A certificate of deposit (CD) account was an almost mandatory requirement for savers in recent years. Thanks to a spike in inflation and a resulting rise in interest rates, savers were able to earn exponentially more with a CD account than they could have in 2020 or 2021. It was common for rates on CDs to fall in the 4% or 5% range, with some savers even able to earn rates of 6% or 7%. But as inflation declined in 2024, interest rate cuts were issued again, with the Federal Reserve slashing the federal funds rate three times in the final months of the year.

These actions have caused the returns on CD accounts to decline. But they haven’t rendered these accounts useless, either, as savers can still earn a substantial return on their money. They’ll just need to take a more nuanced and strategic approach than they may have in recent years. To that end, below we’ll break down some important CD account dos and don’ts that savers should know for 2025.

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CD account dos and don’ts savers should know for 2025

Ready to get started with a CD this January? Here’s what you should (and shouldn’t) do now:

Do: Opt for a long-term CD

Long-term CDs have lower interest rates than short-term CDs currently. But the difference in rates is negligible and the long-term interest earning potential is much higher with long-term CDs. Use a $5,000 deposit as an example. This amount deposited into a 1-year CD with today’s 4.50% rate will grow by just $225 upon maturity. But that amount deposited into a 3-year CD with a rate of 4.15% will result in $648.69 earned. So if the end goal is to earn as much interest as possible, forgo the higher short-term CD rate and opt for a long-term CD instead.

Get started with a long-term CD here.

Don’t: Wait for rates to change again

The pace of interest rate cuts in 2025 is forecast to be much slower than it was in the final months of 2024. But that doesn’t mean savers should become complacent, either. While banks use the Fed’s actions as a guide for what they offer savers, they don’t need to follow those actions directly. And if they start to think that another interest rate cut is imminent, they may lower what they offer to savers in anticipation of that cut. Waiting to open a CD, then, isn’t beneficial. Instead, lock in a high-rate, long-term CD now.

Do: Deposit as much as you can for as long as you can

It’s critical that you accurately calculate your CD deposit before opening an account. Since you’ll need to pay an early withdrawal penalty that could eliminate most (or all) of your interest earned if you take out the money prematurely, you’ll want to make sure that you can keep your funds untouched in the account. That said, today’s CD rates are unlikely to be this high in a few years (they barely broke 1% in 2020). So do the math and deposit as much as you can for as long as you can to take advantage of this timely opportunity.

Don’t: Leave your funds in other account types

While you’ll need money in your checking accounts for obvious reasons, you should avoid leaving too much money in other, non-CD accounts right now. High-yield savings accounts, for example, have rates competitive with CDs but rates on those accounts are variable and likely to decline further as the rate climate continues to cool. And the interest rate on a traditional savings account is just 0.42% now. Leaving too much money in either of these accounts, then, should be avoided, at least while CDs are still offering higher, more reliable returns. 

The bottom line

Every saver’s financial circumstances are different but most would benefit by opening a long-term CD now. Acting strategically and quickly, however, is key. By taking the above actions and avoiding the problematic ones savers can set themselves up for CD success both in 2025 and, potentially, multiple years that follow.

Have more CD questions? Learn more about your options here today.