This Is One of the Worst Mistakes You Can Make Now That CD Rates Are Falling

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There was a time not so long ago when locking in a CD at 5% was pretty easy. But ever since the Federal Reserve started cutting its benchmark interest rate, 5% CDs have been hard to find.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. The Fed made its first rate cut of the year in mid-September. And it followed it up with a second cut earlier this month. As a result, CD rates have dropped into the 4% range, with many now paying closer to the 4% mark than 4.5%.Because CD rates are falling, you may be eager to open one while you can still snag a good deal. And if so, check out this list of the best CD rates to narrow down your choices.But if you’re going to open a CD in the coming weeks, there’s one big mistake you should definitely take care to avoid.Don’t put your emergency fund in the wrong placeIf you have a fully loaded emergency fund — enough money to cover three months of essential bills or more — it’s a sign you’re in great shape financially.Even if you don’t have three full months’ worth of essential expenses in the bank, if you have a decent chunk of money earmarked for unplanned bills or a period of job loss, you’re ahead of many Americans. The Federal Reserve found that as of 2022, 37% of U.S. adults didn’t have enough savings to cover a surprise $400 bill.But if you’re thinking of moving your emergency fund into a CD to get a good rate while you can, you should know that you’re playing with fire.The whole point of having an emergency fund is to be able to cover unplanned expenses on a whim. But when you put money into a CD, you have to commit to the term. If you take your money out before your CD matures, you’re typically hit with an early withdrawal penalty that negates the benefit of having a CD in the first place.So if you’ve done the smart thing and built yourself an emergency fund, don’t move it to a CD. Instead, make your peace with earning a bit less interest, and with the fact that your interest rate may not be set in stone the way it is with a CD.Don’t just settle for any old savings accountYou might earn a touch less interest in a savings account today than a CD. And worse yet, because the Fed is expected to continue cutting rates, you may find that you’re earning less and less on your savings from one month to the next.But you don’t want to get hit with an early withdrawal penalty. Depending on the term of your CD and your bank, it could amount to several months of interest or more.Instead, shop around for the best savings account rate you can find. You can start with this list of the top savings account rates today.If you have your money at a brick-and-mortar bank, you should especially consider moving your emergency fund to a savings account with an online bank. Online banks are commonly able to offer superior rates because they have less overhead than physical banks.It’s natural to want to open a CD while rates are still decent. But putting your emergency fund into a CD is a mistake you might end up kicking yourself for.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”:”

There was a time not so long ago when locking in a CD at 5% was pretty easy. But ever since the Federal Reserve started cutting its benchmark interest rate, 5% CDs have been hard to find.

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.

The Fed made its first rate cut of the year in mid-September. And it followed it up with a second cut earlier this month. As a result, CD rates have dropped into the 4% range, with many now paying closer to the 4% mark than 4.5%.

Because CD rates are falling, you may be eager to open one while you can still snag a good deal. And if so, check out this list of the best CD rates to narrow down your choices.

But if you’re going to open a CD in the coming weeks, there’s one big mistake you should definitely take care to avoid.

Don’t put your emergency fund in the wrong place

If you have a fully loaded emergency fund — enough money to cover three months of essential bills or more — it’s a sign you’re in great shape financially.

Even if you don’t have three full months’ worth of essential expenses in the bank, if you have a decent chunk of money earmarked for unplanned bills or a period of job loss, you’re ahead of many Americans. The Federal Reserve found that as of 2022, 37% of U.S. adults didn’t have enough savings to cover a surprise $400 bill.

But if you’re thinking of moving your emergency fund into a CD to get a good rate while you can, you should know that you’re playing with fire.

The whole point of having an emergency fund is to be able to cover unplanned expenses on a whim. But when you put money into a CD, you have to commit to the term. If you take your money out before your CD matures, you’re typically hit with an early withdrawal penalty that negates the benefit of having a CD in the first place.

So if you’ve done the smart thing and built yourself an emergency fund, don’t move it to a CD. Instead, make your peace with earning a bit less interest, and with the fact that your interest rate may not be set in stone the way it is with a CD.

Don’t just settle for any old savings account

You might earn a touch less interest in a savings account today than a CD. And worse yet, because the Fed is expected to continue cutting rates, you may find that you’re earning less and less on your savings from one month to the next.

But you don’t want to get hit with an early withdrawal penalty. Depending on the term of your CD and your bank, it could amount to several months of interest or more.

Instead, shop around for the best savings account rate you can find. You can start with this list of the top savings account rates today.

If you have your money at a brick-and-mortar bank, you should especially consider moving your emergency fund to a savings account with an online bank. Online banks are commonly able to offer superior rates because they have less overhead than physical banks.

It’s natural to want to open a CD while rates are still decent. But putting your emergency fund into a CD is a mistake you might end up kicking yourself for.

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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