When CD Accounts Might Not Be Your Best Move: A Closer Look at the Numbers

Before you lock your money into a certificate of deposit, financial experts suggest asking yourself some hard questions. According to experts from Georgia’s Own Credit Union and Addition Financial, the decision to open a CD requires careful consideration of your personal financial situation. Here’s what you need to know about CD accounts worth evaluating before you commit.

The Debt Problem First

The average American household carried $105,056 in debt as of 2024 — a number that includes mortgages, auto loans, credit cards, and personal obligations. If you’re part of this majority, opening a CD might actually work against your financial goals.

“High-interest debt is the real enemy,” explains one financial advisor. “If you’re paying 18% on credit card debt while earning 5.75% on a CD, the math doesn’t work in your favor.” Paying down expensive debts should typically take priority over locking funds into savings vehicles. The interest you’re paying usually exceeds what you’d earn, making it mathematically sensible to tackle debt first.

Liquidity Lockdown: The Hidden Cost

When you deposit money into a CD, you’re entering what financial institutions call a “commitment period.” Break that commitment early, and penalties follow. These aren’t small slaps on the wrist either — they can range significantly depending on your institution and the CD’s term length.

“The core issue is this: If you have bills to pay, upcoming major purchases planned, or you haven’t built a solid emergency fund yet, a CD simply isn’t the right tool,” explains Brandon Stout, relationship advisor at Addition Financial. “What looks like penalty fine print can become a real financial burden when you actually need the money.”

The Federal Deposit Insurance Corporation (FDIC) data shows that as of February 2025, CD rates cap out between 5.75% and 5.99%, depending on term length. Yes, that’s attractive — but only if you can afford to wait until maturity.

The Emergency Fund Gap

Most financial planners recommend keeping three to six months’ worth of living expenses in readily accessible savings. Before you even think about a CD, that safety net needs to exist.

“Here’s where people get trapped,” according to Brittany Pedersen, director of deposit and payment operations at Georgia’s Own Credit Union. “You open a CD thinking you have enough emergency savings, then life happens. A car breaks down, a medical bill arrives, and suddenly you’re facing an early withdrawal penalty on top of your crisis.”

This creates a double problem: delayed access to funds and a financial penalty that makes your emergency worse.

Rate Shopping Matters More Than You Think

Yes, CD rates look impressive compared to traditional savings accounts. The FDIC caps rates on money market and savings accounts at 5.08% — lower than CDs. But here’s the catch: not every bank offers the maximum advertised rate.

“You might find a high-yield savings account with rates nearly matching or even competing with certain CD offers,” Pedersen notes, “without the restriction of locking your money away.” If you can achieve similar returns with better liquidity, that becomes the smarter choice.

Institution Insurance: Non-Negotiable

One final checkpoint before opening any CD: verify your institution carries FDIC or NCUA insurance. These protect up to $250,000 per depositor in case of institutional failure.

“I simply wouldn’t recommend putting money anywhere without this protection,” Pedersen states firmly. If a bank or credit union can’t offer FDIC or NCUA coverage for their CDs, that’s a major red flag.

When a CD Account Actually Makes Sense

For those with stable finances, no near-term cash needs, and debts under control, CDs offer genuine advantages. If you have money sitting idle in low-rate savings, rolling it into a higher-yield CD can meaningfully increase your interest income. For families building college funds or long-term wealth, CD accounts worth considering become clearer.

The bottom line: CD accounts are powerful tools for the right situation. Just make sure that situation actually describes your current financial reality.