Andrii Yalanskyi/Getty Images
As the Federal Reserve raised rates throughout 2022 and into 2023, the high-rate environment led certificates of deposit (CDs) to be one of the most obvious and beneficial choices for earning more on your savings. The rate environment has changed a bit since then, though, with the Fed recently issuing back-to-back 25-basis-point rate cuts in September and October of this year. As a result, CD rates have dropped substantially.
And, rates on these unique savings products could fall even further if the Federal Reserve’s rate-cutting trend continues at its next meeting. While there’s no guarantee it will happen, the likelihood of the Fed cutting rates at its December 10 meeting is just below 70%, according to the CME Group FedWatch Tool. That, in turn, could lead banks and credit unions to adjust what they’re offering on their CD account options.
So, if you have a CD scheduled to mature in 2026, this is a good time to think about your next move. When your CD account term ends, the rate climate could look very different compared to when you opened your account. Fortunately, there are a few smart moves you can consider now, before your CD matures in 2026.
Compare your top CD account options online now.
Have a CD account set to mature in 2026? Here’s what experts recommend doing now.
There are a few different routes to consider when your CD account matures. Experts say the following could be worth considering now:
Open a new short-term CD
Short-term CDs, which are CDs with terms shorter than 12 months, are currently offering higher rates than many long-term options. This uncommon scenario is known as an “inverted curve.” Historically, banks will offer higher rates on longer-term CDs to entice you to keep your savings with them for a longer period, but the uncertain rate environment has resulted in the opposite being true right now.
Savers with a CD maturing in 2026 may, in turn, want to consider opening a new short-term CD now, Mary Grace Roske, head of marketing and communications at CD Valet, says. And, that’s especially true if a competitive seasonal offer is available.
“Many institutions are currently offering promotional shorter-term rates that stand well above standard CD offers, in some cases by as much as 125 basis points. This creates a window of opportunity to lock in attractive yields before rates slip further,” Roske says.
Find the right CD account for your savings plan here.
Open a new long-term CD
Long-term CDs have terms ranging from 18 months to five years, and these types of CD accounts could be a good option to lock in a higher-than-average return on your money. For example, you may be able to lock in a rate of just under 4% on a 3-year CD right now. That rate would then remain unchanged for 36 months, even if market interest rates continue to cool.
“Locking in a relatively high rate in this current market allows peace of mind when future rate cuts do hit the market,” says Derek Elston, a client deposit services sales officer at Merchants Bank. “Even though we have seen multiple rate cuts in Q4, some banks are still offering attractive rates. Knowing you might be able to lock in a competitive rate for longer than 12 months is still a great vehicle for investment dollars, especially if you are retired or saving to purchase a home in the future.”
Just be sure to only deposit an amount that you’re comfortable leaving untouched during the full CD term. If you have to pull funds out before the CD’s maturity date, you’ll likely have to pay an early withdrawal penalty to do so.
Open a high-yield savings account
“High-yield savings accounts are still a great option to earn a decent interest rate on money that is extremely liquid and flexible,” notes Matthew Hofacre, founder and senior financial planner at Pay It Forward Financial Planning.
That’s because high-yield savings accounts offer competitive yields that tend to be close to or comparable to CDs, with some banks offering APYs of 4% or more currently.
Opening a high-yield savings account right now could also mean that you earn a solid rate today while you wait to see if the Fed continues to lower rates. And, there are no specific terms or early withdrawal penalties to contend with, so you’d be free to access your money at any time. Be aware, though, that rates are variable on these accounts. That means if rates fall, your rate of return could also be lower.
“The drawback to opening a high-yield savings account right now is that the interest rate fluctuates, and if interest rates decline, so too will the APY on the high-yield savings account,” Hofacre says. “However, an investor should consider a high-yield savings account if they aren’t sure when they may need to deploy that money. There’s no penalty for withdrawing money, unlike a bank CD, which often imposes a penalty for selling it before maturity.”
Why traditional savings accounts are typically not a good option
As you explore your options, there’s one account you can safely cross off your list: a traditional savings account. These standard savings accounts are generally offered by large national banks and credit unions and typically pay very little interest on the money in your account. According to the Federal Deposit Insurance Corporation (FDIC), the average interest rate on these accounts is just 0.40% currently.
At that average rate, your return would be negligible, and it wouldn’t keep pace with the current annual inflation rate. So, parking your money in accounts with stronger earning potential, like those outlined above, may make more sense.
The bottom line
Short- and long-term CDs, as well as high-yield savings accounts, are worthwhile options to research before your CD reaches its maturity date next year. It’s imperative to plan your next move now, before your account matures, because once it does, you have a limited period to act before your CD auto-renews at your bank’s current rate. If your funds do roll over, you may have to pay a penalty to get access to them. By exploring your options now, though, you can make plans and be ready to move your funds into a new account once your CD matures.