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MoneyWatch: Managing Your Money

CD rates could soon peak. Here are 4 types to consider now.

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By Kendall Little

/ CBS News

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If you find a rate that works for your goals, it could be worth considering a long-term CD today. Getty Images

The Federal Reserve paused interest rate hikes in June, marking the first Fed meeting without a rate increase since March 2022.

There are some mixed signals on where interest rates go from here. On one hand, lower inflation rates combined with the recent pause could be a sign that the Fed is ready to hold rates where they are for a while. But some believe, and Fed Chair Jerome Powell recently stated, that more rate hikes could still be necessary to bring inflation down to the target range.

If we are approach peak interest rates, you may want to consider a look at your savings strategy. A rate pause means that today's high savings rates will likely stay elevated — but it could also indicate now is a good time to lock in a CD rate. 

There are a number of different types of certificates of deposit (CDs), which allow you to strategize your savings differently. You can find a CD that fits your financial plan, whether you're certain we've reached a peak or you'd rather leave open the opportunity to switch to a new, higher rate. 

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4 types of CDs to consider now

These are four CD types that can help you maximize your savings today, whether you're ready to lock in a top rate or want the option to boost your APY as rates reach their peak.

Short-term high-yield CDs

If interest rates are approaching a peak, that could mean now is actually the best time to lock in a great CD rate. High-yield CDs today are already among the most lucrative savings options, and some short-term CDs offer above 5% APY. 

If you open a traditional CD, make sure you understand the requirements beforehand. Often, there's a minimum deposit requirement you must meet upon account opening. And CDs carry penalties for early withdrawal, which may cost you a portion or even all of the interest you've earned.

Here are some great short-term CDs available now:

  • Popular Direct 1-year CD: 5.35% APY
  • Bread Savings 1-year CD: 5.25% APY
  • Bask Bank 6-month CD: 5.25% APY

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Long-term CDs

For those who are ready to maximize today's rates for as long as possible, long-term CDs could be a good option. When rates are rising, locking in a long-term CD could mean missing out on higher rates to come. But if banks are already offering their highest rates, or near the point where they will stop increasing rates, a long-term CD could make a lot of sense. 

Before you lock in, just make sure you only deposit money that you know you won't need before the CD matures. Otherwise, you could risk losing most or all of your interest earned via early withdrawal penalties. Typically, the longer your CD term, the larger your penalty.

Here are a few competitive long-term CD rates right now:

  • Popular Direct 5-year CD: 4.53% APY
  • Barclays Bank 5-year CD: 4.35% APY
  • Bread Savings 5-year CD: 4.25% APY

No-penalty CDs

Unlike traditional CDs, no-penalty CDs allow you to take out your deposit in full at any point. In some cases you may have to meet a short waiting period first. Many no-penalty CDs also require you to withdraw your full balance if you choose to do so before the CD term ends. No-penalty CDs are often shorter in length, with terms around one year.

In exchange for the added flexibility, no-penalty CDs generally carry slightly lower interest rates — though they are still on-par or higher than many top high-yield savings account rates today.

Here are a few of today's top no-penalty CD rates:

  • CIT Bank 11-month no-penalty CD: 4.90% APY
  • Marcus 13-month no-penalty CD: 4.35% APY
  • Ally Bank 11-month no-penalty CD: 4.25% APY

Bump-up CDs

Bump-up CDs are not very common, but they're another flexible CD type that can help you take advantage of changing interest rates. With a bump-up CD, you'll get the opportunity to request a rate increase if the bank raises the rate it offers on your term. 

If you opt to request the bumped-up rate, you won't have to pay any penalty, and you'll earn the new, higher rate until your CD term ends. It's important to read the complete terms of your CD upon opening, since some bump-up CDs only allow the rate bump once over the lifetime of the account, while others may allow more than one.

Here are some of the best bump-up CDs we found today:

  • Marcus 20-month Rate Bump CD: 4.35% APY
  • Synchrony Bank 24-month bump-up CD: 4.00% APY
  • Ally Bank Raise Your Rate 2-year CD: 3.75% APY

The bottom line

Locking in a CD rate now may help you maximize today's top rates at their peak. But it can pay to consider the different CD options available. Short-term CDs offer the best rates right now, or you may want to lock in a long-term CD to maximize today's high rates longer. No-penalty and bump-up CDs are other CD options with competitive interest rates that can give you more flexibility if rates continue going up in the months to come.

Start your search for the best CDs by .

Edited by Matt Richardson

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