Interest rates have come down quite a bit in the last few months. High-yield savings accounts that used to offer 5% or more are now earning less than 4.5%. It's likely that rates will keep falling, too, meaning your savings will earn even less.

But you could prevent that with a certificate of deposit (CD). If you open a 1-year CD, which is one of the more popular term options, you'll lock in a high rate for a full year. Here's how to decide if this is the right place for your money.

Why a 1-year CD could be a good choice

What makes CDs special is that they offer fixed interest rates. Savings account rates can go up and down. If you open a CD, you're guaranteed the same rate until its maturity date. They're ideal when rates are falling and you don't want to lose out on interest.

Once you decide to open a CD, the next step is figuring out how long of a term you want. CDs are generally available with terms ranging from three months to five years, although some banks have longer and shorter CDs available.

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

American Express® High Yield Savings APY 3.90% Rate info 3.90% annual percentage yield as of December 2, 2024. Terms apply. Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	APY 3.90% Rate info 3.90% annual percentage yield as of December 2, 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

A 1-year CD works well if you want to continue earning a high interest rate but don't want to keep your money there for too long. Lots of people don't feel comfortable committing to a CD for two years, three years, or longer. With a 1-year CD, you can get through 2025, then see what interest rates and your finances look like to decide your next move.

Ready to get a CD? One of our favorites is the Barclays Online CD. Its 1-year CD is currently offering an impressive 4.25% APY, with no minimum balance requirement. Click here to learn more and open your CD today.

Drawbacks of a 1-year CD

The biggest drawback with CDs is the early withdrawal penalty. Banks will guarantee you an interest rate, but only if you guarantee to keep your money deposited for the entire term. If you need it sooner, you'll pay a penalty. Banks typically charge an early withdrawal penalty of three months interest for 1-year CDs.

Only deposit money into a CD if you're confident you won't need it until the maturity date. With money you might need, such as your emergency fund, find a high-yield savings account that lets you make withdrawals at any time.

Another potential downside is that one year isn't very long. While it's impossible to be completely sure what will happen with interest rates, they could be lower in a year than they are now. Once your 1-year CD matures, you may not be able to get a comparable rate. If you're concerned about this, consider opening a longer CD.

No matter how long of a CD you want, there are plenty of high-paying options. Check out our list of the best CDs to find one that fits your needs.

A guaranteed APY

To sum it up, if you have savings you won't need for a year, then a 1-year CD could be a good place to put it. There's no risk involved, as long as you don't need to make an early withdrawal.

The most important part of choosing a CD is making sure the term fits your financial needs. If you might need the money in six months, get a CD for that long. If you won't need it for longer than one year, a longer CD may be the way to go. But if you're looking for a safe, easy option, a 1-year CD will probably be a match.