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Buying Short Term CDs Doesn't Seem So Wise at the Moment

Buying Short Term CDs Doesn't Seem So Wise at the Moment

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Author: Jason Rodgers on June 11, 2009 - modified on August 2, 2017

Short term CD rates are falling as the Federal Reserve holds the overnight Fed Funds rate close to zero.

Short-term CDs just aren’t attractive at the moment. The 10-year Treasury is now pushing 4% - changing the entire yield curve. While the Fed may try desperately to hold rates low, but the reality is that inflation is a real threat at the moment. If we do see inflation, savings and money market rates will quickly go up. Since savings rates are very close to, and in many cases – above, short term CD rates, they are your better bet. There is a real risk of higher rates, and if they were to fall, they don’t have far to fall anyway.

See the best CD rates here.

Jason Rodgers: Jason Rodgers was an experienced research analyst for a major bank prior to retiring to run his own investment consultancy in beautiful Lihue, Hawaii. Jason contributed articles to BestCashCow from 2008 to 2014.

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Today's Highest Online CD Rates

Bank	Product Term	Interest Rate (APY)
Northern Bank Direct	1-Year	5.60% APY with $500 minimum
Finworth, a division of InsBank	1-Year	5.38% APY with $50,000 minimum
TotalDirect, a division of City National Bank of Florida	1-Year	5.35% APY with $25,000 minimum
Dollar Savings Direct, a division of Emigrant Bank	3-Year	5.00% APY with $1,000 minimum
First Internet Bank of Indiana	3-Year	4.66% APY with $1,000 minimum
IncredibleBank	3-Year	4.58% APY with $1,000 minimum
First Internet Bank of Indiana	5-Year	4.55% APY with $1,000 minimum
BMO Alto, a division of Bank of Montreal Harris	5-Year	4.50% APY with no minimum
Department of Commerce	5-Year	4.34% APY with $500 minimum

See More Online CD Rates →

Comments

Sam Cass

June 11, 2009

What do you mean by short term? If I put something into a 1-year CD then I can always reinvest the money in 12 months once rates have risen.

I would think the danger would be in longer-term CDs, where I'm locked in. As the analysis on this site shows, those rates have stabilize more than the shorter-term ones but that doesn't mean they aren't going to spike.

A 12-month at 2.49% sure seems better than a 5-year CD at 3.80%.

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