This Is the Single Best Reason to Choose a CD Instead of Savings in 2024

There are plenty of great places to put your money in 2024. Certificates of deposit (CDs) and savings accounts are offering really competitive interest rates right now. Both products have APYs of over 5.00%. Since these unprecedented yields are higher than they've been for decades, it can be hard to pick between the two options.

There is, however, one clear reason why a CD is a better choice in 2024. Here's what it is.

Pick a CD over a savings account for this simple reason

You can score great rates with the best high-yield savings accounts right now. For example, the Western Alliance Bank High-Yield Savings Premier currently offers a 5.36% APY) and requires a minimum deposit of just $500 to open. With savings accounts like that, it may seem absurd to open a CD under current conditions.

Unlike a CD, you don't have to agree to leave your money untouched for a set time when you open a high-yield savings account. CDs require you to give up liquidity and leave your funds alone for the duration of the CD term to avoid penalties.

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 June 26, 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 June 26, 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

The problem with savings accounts, though, is that your rate isn't guaranteed to last. The APYs on high-yield savings accounts are variable. Those rates can change at any time, and will inevitably go down if the Federal Reserve (America's central bank) cuts rates.

You won't have this problem with CDs, as your rate is guaranteed for the CD term. Let's say you pick one of the best high-yield CDs and score a rate above 5.00% for a year or longer. You can be certain you'll keep this record-high rate for a while and won't have to worry about your return on investment (ROI) declining dramatically.

The ability to lock in your rate is the single best reason to buy a CD right now, as there's a very real chance rates will fall soon. When they do, you'll lose today's great opportunities for good.

Protect your money against rate cuts if you can

The Federal Reserve held interest rates steady at its June meeting, so a rate cut isn't going to happen immediately. But policymakers at the central bank expect at least one rate cut in 2024.

If and when that happens, you can expect banks to act quickly to reduce the yields they're offering -- even on existing accounts. As if this wasn't reason enough, multiple rate cuts are also likely in 2025. The Federal Reserve has repeatedly signaled it wants to aggressively drop rates as soon as inflation hits a sustainable level.

In fact, the Fed had originally forecast multiple cuts this year. Since that didn't happen and they're now anticipating just a single cut in 2024, they'll likely push some of those long-awaited and long-planned rate drops through in 2025 (if inflation data is favorable).

Not only will your savings account rate start to go down at that time, but CD rates likely will as well. At that point, it will be too late to buy a CD at today's great rates.

Don't pass up an unprecedented chance to ensure you keep earning today's record-high yields for as long as possible. Buy a CD today. That way you won't have to worry about missing out on the opportunity to earn upwards of 5.00% for as long as possible on one of the safest investments out there.