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Typically, these accounts have higher interest rates than either traditional orhigh-yield savings accounts(HYSAs).
However, they also come with a few drawbacks.
Closing a CD before its maturity can result in penalties that you will have to pay.
Early withdrawal fees range by institution and CD.
Accounts with longer maturity dates may come with higher fees, though this depends.
This is a double whammy when youre facing a financial crisis.
Theyre often touted as having a higher yield than traditional checking and savings accounts.
And once you open an account, your rate is guaranteed.
That said, other accounts may have competitive rates, too.
The rate cap on money market accounts, interest-bearing checking accounts and savings accounts is 5.08%.
While the rate cap is higher on CDs, not all banks will offer the most competitive rates.
You Have Expensive Debt
According to Experian, the average American householdowed $105,056 in 2024.
You shouldnt open a CD if you have high-interest debt, said Pedersen.
Both of these will generally cover up to $250,000 against the institutions failure.
If you find a bank or credit union that offers CDs that arent insured, look elsewhere.
CDs are also a secure way to invest provided theyre insured.
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