10-Year CDs: Pros, Cons, and Current Rates

Locking in a high interest rate on savings can be advantageous, especially when substantial funds are involved. Certificates of Deposit (CDs) offer higher interest rates than traditional savings accounts and allow for rate-locking for multiple years. Longer terms generally offer higher rates (except in falling interest rate environments).

What is a 10-Year CD?

A 10-year CD is a time deposit account with a 10-year term, featuring a fixed interest rate guaranteed throughout the term. Early withdrawals result in penalties that vary by institution but typically amount to several months' worth of interest. No-penalty CDs exist but offer lower rates.

Current 10-Year CD Rates

While 10-year CDs offer long-term rate-locking, they may not always provide the best rates. As of January 28, 2025, some top 10-year CD rates include:

[Rates Table]

These rates surpass the national average but may fall short of the highest available CD rates. For instance, Synchrony Bank and Marcus by Goldman Sachs offer higher APYs on shorter-term CDs.

Pros and Cons of 10-Year CDs

Pros:

* Higher rates than traditional savings accounts
* Fixed interest rate provides predictable returns
* Low risk
* Minimal fees to open an account

Cons:

* Penalties for early withdrawals
* Limited potential to keep pace with inflation
* Lower returns compared to other investments

Are 10-Year CDs Worth It?

10-year CDs offer a secure way to set aside funds while earning a fixed rate higher than typical savings accounts. They may be attractive for those with surplus funds, particularly during high-rate periods. However, the extended lock-in period may deter those who may need to access their funds sooner.

Alternatives to 10-Year CDs

For lower-risk account options with more flexibility, consider:

* High-Yield Savings Accounts: Offer higher rates than traditional savings accounts but have variable APYs.
* Money Market Accounts: Combine features of checking and savings accounts, offering competitive rates and check-writing/debit card options.
* Treasury Notes: 10-year Treasury notes offer fixed interest rates paid every six months until maturity. They can be sold on the open market before maturity if needed.

All savings products have their merits and drawbacks. Carefully assess each option's advantages and disadvantages before deciding where to allocate your funds.