Fact Check: Are cds worth it?

Fact Check: Are cds worth it?

Published May 2, 2025
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VERDICT
Partially True

# Are CDs Worth It? The claim "Are CDs worth it?" raises an important question regarding the value of Certificates of Deposit (CDs) as an investment ...

Are CDs Worth It?

The claim "Are CDs worth it?" raises an important question regarding the value of Certificates of Deposit (CDs) as an investment option in the current financial landscape. As interest rates fluctuate and economic conditions change, potential investors are left to consider whether CDs are a viable choice for their savings strategy.

What We Know

  1. Interest Rates: The average annual percentage yield (APY) for one-year CDs was reported at 1.76% as of September 18, 2023, a significant increase from 0.60% a year prior 6. This increase in rates is attributed to the Federal Reserve's actions to combat inflation, which saw rates rise from 0.25% in March 2022 to as high as 5.25% by July 2023 1.

  2. Safety and Insurance: CDs are considered safe investments, as they are typically insured by the Federal Deposit Insurance Corporation (FDIC) for banks or the National Credit Union Administration (NCUA) for credit unions, protecting deposits up to $250,000 9.

  3. Comparison to Other Investments: The performance of CDs can be compared to other investment vehicles. For instance, the S&P 500 Index had a 3-year average annual return of 13.72% as of July 31, 2023 2. This suggests that while CDs offer safety, they may not yield returns comparable to more volatile investments like stocks.

  4. Investment Goals: Financial experts indicate that whether CDs are a good investment depends on individual savings goals and the current interest rate environment 3. For short-term savings or those seeking guaranteed returns, CDs may be beneficial, while long-term investors might prefer stocks or bonds 10.

  5. Market Trends: Some analyses suggest that as interest rates drop, the attractiveness of CDs may diminish, leading to lower yields in the future 4. However, current rates still provide a competitive return compared to traditional savings accounts.

Analysis

The discussion around the value of CDs is multifaceted and influenced by various factors, including economic conditions, individual financial goals, and market trends.

  • Source Reliability: The sources cited range from financial news outlets like Forbes 3 and Kiplinger 2 to financial advisory platforms like NerdWallet 10. These sources generally have established credibility in personal finance, but they may exhibit bias based on their target audience or potential conflicts of interest, such as promoting specific financial products.

  • Methodology: Many articles rely on average APY data from the FDIC and other financial institutions, which is a reliable metric for assessing the current state of CDs. However, the interpretation of this data can vary. For example, while some sources emphasize the safety and guaranteed returns of CDs, others highlight the opportunity cost of not investing in higher-yielding assets like stocks 68.

  • Conflicting Opinions: There is a clear divide in opinions regarding the suitability of CDs. Some experts advocate for their use as a stable investment for conservative savers, while others caution against their limited growth potential compared to equities 210. This divergence suggests that the answer to whether CDs are worth it is not straightforward and depends heavily on individual circumstances.

  • Additional Information Needed: To further evaluate the claim, additional data on long-term trends in CD rates, comparative analyses with other investment vehicles over similar time frames, and insights into consumer behavior regarding savings strategies would be beneficial.

Conclusion

Verdict: Partially True

The claim regarding the worth of CDs is partially true, as it reflects a nuanced reality. Current interest rates for CDs have improved significantly, providing a safer investment option compared to traditional savings accounts. However, the returns on CDs are generally lower than those of more volatile investments like stocks, which may yield higher long-term growth.

The determination of whether CDs are a good investment ultimately depends on individual financial goals and the current economic climate. While they can be beneficial for short-term savings and risk-averse investors, they may not be suitable for those seeking higher returns over the long term.

It is important to acknowledge the limitations in the available evidence, including potential biases in the sources and the variability of market conditions. As such, readers should approach this information with a critical mindset and consider their personal financial situations when evaluating the worth of CDs as an investment option.

Sources

  1. Bankrate. "Are CDs worth it right now? Here's what experts say." Link
  2. Kiplinger. "Are CDs a Good Investment in 2023?" Link
  3. Forbes Advisor. "Are CDs Worth It?" Link
  4. CNET. "Are CDs Still Worth It in 2024?" Link
  5. Bankrate. "The pros and cons of CD investing." Link
  6. MoneyWise. "Are CDs Worth It? Yes, Here's Why." Link
  7. CBS News. "Is a short-term CD worth it for 2025?" Link
  8. Investopedia. "Are CDs Still Worth It? Yes, They Areβ€”But Don't Sleep on These Top Rates." Link
  9. BECU. "Are CDs Worth It Right Now?" Link
  10. NerdWallet. "Are CDs Worth It?" Link

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