Is Opening a CD (Certificate of Deposit) Worth It?

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An important part of setting savings goals is choosing where to keep your money. If you are exploring savings options, you have likely encountered Certificates of Deposit*, or CDs. But is this financial tool a smart choice? And are the current CD rates worth it your time and money? In this blog, we'll unpack the pros and cons of CDs and help you decide whether opening one fits your savings goals.

What is a CD?

Let’s have a quick refresh on the basics of certificates of deposit. A CD is a savings account where you hold a fixed amount of money for a set length of time, ranging from a few months to five years. When you open a CD account, you are essentially setting aside your money until a later date (the “maturity date”) with the promise of receiving a specific interest rate in return. When the waiting time is over, you will receive your initial deposit plus the money you have earned from interest.

You can learn more about certificates of deposit and how they work in our previous blog.

Pros/Cons of CDs

Every savings strategy comes with its own set of advantages and disadvantages. Before opening an CD, it is wise to understand the pros and cons.


  1. Higher Interest Rates:CDs typically offer better interest rates than regular savings accounts. Also, with the right timing and strategy, you can take advantage of high interest rates as they become available in the market.
  2. Low Risk:They provide a secure approach to growing your savings. Unlike stocks and other investments, CDs are not impacted my market fluctuations, making them a reliable option in uncertain economic times. With FDIC insurance, your money is safe even in the rare case of bank failure.
  3. Predictable and Guaranteed:When you open a CD, your rates are locked in. This means your CD guarantees both your initial deposit and any earned interest—as long as you don’t withdraw before the maturity date. This predictability helps with your future budgeting and financial planning.
  4. Variety of Terms:CDs terms can range from a few months to several years. This gives you the flexibility to choose a term that aligns best with your goals and current financial position.
  5. Laddering:By strategically staggering your CD terms and maturity dates, you can benefit from rising interest rates while still maintaining access to some of your savings. This strategy is known as a CD ladder.


  1. Early Withdrawal Penalties:If you need to pull your funds from a CD account earlier than its maturity date, you will encounter penalties and fees. This is because CDs are designed to remain untouched for the duration of its term.
  2. Potential Missed Opportunities: If interest rates increase after you have already opened a CD, you could miss out on the chance to invest in higher-yielding CDs because your funds are already locked into ones with lower-rates.
  3. Limited Liquidity:CDs are intended to hold money for a fixed period, so your funds aren’t as readily accessible as they would be in a regular savings account.
  4. Minimum Deposit Requirements:This can be a hurdle for some people with limited funds to set aside. To access higher CD rates, you may also need to make a larger initial deposit, which might not sound very appealing.
  5. Low Returns:CDs are mainly for savingnot investing. While CD interest rates are typically higher than those of regular savings accounts, they may still be lower compared to other investment options. This means your money will not grow as quickly as it might with riskier options like stocks and bonds.

Are CDs worth it?

Opening certificates of deposit can be an excellent choice in several ways, especially in the following situations:

If you have short-term savings goals: Perhaps you are saving for something like a down payment on a house, vacation, new car, or even a wedding. You can choose CDs with maturity dates that align with the timing of your financial needs. This way, you can earn a little extra interest until it’s time to cash out and make those long-awaited purchases!

For keeping your money out of reach: Placing your money in a CD can act as a safeguard from impulse buys. Since CDs have penalties for early withdrawals, this serves as a hurdle that discourages you from making unplanned purchases, allowing you to stay on track with your financial goals. Additionally, this provides you with the time to carefully consider how you want to use your money in the future, whether that involves investing, saving, or planned spending.

Preserving your money without risk: Investing with CDs can be a smart choice for those who prefer avoiding stock market risks. If you are seeking a secure way to grow your money and are comfortable having it tied up for some time, CDs can be a great option.

When the interest rates are high: Opening a CD is a good idea when you can secure high interest rates for your savings. We can’t predict how interest rates will look in the future. So, it's smart to grab the good rates while they're available. This way, you'll have a guaranteed way to earn more from your money later on.

Should I open a CD today?

Interest rates are currently at their peak, making it an opportune time to consider opening a CD account or setting up a CD ladder. Remember, these favorable rates won't last much longer, so it's wise to seize this chance to secure your financial future.

Are you shopping for the best CD rates? At Armed Forces Bank, we're offering high-yield options, including 9-month CDs at 5.25% Annual Percentage Yield (APY)* and 13-month CDs at 5.40% APY*. Explore our various term options* to find the best fit for your savings goals!

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*A penalty may be imposed for early withdrawal. The Annual Percentage Yield (APY) is accurate as of 09/19/23.  CD rates are subject to change at any time and are not guaranteed until CD is opened. Fees charged to the account could reduce earnings on the account.