The 3 Biggest Mistakes You Might Make Opening a CD This October

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Looking to store some money in CDs? Read on to avoid some key blunders. [[{“value”:”

There’s a reason October could be a great time to open a CD. The Federal Reserve is set to meet in early November. And there’s a good chance the central bank will cut interest rates again at that gathering. If you act now, you can potentially lock in a CD at a more favorable rate, before another rate cut happens.

But if you’re going to open a CD before the end of October, you need to avoid certain mistakes. Here are three big ones you’ll want to steer clear of.

1. Not shopping around for the best rate

CD rates are already down compared to where they were this summer. But some short-term CDs are still paying close to 5%. If you’re going to open a CD, you might as well find the best rate before rates fall again.

So don’t just jump on the first decent CD rate you see. Instead, spend a little time comparing rates, keeping in mind that different banks may have different minimum deposit requirements. You can click here for a roundup of the best CDs on our radar today.

2. Using a CD to house your emergency fund

It’s smart to have money set aside for emergencies — things like home repairs, medical bills, or a period of unemployment. But if you’re thinking about putting your emergency fund into a CD, you’re potentially setting yourself up for disaster.

Your emergency fund needs to be accessible to you at all times. But CDs typically charge an early withdrawal penalty for removing even a portion of your money prior to maturity. If your goal is to snag the highest return possible on your emergency savings, don’t look to a CD. Instead, shop around for the best high-yield savings account rate.

3. Not setting up a CD ladder

You may be inclined to open a 12-month CD this month to snag the best interest rate available. But before you go and put all of your money into a 12-month CD, you may want to look at a ladder instead.

With a CD ladder, you split your deposit into several CDs with staggered maturity dates. What you might do this month is take your initial deposit, divide it into four, and open CDs with these terms:

Three monthsSix monthsNine months12 months

The benefit here is that if you end up needing some of your money in a pinch, you won’t automatically be subjected to an early withdrawal penalty since you’ll have a portion of your money freeing up every three months.

And remember, as the Fed continues to lower interest rates, borrowing should get less expensive. You may realize in early 2025 that you’re ready to move forward with buying a car, or another big-ticket item. It would be a shame to have to delay that plan because all of your money is tied up in a CD. And it would be just as much of a shame to pay a penalty in order to be able to use your own money.

If you want to open a CD before the Fed’s next rate cut, October is the time to get moving. But do your best to avoid these mistakes so you don’t wind up regretting your decision to put money into a CD this month.

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