3 Reasons You May Regret Not Buying a CD Now

If you have some spare cash, you should think seriously about buying a certificate of deposit (CD). CDs may not be on your radar, since only around 6.5% of Americans own them. But if you don't invest in them now, you may end up regretting it later. Here's why.

1. CDs are offering competitive yields -- and they won't last forever

Today, high-yield CDs are offering very competitive rates. On The Ascent's list of best CD rates, many are paying above 5.00% -- with some as high as 5.15%. The last time yields were this high on CDs was after the 2008 recession.

This isn't going to last forever. In the past few months, there's already been a 20% drop in the number of CDs offering a rate of at least 5%. And once these high rates are gone, it could be a long time before they come back up to these levels -- if they do at all.

After all, it took the collapse of the housing market and a global recession to bring rates up to this level the last time; and it took a global pandemic, billions in stimulus aid, and unprecedented inflation this time.

Our Picks for the Best High-Yield Savings Accounts of 2024

Capital One 360 Performance Savings APY 4.25% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of April 11, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings Member FDIC.	APY 4.25% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of April 11, 2024. Rates are subject to change at any time before or after account opening.	Min. to earn $0
American Express® High Yield Savings APY 4.25% Rate info 4.25% annual percentage yield as of July 1, 2024 Min. to earn $1 Open Account for American Express® High Yield Savings Member FDIC.	APY 4.25% Rate info 4.25% annual percentage yield as of July 1, 2024	Min. to earn $1
Citizens Access® Savings APY 4.50% Min. to earn $0.01 Open Account for Citizens Access® Savings Member FDIC.	APY 4.50%	Min. to earn $0.01

If you pass up this chance to get great returns with such a low-risk investment, you may find yourself wishing you'd made a different choice.

2. You can get great rates with a short time commitment

There's an unusual opportunity with CDs right now. Short-term CDs are actually offering higher yields than long-term CDs. Historically, the reverse has almost always been true. Banks must offer a term premium, or higher yields, to convince people to lock money up for longer periods of time.

Since the expectation is that interest rates will fall soon, the yield curve has inverted. You can buy a 6-month or 1-year CD providing better rates than a 5-year CD. This means you can get these great yields without agreeing to lock up your money for years to come.

If you can make a short-term commitment, you limit your interest rate risk because you won't be stuck in the CD for long if rates defy expectations and continue rising. You also won't have to wait a long time to get your money out if you need it for something else. It's a great opportunity to put money away for a few months and earn a lot on it.

If you don't take advantage, you could find yourself wondering why you passed up this opportunity.

3. Your high-yield savings account could soon pay a lower rate

The last big reason why you may regret not buying a CD now is because your high-yield savings account could drop its rate soon.

High-yield savings accounts have variable rates. With CDs, your rate is guaranteed until the CD matures at the end of the term. That's not the case with a savings account. Your rate could drop quickly if the Federal Reserve cuts rates. By then, it will be too late to get the competitive CD rates on offer now. You'll be stuck with your money sitting in an account paying nowhere near the generous return high-yield savings accounts are currently offering.

You don't want to regret not acting, so look for a CD to buy today if you have money you won't need to access for three or more months. Many CDs have no minimum balance requirements, so you don't even need a lot of money to seize this opportunity and avoid future regrets.