Numerous banks and credit unions are still offering CDs with rates exceeding 5% APY, significantly higher than the national average. However, attention is now focused on the Federal Reserve and the possibility of rate cuts.
Initially, experts predicted as many as six interest rate cuts from the central bank this year, but forecasts have since been revised. Many now anticipate only two or three cuts, or possibly none at all. Despite expectations of lower rates later this year, financial planner Peter B. Salkins suggests considering locking in these higher rates, depending on individual investment goals and time horizons.
Regarding CDs in 2024, while the Fed has maintained the benchmark funds rate since last July, signs point to potential cuts, possibly beginning in September. Until then, savings rates are expected to remain high, closely linked to decisions made by the central bank.
Salkins highlights the attractiveness of CDs, money markets, and short-term Treasurys in the current high-interest-rate environment. However, he advises investors to be mindful of FDIC insurance limits, account minimums, and potential penalties associated with CDs. Additionally, attention should be paid to the CD renewal process to avoid unintended consequences.
Despite the allure of high CD returns, investors should remember that rates may not remain elevated indefinitely, especially with the possibility of future rate cuts. Thus, investment decisions should align with individual goals and time horizons.
Here are some key considerations when choosing a CD:
1. Goals and Risk Tolerance: Investors should align their investment choices with their goals and risk tolerance.
2. FDIC Insurance Limits: Ensure that deposits are within FDIC insurance limits to protect against loss.
3. Account Minimums: Be aware of any account minimums required to open a CD.
4. Potential Penalties: Understand the penalties for early withdrawal from a CD.
5. CD Renewal Process: Pay attention to the CD renewal process to avoid unintended consequences.
While some of the best CD rates may have restrictions or eligibility requirements, there are still plenty of high-earning options available. However, investors should act with caution and consider their individual circumstances before making investment decisions.
Below are some of the top CD rates for May 2024:
– California Coast Credit Union: 9.50% APY for a 5-month celebration certificate with certain membership requirements.
– Financial Partners Credit Union: 6.00% APY for an eight-month promotional certificate with specific residency requirements.
-Merchants Bank of Indiana: 5.92% APY for a flex CD with a variable rate based on the prime rate index.
– Newtek Bank: 5.55% APY for a 6-month CD with a minimum deposit requirement.
– Flagstar Bank: 5.50% APY for a 7-month CD with a low minimum deposit requirement and online access.
Additionally, there are accessible CD options with rates above 5% APY for those without specific membership requirements or regional restrictions. These options provide opportunities for investors to earn competitive returns on their investments.
