Why you should deposit $5,000 into an 18-month CD now (2024)

All eyes turn toward the Federal Reserve today as they meet to discuss the future of the economy and the interest rate climate. While a reduction to the federal funds rate, which affects what lenders offer borrowers, isn't expected after their meeting on Wednesday, it's appearing more likely to occur in September. While that will be welcome news for borrowers coping with high rates on everything from mortgages to credit cards, it will likely mark the end of this cycle's high rates on borrowing products.

Those who have opened high-yield savings and certificates of deposit (CD) accounts in recent years have earned hundreds and perhaps thousands of dollars during this unique economic period. And while rates aren't expected to drop dramatically to start, the opportunity to earn today's high rates could soon close. Against this backdrop, some savers should consider locking in a high CD rate while they're still available. And, right now, an 18-month CD could offer the perfect mix of rate and flexibility. There are multiple reasons why it could be worth making a $5,000 deposit into an 18-month CD today. Below, we'll break down three of them.

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Why you should deposit $5,000 into an 18-month CD now

Not sure if it's worth making this deposit into one of these accounts right now? Here are three reasons why it could be valuable:

Rates are still high

The interest rate climate is expected to change as 2024 evolves and into 2025. But, right now at least, interest rates on CDs are still high. While you may be able to secure a slightly higher rate with a short-term CD, returns on accounts with 18-month terms are around 4.50% to 5.00% if you pursue this account now. If you wait, rates may drop, perhaps significantly if inflation continues to cool. But if you act now you can lock in a rate for the full 18 months, offering you a way to grow your money even as the overall rate climate begins to decline.

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You're guaranteed to earn hundreds of dollars

There aren't many investments or savings vehicles right now that can guarantee you a profit worth hundreds of dollars. But an 18-month CD with a deposit of $5,000 can do just that. Whether you lock in a rate of 4.50%, 4.75%, 5.00%, or somewhere in between those ranges, you'll earn upwards of $300 in interest once the account has matured. And because the CD matures in just a year and a half, that money will be relatively accessible compared to other investments, which may take multiple years to produce a similar profit.

It's more manageable

While you'll earn more interest with a deposit of a higher amount, a $5,000 deposit could be easier to part with for the full CD term. Remember that any money withdrawn from the CD account prematurely will result in an early withdrawal penalty. While that exact penalty will vary based on when you withdrew the money and the lender, it could easily erase all of the interest you have earned to date. So you'll reduce your chances of having to take the money out early with a smaller deposit of $5,000 versus $7,500 or $10,000 or higher. But you'll still earn a competitive rate in the interim.

The bottom line

There are major advantages to opening a CD now, regardless of the amount deposited and the term selected. But an 18-month CD with a $5,000 deposit could be the perfect mix for savers. The deposit won't be so significant that you'll need to worry about an early withdrawal penalty but, at the same time, you'll be guaranteed to earn hundreds of dollars in interest simply by opening the account and leaving it untouched for the full term. And with rates on these accounts hovering near 5% now — but the likelihood of those rates to drop seemingly increasing by the week —now could be the smart time to pursue this account type with this deposit amount while you still can.