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CDs in the Spotlight: Why Savers are Turning to Certificates of Deposit

Sarah Sharkey Updated: September 28, 2023 • 3 min read
young man holding his spare money savings in an envelope

Key Points:

  • A recent survey found savers are increasingly interested in CDs.

  • While interest in CDs is rising, many respondents would put extra funds in stocks.

  • CD rates vary, with some paying over 5%.

A recent survey found that savers are gaining interest in certificates of deposit (CDs). As this type of deposit product gains popularity, understanding the reasons behind the surge can be helpful.

Let’s explore why CDs might be getting more popular. Plus, if and when a CD might be the right fit for your portfolio.

More Investors Are Interested in CDs

Investopedia recently conducted a survey of its readers about investment vehicles. Based on the survey results, people are more likely to invest in CDs than before. When asked the question, ‘if you had an extra $10,000 right now, where would you be most likely to put it,’ 14% of respondents chose CDs. Individual stocks were slightly more popular, with 17% of respondents selecting individual stocks.

If you already have a fully stocked emergency fund, putting extra savings into a CD could help you snag a higher interest rate.

Factors Behind the Rising Popularity

CDs are a solid option for savers and investors. But CDs aren’t the most exciting investment choice, which means they are often overlooked. That’s changing quickly. Below are some of the reasons why CDs are gaining popularity:

  • Higher rates: As the Federal Reserve combats inflation, it has made a push to raise interest rates. A higher federal funds rate has led to higher CD rates. Some CD rates are above 5%. 
  • Stability: CDs aren't a flashy type of investment. But they do offer safe and predictable returns. Investors trying to navigate this turbulent market can find the stability they crave by locking in a CD rate. 

A combination of higher rates and a turbulent market might push more investors to seek the security of a CD. 

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Is a CD the Right Fit for Your Portfolio?

CDs might be gaining in popularity. But that doesn’t automatically mean that this type of deposit account is the right fit for your finances.

Here’s when a CD might be a good fit for your situation:

  • You have ample savings on hand. A CD involves locking up your funds for a set period of time. If you already have a fully stocked emergency fund, putting extra savings into a CD could help you snag a higher interest rate.
  • You want to protect your purchasing power. If you have a big purchase coming up soon, stashing your funds into a CD might be a good idea. You’ll be able to earn interest on your savings until you are ready to make the purchase.
  • You like stability. CDs come with little to no risk of losing funds attached, especially when interest rates are relatively high. If you are unsure about investing in an unstable environment, sticking with CDs can help you generate some amount of returns.

CD Related Articles

Here's when a CD might not suit your needs:

  • You won’t have any savings available. If you lock all of your savings into a CD, an unexpected expense could throw your finances for a loop. CDs often come with early withdrawal penalties. With that, CDs usually aren’t a good idea if you don’t have any other savings on hand.
  • You want to build wealth for the long term. CD rates are attractive right now, but they vary over time. If you want to build a nest egg for retirement, investing in other assets, like stocks or real estate, might be a better solution.

If you decide that CDs are the right fit for your situation, then locking in a top rate is a priority. The good news is that it’s easy to compare rates across multiple CDs before committing your funds.

The Bottom Line

CDs are an attractive opportunity for savers to grow their funds. With interest rates on the upswing, CD rates are especially enticing right now. If you are ready to tuck some of your savings into a CD, explore top CD rates today

Written by Sarah Sharkey linkedin-icon

Sarah Sharkey is a personal finance writer with a Master's in Management from the Hough School of Business at the University of Florida. She enjoys helping people make better financial decisions and has written for numerous personal finance publications, including Money Under 30, Business Insider, and The College Investor. Sarah enjoys traveling, hiking, and reading when she is not writing.