I’m Going to Open a CD. Here’s Why I’m Not Going for the Absolute Top Rate

CD yields are at their highest level in more than 15 years, and the expectation of interest rate cuts from the Federal Reserve may make it a good idea to act quickly to secure today’s interest rates. And while interest income is an important motivator when opening a CD, it’s not the only thing to consider.

For example, some of the banks offering the best CD rates on the market have high minimum deposit requirements. Some only offer high rates for one or two different terms. And honestly, some of the banks with the absolute highest CD yields are a bit awkward to use.

I plan to open a CD soon to lock in APY before rates start to fall, and I’ve already crossed the highest-paying banks off my list. Here are three reasons why.

1. I want to build a CD ladder

To be clear, I have narrowed my search for CD deposit banks to a short list, but I haven’t made a final decision yet.

One of the main reasons I crossed some banks off the list is that many of them don’t offer a wide selection of CD term lengths. Some offer a full menu of CDs but only offer high rates on one or two.

I plan to use a CD ladder, not just one CD. If you’re not familiar, a CD ladder involves dividing your money into equal amounts and using them to open CDs with different maturities. I plan to use 1-, 2-, 3-, 4-, and 5-year CDs and I don’t want to split my money between several different banks. So I’ll have to find a bank that offers CDs with competitive interest rates for all five maturities.

2. I value comfort

Put simply, some of the most profitable CDs come from banks that are pretty inconvenient to use. Maybe they have very limited customer service. Maybe they only give you one option to deposit money into your account. Or maybe they make it hard to find important information, like the payout process when the CD matures.

While I want high yield, I am willing to sacrifice some of that for convenience. I want to be able to deposit money via mobile check, bank transfer, or other methods. I also want to be able to call and talk to someone if I need help with my account. These factors play a major role in my decision.

3. I want a great banking app

Last but not least, I will immediately eliminate a bank from consideration if it has a clunky mobile app or no mobile banking app at all. As I mentioned, I plan to build a CD ladder out of five different CDs and I want to be able to quickly and easily view and manage my accounts wherever I am.

Of course, if… Already I use the bank and its apps to some extent. Between personal bank accounts, investments, business accounts, and more, I already have relationships with four different financial institutions (although none offer great CD rates at the time of this writing).

Summary

If you’re willing to jump through hoops and getting the highest possible interest rate is a priority for you, there’s nothing wrong with choosing a CD that offers it. However, it’s not the best move for everyone — after all, that’s why not everyone who opens a CD chooses the highest interest rate on the market.