3 Reasons Not to Open a 12-Month CD This November -- Even Though They're Paying Over 4%

Motley Fool2024-11-16

KEY POINTSYou may be eager to lock in a 12-month CD while rates are still strong.Before you do, think about whether you might want the money for a down payment on a home or car in the new year....

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Read on to see why that may not be the case.","collect":0,"end_time":0,"defaultTopTitle":"fool.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"COF":"第一资本","BK4516":"特朗普概念","IE00B19Z3B42.SGD":"Legg Mason ClearBridge - Value A Acc SGD","LU0130518102.USD":"HARRIS ASSOCIATES GLOBAL EQUITY \"R\" INC","BK4585":"ETF&股票定投概念","LU1861217088.USD":"贝莱德金融科技A2","LU1861220207.SGD":"Blackrock FinTech A2 SGD-H","LU0648000940.SGD":"Natixis Harris Associates Global Equity RA SGD","LU0130102774.USD":"Natixis Harris Associates US Equity RA USD","CD":"秦淮数据","LU0648001328.SGD":"Natixis Harris Associates US Equity RA SGD","IE0002270589.USD":"LEGG MASON CLEARBRIDGE VALUE \"A\" (USD) INC","LU0477156797.USD":"HARRIS ASSOCIATES GLOBAL EQUITY \"RE\" (USD) ACC","BK4166":"消费信贷","BK4588":"碎股","BK4116":"互联网服务与基础架构","LU0130103400.USD":"Natixis Harris Associates Global Equity RA USD","LU2360107671.USD":"BGF FINTECH \"A4\" (USD) INC","LU1201861165.SGD":"Natixis Harris Associates Global Equity PA SGD","LU1201861249.SGD":"Natixis Harris Associates US Equity PA SGD-H","LU0211331839.USD":"FRANKLIN MUTUAL GLB DISCOVERY \"A\" (USD) ACC","LU0980610538.SGD":"Natixis Harris Associates US Equity RA SGD-H","IE00B19Z3581.USD":"Legg Mason ClearBridge - Value A Acc USD","LU0053666078.USD":"摩根大通基金-美国股票A（离岸）美元"},"translate_title":"今年11月不开立12个月期CD的3个理由——即使他们支付超过4%","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"CD":1,"US7Y.BOND":0.9,"US10Y.BOND":0.9,"US12M.BOND":0.9,"US2Y.BOND":0.9,"US30Y.BOND":0.9,"COF":0.9,"US3Y.BOND":0.9,"US5Y.BOND":0.9,"US6M.BOND":0.9},"content_text":"KEY POINTSYou may be eager to lock in a 12-month CD while rates are still strong.Before you do, think about whether you might want the money for a down payment on a home or car in the new year.Consider your CD's term carefully, and think about your savings time frame.If you're bummed out by the fact that 5% CDs are basically a thing of the past, you're not alone. It's disappointing to see CD rates fall, even though falling rates also mean less expensive borrowing.The good news, though, is that you can still snag a 12-month CD at over 4% -- at least for the time being. The Federal Reserve is supposed to continue making interest rate cuts, so today's rates may be short-lived.But for now, if you look around, you might have a pretty easy time finding a 12-month CD that pays upward of 4%. You can check out this list of the best CD rates for more options.That said, opening a 12-month CD may not be the best move this month. Here are some reasons why.Our Picks for the Best High-Yield Savings Accounts of 2024American Express® High Yield SavingsAPY4.00%                        Rate info                Circle with letter I in it.      4.00% annual percentage yield as of November 16, 2024      Min. to earn$0Open Account for American Express® High Yield SavingsOn                          American Express's             Secure Website.                                                  Member FDIC.                                              APY4.00%                        Rate info                Circle with letter I in it.      4.00% annual percentage yield as of November 16, 2024      Min. to earn$0Capital One 360 Performance SavingsAPY4.00%                        Rate info                Circle with letter I in it.      See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Oct. 23, 2024. Rates are subject to change at any time before or after account opening.      Min. to earn$0Open Account for Capital One 360 Performance SavingsOn                          Capital One's             Secure Website.                                                  Member FDIC.                                              APY4.00%                        Rate info                Circle with letter I in it.      See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Oct. 23, 2024. Rates are subject to change at any time before or after account opening.      Min. to earn$0CIT Platinum SavingsAPY4.55% APY for balances of $5,000 or more                        Rate info                Circle with letter I in it.      4.55% APY for balances of $5,000 or more; otherwise, 0.25% APY      Min. to earn$100 to open account, $5,000 for max APYOpen Account for CIT Platinum SavingsOn                          CIT's             Secure Website.                                                  Member FDIC.                                              APY4.55% APY for balances of $5,000 or more                        Rate info                Circle with letter I in it.      4.55% APY for balances of $5,000 or more; otherwise, 0.25% APY      Min. to earn$100 to open account, $5,000 for max APY1. You're planning to buy a home or car soonSince the Fed is expected to keep cutting interest rates, it could end up being cheaper to sign a mortgage or finance a car in the new year. For this reason, you may want to hold off on tying up your money in a CD.You may end up needing that money for a down payment on a home or vehicle. And it would be a shame to have to put off a purchase like that because your money isn't available to you without a penalty.2. A longer-term CD may be a better fit for your needsYou'll generally find a better interest rate on a 12-month CD today than a longer-term CD, like 36, 48, or 60 months. Banks are anticipating further rate cuts from the Fed, so they're being more cautious with their longer-term CD rates.But while a 12-month CD might give you a higher interest rate than a longer-term CD initially, all told, you might earn more money on a longer-term CD. If you're saving for a goal that's a few years out, you may want to consider a term beyond 12 months.Say you can get 4.5% on a 12-month CD, and only 3.75% on a 36-month CD. The 36-month CD might seem like a worse deal. But if CD rates fall a lot in the new year, by the time your 12-month CD renews, perhaps the best rate you can get is 2.5%. In that case, you could end up kicking yourself for not locking in 3.75% instead.3. A stock portfolio might pay you a lot moreThe idea of earning more than 4% from a CD might seem appealing. But you may be able to do a lot better by investing your money in stocks. Over the past 50 years, the S&P 500's average annual return has been 10%. This accounts for years when stock values soared and years when they declined.Say you're thinking of opening a $5,000 CD with a 12-month term. If you snag a 4.5% APY, you're looking at $225 in interest. But beyond that point, who knows what you'll earn on that money.On the other hand, if you put $5,000 into a stock portfolio that gives you a 10% yearly return, in 25 years, you'll be sitting on about $54,000. If you like the idea of that, then instead of opening a 12-month CD this month, or any CD, open a brokerage account and start putting your money to work.Opening a 12-month CD this November isn't necessarily a poor choice. But for these reasons, you may want to go an alternative route.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.30.2","shortVersion":"4.30.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2483107515"}