3 Reasons I'm Not Touching CDs -- Even With Rates Above 5.00%

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Certificates of deposit (CDs) are offering some pretty great rates right now. There are numerous offers with rates topping 5.00% and some CDs are paying as high as 5.15%.

Despite these impressive yields, I'm absolutely not interested. Here are some key reasons why that's the case.

1. I don't want to deal with the hassle of investing in CDs

When it comes to managing my money, I'm a pretty lazy person. I've automated as much of my financial life as possible, transferring money automatically to my savings accounts and bills so I don't have to think about it. I don't change savings accounts all the time to chase the best rates, and I don't participate in complicated credit card rewards programs where I have to keep track of different bonus categories.

Since I like to keep things simple, I'm just not interested in dealing with the hassle of investing in CDs.

Most of the best rates right now are on CDs that have a term of two years or less. CDs with longer terms are paying close to the 3.00% to 4.00% range. So, to get the very best rates, I'd have to research my options, buy a CD now, then deal with moving the money elsewhere in a year or so to avoid having my CD auto-renew at a potentially lower rate.

Alternatively, I can just leave my money in the high-yield savings account I already have. It's paying around the same rates as those long-term CDs. Sure, my rate could fall if the Federal Reserve lowers interest rates, but I don't think that's going to happen for a while. And even if it does, the effort involved to squeeze a little bit extra out of the money I have in savings just isn't worth the time and effort.

Unless you have tens of thousands of dollars in savings or you enjoy poring over bank offers and want to do it every few months or so, the extra returns a CD may offer over a savings account may not be worth your time either.

2. I'm not OK with locking up my short-term savings

I also don't want to commit my money to CDs. CDs require you to agree to leave your funds invested for a set term. But like most people, I just don't have a lot of money in a savings account that I don't need for something else.

I have a vacation fund, an emergency fund, and a car and home repair fund in savings right now. I can't commit to putting that money into a CD and not being able to get it out if I need it for unexpected expenses or I can get a good deal on a trip. That money should be accessible to me.

The reality is, money in your savings account usually isn't an investment. It's being saved for something specific and that is its purpose rather than to maximize your return. Now, you may have a situation where you do have money in short-term savings you absolutely won't need for a few years. If so, then maybe a CD might be worth your while. But that's not a very common position to be in.

3. I'd rather earn higher returns on my long-term investments

Finally, the last big reason I'm not touching CDs is because my longer-term investments are in an S&P 500 index fund. I'm expecting it will earn me 10% average annual returns over the long run -- the historical average over the past 50 years, and double what CDs are paying.

Any money you're OK with locking up for a while is likely going to do better in the market, as long as you have a long enough investing timeline to wait out any potential downturns. If you can leave the money invested for a couple years, buying a CD and capping your rates -- even at a generous 5.00% -- doesn't make a whole lot of sense.

For all of these reasons, I'm not touching CDs -- and you may not want to either.

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