Earlier in the year, a lot of people were clamoring to open CDs while rates were sitting at or above 5%. But at this point, the days of 5% CDs are over.

The Federal Reserve has cut interest rates twice this year -- once in September, and once earlier this month. And the reason for those rate cuts is that inflation has been slowing, which is good for consumers. Cooling inflation means you shouldn't see the cost of your gas, groceries, or utilities rise so dramatically in the coming months.

But the Fed also isn't done cutting interest rates. It's expected to keep doing that in 2025. If you want to lock in a decent CD rate -- somewhere in the 4% range like many CDs are paying today -- then you'll want to get moving. 

It's important to shop around for a new CD to snag the best rate possible. Click here for a list of the best CD rates today to get started.

Our Picks for the Best High-Yield Savings Accounts of 2024

American Express® High Yield Savings APY 4.00% Rate info 4.00% annual percentage yield as of November 23, 2024. Terms apply. Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	APY 4.00% Rate info 4.00% annual percentage yield as of November 23, 2024. Terms apply.	Min. to earn $0
Capital One 360 Performance Savings APY 3.90% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Nov. 21, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	APY 3.90% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Nov. 21, 2024. Rates are subject to change at any time before or after account opening.	Min. to earn $0
Western Alliance Bank High-Yield Savings Premier APY 4.46% Rate info The annual percentage yield (APY) is accurate as of November 7, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY. Min. to earn $500 to open, $0.01 for max APY Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website. Member FDIC.	APY 4.46% Rate info The annual percentage yield (APY) is accurate as of November 7, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.	Min. to earn $500 to open, $0.01 for max APY

But there's also a specific strategy you may want to employ if you're planning to open a CD before the end of the year. And it's one that could pay off.

It pays to consider longer-term CDs

During periods when interest rates are stable, longer-term CDs commonly come with a higher interest rate than shorter-term CDs. This is because banks reward savers for committing to longer terms.

That's not the case today, though. You're likely to find a better interest rate on a 12-month CD than a 36-month CD because banks are aware of the Fed's plans to cut rates in the near term. 

You might assume that your best bet today is to open a 12-month CD and snag the highest possible rate. But if you're saving for a goal that's a few years away, and investing your money is too risky because of your relatively short timeline, then you may be better off with a longer-term CD-- say, 36 months.

You may be looking at a 4.5% interest rate on a 12-month CD today, vs. 3.75% on a 36-month CD. But with that second option, you're locking in a good rate for three full years. With a 12-month CD, you run the risk of being unable to renew at an attractive rate once your CD matures.

How much a longer-term CD could benefit you

Let's say you have $10,000 to put into a CD. If you open a 12-month CD at 4.5%, you're earning $450. Beyond that, it's anyone's guess. With a $10,000, 36-month CD at 3.75%, you're earning a guaranteed $1,168 because you get to keep your 3.75% rate for much longer. 

Meanwhile, let's say 12-month CD rates drop to 3% by the time you're ready to renew in 2025, and then to 2% the year after. In that case, you're earning $313 your second year and then $215 the year after that. That's a total of $978, which is clearly less than $1,168. 

Don't just chase the highest interest rate

It's easy to see why you'd be drawn to a 12-month CD today, or another relatively short-term rate that's the highest your bank is offering. But before you commit to that, consider the benefit of locking up your money a bit longer, especially if a three-year time frame or so aligns with a specific goal of yours, like buying a house or paying for college. You may find that committing to a longer term pays better overall.