Rates for six-month CDs are far more generous than they were a few years ago. But rates may have peaked. They're expected to come down when the Fed announces whether (and by how much) it will cut rates in September.
If you have a little extra money to set aside, a six-month certificate of deposit (CD) can help you lock in a guaranteed yield without locking up your cash for the long term. You can also use six-month CDs as part of a CD ladder, a longer-term investing strategy that involves mixing certificates of different maturities.
Best 6-month CD rates
The market for six-month CDs is large and, as a result, quite competitive. Today, these short-term instruments often offer the highest annual percentage yields (APYs) available on an FDIC-insured product.
These CD rate picks reflect the best 6-month CD rates we found on DepositAccounts and CD Valet, which together track 275,000 rates at banks and credit unions across the country.
- Geismar Complex Federal Credit Union: 6.17%
- Kings Peak Credit Union: 5.65%
- Sonata Bank: 5.60%
- UBI Federal Credit Union: 5.50%
- Merchants Bank of Indiana: 5.25%
Rates on 6-month CDs are among the highest across maturity terms right now, with many banks and credit unions offering 6-month CDs with APYs well above 5.00%.
That means short-term interest rates are higher than long-term interest rates, which economists describe as an inverted-yield curve.
"We're in the longest-running yield inversion that I've experienced in over 40 years," says Tim Pagliara, chief investment officer of investment advisory firm CapWealth in Franklin, Tenn.
Many analysts view an inverted-yield curve as a harbinger of a recession, since it implies that borrowing costs will be lower in the future and the Fed tends to cut rates to stimulate the economy during a recession.
CD yields are highly influenced by the Federal Reserve's adjustments of its benchmark interest rate, the federal-funds rate. The Fed has held this rate at a range of 5.25% to 5.5% since July 2023, but experts anticipate it to drop in September by at least a quarter point and up to a half point. According to futures-market analysis by the CMEGroup's FedWatch, a one-point drop could be on the horizon by the end of 2024. The size of the rate cut largely depends on employment and inflation reports.
If the fed-funds rate does drop, consumer deposit rates are likely to follow.
What is a CD
CDs resemble savings accounts in that you can open them at a local bank, online bank or credit union), and they are insured by the Federal Deposit Insurance Corp. (FDIC) or National Credit Union Administration (NCUA). Unlike traditional savings accounts, however, CDs require you to lock up your money for a set term. In return, they offer fixed interest rates that are generally higher than rates on other savings accounts. Some of the best CD yields can be found with terms of less than one year, making six-month CDs a low-risk investment worth considering.
When to buy a 6-month CD
Whether six-month CD rates fall or not, it could be a good time to lock in a fixed earning rate if you have unallocated cash on hand and find yourself in one of the following situations.
You have an upcoming expense in six months
A six-month CD is a useful tool for socking away money for a planned expense. For instance, if you are planning a purchase such as a new car or you want to put an addition on your house, you can use a six-month CD to allocate that cash so it will be there when you need it and grow in the meantime.
Because they're term savings accounts with fixed maturity periods, CDs make it difficult to tap your money early by design. They can have steep early-withdrawal penalty fees that put a significant dent in—or, in the case of six-month CDs, sometimes entirely deplete—your interest earnings. This may serve as a deterrent for unnecessary spending.
You don't know where to put your cash
If you're new to investing or have recently come into a large amount of money—say, from an inheritance—the potentially high yields on six-month CDs give you the opportunity to tuck the money away for temporary safekeeping without incurring market risk. And with a maturity period of just six months, you're not making a lasting commitment.
Think of it as buying yourself time to research where and how to put that cash for the longer term, says Dillon Haviland, a financial planner at TBH Advisors in Nashville, Tenn., says, "A six-month CD is going to give you the ability to realize that interest and think about what you want to do."
You want to start a CD ladder
Building a CD ladder entails opening several CDs that mature at regular, but staggered, intervals. As each CD matures, you can roll it over into a new instrument or remove the cash, depending on your needs. Laddering your savings across multiple CDs gives you the flexibility of having frequent access to your money as the CDs mature, and the opportunity to lock in the best rates for several repayment terms.
For instance, you could start out with a six-month CD and a one-year CD. When the six-month CD matures, you would then roll over that balance into a new one-year CD. Maintaining this structure would let you have steady access to that cash at six-month intervals, if you need it.
Financial planners recommend CD ladders because they can be tailored to an individual's financial needs. For instance, you could set up three-, six- and nine-month CDs if you wanted to access your money every three months.
Ken Tumin, founder of rate-tracking site DepositAccounts, points out that laddering sort of works like dollar-cost averaging, the strategy of buying stocks on a regular basis rather than trying to time the market. "You don't worry about whether to stay short or go long based on how you think interest rates will evolve, and that often turns out to be not only the simplest but also the most effective strategy," he says.
How we picked
To find the best six-month CD rates, we looked at CDs with minimum deposits of $1,000 or less available at member institutions of the FDIC or the National Credit Union Administration, the government agency that oversees and provides deposit coverage for member credit unions.
We focused on fixed-rate CDs because, while some variable-rate CDs had higher rates than ones featured here, the drawback is the possibility that the rate could drop before your CD matures, tying your money up at a lower return. Some of the rates featured here might require opening your CD in person or be offered by a credit union that restricts membership.
Keep in mind that you might find a great six-month CD rate at a local community bank or credit union near you.
More about Savings and CDs Rates
- Best Savings Account Rates
- Best 1-Year CD Rates
- Best 5-Year CDs
Meet the contributor
Martha C. White
Martha C. White is a contributor to Buy Side from WSJ.
