Why you should open a short-term CD with inflation rising again

A short-term certificate of deposit (CD) account comes with an interest rate higher than most traditional savings accounts, high-yield savings versions, and even many long-term CD options. This is a direct reversal from the recent rate structure when banks typically offered higher returns on long-term CDs instead. But in the unusual economic climate of the last few years, lenders have generally offered savers higher rates on those CDs set to mature in 12 months or less. That’s partially due to the unpredictability of the rate climate.

That unpredictability was again on full display this week when the Bureau of Labor Statistics released its latest inflation reading, this time again showing an uptick in the rate. Now at 3%, inflation has risen in four consecutive months, all but ensuring an end to interest rate cuts for the foreseeable future. While this may not be welcome news for borrowers and many other Americans, it does open a window of opportunity for CD account holders to take advantage of, specifically via a short-term CD. 

Below, we’ll break down three reasons why savers should open a short-term CD with inflation rising again.

See how much more you could be earning with a short-term CD here.

Why you should open a short-term CD with inflation rising again

Here are three reasons why a short-term CD is worth opening again, now that inflation is on the rise:

Interest rates are high

If you’re determined to find the highest interest rate possible for your money now, a short-term CD is one of your better options. Traditional savings accounts have a rate of just 0.41% now, while long-term CDs have rates in the low 4% range. Short-term CDs, however, have rates around 4.50% now or higher, depending on the lender you choose (online banks usually offer higher rates). That’s $4.50 for every $100 deposited, all earned simply by transferring a portion of your money into one of these accounts now. And that interest is guaranteed, thanks to the fixed rate nature of CDs, making this both a lucrative and secure location for your money now.

Get started with a short-term CD here.

Rates could increase again

With a CD that matures in just a few months, you’ll be positioned to take advantage of additional, higher-rate accounts relatively soon. And that could turn out to be a real possibility if inflation remains unwieldy and interest rate hikes are issued again. An uptick in the federal funds rate will cause rates on CDs to soon follow, possibly at the same time the CD you open now is set to mature. From there you can simply transfer the funds into an account with an even higher rate.

You’ll maintain flexibility

In today’s inflationary, high-rate climate, flexibility is key. And you’ll maintain some form of it via a CD that has a term of just a few months. This is arguably better than a long-term CD now, which will lock your money away for an extended period and cause you to lose out on other, higher-interest earning opportunities. You can also ladder a series of short-term CDs with different maturity dates to increase your flexibility, allowing you to more easily move funds in and out of high-rate accounts while still maintaining some routine access to your money. 

The bottom line

Short-term CDs have high interest rates perfectly positioned to rise again later in 2025. And because the terms associated with these accounts are all under 12 months, savers will still maintain a baseline level of flexibility that’s unavailable with some other CD options. In the face of consistently rising inflation, then, and a frozen interest rate climate, many would benefit by looking to short-term CDs now.