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[[{“value”:”Image source: Getty ImagesCertificates of deposit (CDs) are available in a variety of terms. The maximum that many banks offer is 5-year CDs. No matter how long of a CD you get, you need to keep your money there for the full term to avoid an early withdrawal penalty.Alert: highest cash back card we’ve seen now has 0% intro APR into 2026
This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!
Click here to read our full review for free and apply in just 2 minutes. If you’ve been looking for a secure option with a competitive interest rate, a 5-year CD may have caught your eye. Before you open one, you need to be aware of how you’d benefit from one and the potential risk.The benefit of opening a 5-year CDThe main reason to open a CD is to lock in an interest rate. That’s a big perk right now, because interest rates are expected to drop. For the time being, you can still get high rates. There are currently multiple 5-year CDs paying in the 3.5% to 4% range (or more if you’re willing to open a brokered CD, which work a bit differently than standard CDs) — click here to explore our top picks for the best CDs.Let’s say you have $10,000 you won’t need anytime soon. If you put it in a 5-year CD with a 3.75% APY, it would earn $2,021 in interest.You could also use a high-yield savings account and get a similar rate. But if interest rates decline as expected, that savings account could be paying 3.50%, 2.75%, or less in the coming years. You wouldn’t need to worry about that with a CD.Another option would be investing your money in the stock market. While stocks have much more growth potential than CDs and savings accounts, they also carry the risk of losing money. Your $10,000 could be worth $8,000 when you need it. Investing is a smart financial decision, but only with money you can keep invested for the long haul.The drawback of opening a 5-year CDCDs have strict rules about withdrawals. You’re supposed to wait until the maturity date, which is the end of the term, to withdraw your money. Otherwise, you’re looking at an early withdrawal penalty.The penalty amount depends on the bank, but it’s typically largest for long CDs. For 5-year CDs, a common penalty amount is six months of the interest you’ve earned. Since the whole point of a CD is to earn interest, paying it back as a penalty defeats the purpose.Only open a CD if you’re confident you won’t need the money until the maturity date. It gets harder to predict this over longer periods of time. You might be fairly sure you can set some cash aside for six months or a year, but five years is quite a bit longer. Your money will be locked up until 2030. Make sure to think about what you’d do if you lose your job or face some unexpected bills.If you’re not sure you can commit to a CD, a high-yield savings account is a great alternative. To maximize interest, consider one of our favorite high-yield savings accounts from this list.A long-term commitmentWith any CD, you’re trading the convenience of being able to access your money whenever for the safety of a fixed rate. With shorter CDs, this might not be an issue. A 5-year CD requires much more planning to figure out if you can afford to lock up your money for that long.For a stable, guaranteed return, it could be worth opening a 5-year CD in 2025. But for savings you may need sooner than that, find a high-yield savings account that lets you make deposits and withdrawals at any time.Alert: highest cash back card we’ve seen now has 0% intro APR into 2026
This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!
Click here to read our full review for free and apply in just 2 minutes. We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
Motley Fool Money does not cover all offers on the market. Editorial content from Motley Fool Money is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.”}]] [[{“value”:”
Image source: Getty Images
Certificates of deposit (CDs) are available in a variety of terms. The maximum that many banks offer is 5-year CDs. No matter how long of a CD you get, you need to keep your money there for the full term to avoid an early withdrawal penalty.
Alert: highest cash back card we’ve seen now has 0% intro APR into 2026
This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!
Click here to read our full review for free and apply in just 2 minutes.
If you’ve been looking for a secure option with a competitive interest rate, a 5-year CD may have caught your eye. Before you open one, you need to be aware of how you’d benefit from one and the potential risk.
The benefit of opening a 5-year CD
The main reason to open a CD is to lock in an interest rate. That’s a big perk right now, because interest rates are expected to drop. For the time being, you can still get high rates. There are currently multiple 5-year CDs paying in the 3.5% to 4% range (or more if you’re willing to open a brokered CD, which work a bit differently than standard CDs) — click here to explore our top picks for the best CDs.
Let’s say you have $10,000 you won’t need anytime soon. If you put it in a 5-year CD with a 3.75% APY, it would earn $2,021 in interest.
You could also use a high-yield savings account and get a similar rate. But if interest rates decline as expected, that savings account could be paying 3.50%, 2.75%, or less in the coming years. You wouldn’t need to worry about that with a CD.
Another option would be investing your money in the stock market. While stocks have much more growth potential than CDs and savings accounts, they also carry the risk of losing money. Your $10,000 could be worth $8,000 when you need it. Investing is a smart financial decision, but only with money you can keep invested for the long haul.
The drawback of opening a 5-year CD
CDs have strict rules about withdrawals. You’re supposed to wait until the maturity date, which is the end of the term, to withdraw your money. Otherwise, you’re looking at an early withdrawal penalty.
The penalty amount depends on the bank, but it’s typically largest for long CDs. For 5-year CDs, a common penalty amount is six months of the interest you’ve earned. Since the whole point of a CD is to earn interest, paying it back as a penalty defeats the purpose.
Only open a CD if you’re confident you won’t need the money until the maturity date. It gets harder to predict this over longer periods of time. You might be fairly sure you can set some cash aside for six months or a year, but five years is quite a bit longer. Your money will be locked up until 2030. Make sure to think about what you’d do if you lose your job or face some unexpected bills.
If you’re not sure you can commit to a CD, a high-yield savings account is a great alternative. To maximize interest, consider one of our favorite high-yield savings accounts from this list.
A long-term commitment
With any CD, you’re trading the convenience of being able to access your money whenever for the safety of a fixed rate. With shorter CDs, this might not be an issue. A 5-year CD requires much more planning to figure out if you can afford to lock up your money for that long.
For a stable, guaranteed return, it could be worth opening a 5-year CD in 2025. But for savings you may need sooner than that, find a high-yield savings account that lets you make deposits and withdrawals at any time.
Alert: highest cash back card we’ve seen now has 0% intro APR into 2026
This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!
Click here to read our full review for free and apply in just 2 minutes.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
Motley Fool Money does not cover all offers on the market. Editorial content from Motley Fool Money is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.
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