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6 Types of CD Accounts You Might Want To Avoid Right Now

Some certificates of deposit could do more harm than good in the current rate environment.

By Adam Palasciano

Edited by Chris Kissell

Updated July 2, 2025

When interest rates shift, it's smart to re-evaluate your savings strategy. While certificates of deposit (CDs) can be a safe way to earn interest, not every CD on the market is a good deal right now.

If your goal is to build your wealth without locking yourself into a bad product, it's worth knowing which CDs to skip.

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What is a CD?

A certificate of deposit (CD) is a type of savings vehicle that pays a fixed interest rate over a set term, usually ranging from a few months to several years.

In exchange for an interest rate higher than what you would find on a regular savings account, you agree to leave your money untouched until the term ends. Withdrawing money early often comes with penalties.

CDs are best suited for savers who won't need immediate access to the funds and who want a predictable return. However, here are six types of CD accounts that might not be worth your money today.

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1. Longer-term CDs

CDs with terms longer than two or three years may not be a smart choice right now. If interest rates rise, locking in a low rate for five years or more could leave you earning less than the rate of inflation.

Although interest rates have been falling recently, it's possible they could head higher again if new tariffs on imported goods cause inflation to reignite, as many experts predict.

Longer commitments to a CD can also limit your flexibility if better rates become available. It may be wiser to stick with shorter-term CDs or high-yield savings accounts while the rate environment remains uncertain.

2. CDs with tough withdrawal penalties

You never know when you might need to dip into your savings earlier than expected. Some CDs charge hefty penalties for early withdrawals, potentially wiping out months of interest.

If there's any chance you'll need the money before maturity, a strict penalty structure could cost you more than you earn. So, always read the fine print before committing to one of these accounts.

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3. Callable CDs

Callable CDs come with a big catch: The bank can choose to end the CD early, especially if interest rates drop.

That means you could lose out on future interest just when you need a stable return. These products often advertise slightly higher rates to lure you in, but the call feature adds risk for the depositor.

If you want certainty, a noncallable CD is the safer route.

4. CDs with high minimum deposit requirements

Some banks require a larger minimum deposit just to open a CD. That might tie up money you could otherwise use for emergency savings, investing, or higher-yielding alternatives.

Unless the interest rate justifies the commitment, it might not be worth locking away that much cash. You may be able to find competitive rates with lower deposit requirements elsewhere.

5. CDs from traditional banks offering lower returns

Some bigger, more traditional banks do not offer competitive CD rates, even when national averages are rising. If you're settling for a CD with a rate below the rate of inflation or far lower than what is being offered by competitors, you're leaving money on the table.

Loyalty to a particular bank might cost you more than it's worth. It's always smart to shop around and compare yields before choosing where to park your savings.

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6. Any CD, if you need higher returns

CDs offer security, but they rarely deliver big returns. If you're looking to grow your money more aggressively, other vehicles such as stocks, ETFs, or mutual funds may be better options.

So, if earning more interest is your priority, you might want to consider more flexible or growth-oriented alternatives.

Bottom line

CDs can play a role in a balanced savings strategy, but some types of CDs might not sense in today's market. Long lock-up periods, rigid rules, and underwhelming returns can all eat away at the benefits CDs are supposed to offer.

If you're evaluating where to store your cash, now might be the perfect time to compare your options and open a new bank account that better matches your financial goals.

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