

If you're not comfortable locking your money away -- for any amount of time -- then look into a high-yield savings account instead. HYSA rates are variable and can change at any time, but they're a good way to earn a competitive return on your cash without losing access. Check out this list of our favorites to open an account and get started today.

Don't wait -- secure your money in a CD today

With potential rate cuts on the horizon, we may be at the tail end of some of the best CD rates we've seen in some time.