A 5-year certificate of deposit (CD) is a safe way to grow your savings, but is 2025 the right time to lock in your money? Let’s take a look at the pros and cons, as well as some alternatives.
Why open a 5-year CD in 2025?
CDs offer safe, guaranteed returns, so long as you don’t cash them out before their maturity date. Here are some reasons why a 5-year CD might be a good choice this year.
Interest rates are decent
Although CD rates have fallen from last year’s highs, the annual percentage yields (APYs) of the best 5-year CDs are still a little over 4.00%. That’s not a bad yield, especially given that it’s locked in for years.
Interest rates may fall soon
The Federal Reserve seems hesitant to change interest rates one way or the other right now. However, experts agree that cuts seem more likely than raises this year. If interest rates drop, you may be glad you locked in today’s yields.
Our Picks for the Best High-Yield Savings Accounts of 2025
American Express® High Yield Savings Member FDIC. APY 3.70%
Rate info
Member FDIC.
| 3.70%
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| $0 | |
 Capital One 360 Performance Savings Member FDIC. APY 3.70%
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Member FDIC.
| 3.70%
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| $0 | |
 Barclays Tiered Savings Member FDIC. APY 4.15%
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Member FDIC.
| 4.15%
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| $0 |
You have a lot of cash that you want to keep safe for five years or more
CDs make the most sense for people who 1) have a large sum to deposit and 2) won’t need to touch the money until the CD matures.
Why you may not want to buy a 5-year CD in 2025
Despite the benefits, locking in a 5-year CD now may not be the best option for everyone. Here are some reasons why.
You may need the money within five years
If you cash out a 5-year CD before it matures, you’ll have to give up some of your interest earnings.
You only have a small amount to deposit
If you were to deposit $500 in a 5-year CD with an APY of 4.00%, then you’d earn a total of $108 in interest. A savings account with an APY of 3.75% would earn you $102 over the same time frame. Unless you’re investing thousands of dollars, CDs don’t offer much payoff for locking up your money.
Want to earn an APY of 4.00% (or more) while having easy access to your money? Check out our list of the best high-yield savings accounts.
Other investments offer higher returns
Stocks and bonds have higher growth potential than CDs. If you can leave your investment untouched for more than five years, then odds are good you’ll make more money through the stock market.
Where will CD rates go from here?
Predicting interest rates is tricky, but a few key factors could influence CD rates this year.
- If inflation remains high, the Fed may keep interest rates elevated, leading to higher CD rates.
- If the economy weakens, rates could drop as the Fed lowers rates in an effort to stimulate growth.
- Some banks may offer higher rates to attract customers, even if the Fed doesn’t raise rates.
If you’re worried about missing out on higher rates in the future, consider a short-term CD. In fact, 6-month CDs currently offer higher APYs than 5-year CDs — which is unusual, historically speaking.
Alternatives to a 5-year CD
If you’re unsure about locking in a CD, here are some other options:
- High-yield savings accounts currently offer APYs on par with 5-year CDs. And unlike CDs, they allow you to deposit or withdraw money whenever you want. That said, rates are variable and your APY could change at any time.
- Money market accounts offer slightly higher rates than most savings accounts, as well as similar flexibility.
- Treasury notes are government bonds that work similarly to CDs: You commit your money for a certain period of time and earn a guaranteed interest rate. However, you’ll receive an interest payment every six months.
- Stock market investments come with more risk but higher potential returns. It’s best to invest money that you won’t need for at least five years (preferably more). That way you have time to ride out any market downturns.
A 5-year CD in 2025 could be a great choice if you want small but guaranteed returns and don’t need access to your cash. However, if you need more flexibility or higher growth, it’s best to look elsewhere.
