Should you renew your maturing CD account if rate cuts look likely?

An interest rate cut may not be as detrimental for CD account holders as it seems on the surface. Getty Images/iStockphoto

In the interest rate climate of recent years, the decision to open a certificate of deposit (CD) account was an obvious choice. With interest rates on these savings vehicles exponentially higher than they had been in 2020 and 2021, for example, and with that rate fixed in the face of market uncertainty, savers stood to earn hundreds or even thousands of dollars in interest simply by moving some of their funds into one of these account types.

But in the interest rate climate of 2025, does it still make sense to open a CD account? And what should existing CD account holders do if they have an account set to mature this May or later this year? With a cut to the federal funds rate looking increasingly likely for June or July and, thus, a cut to what savers can earn with a CD, some may be wondering about their next steps. Specifically, should you renew your maturing CD account if rate cuts look likely? In many circumstances, it can still be the smart and cost-effective move. Below, we'll explain why.

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Should you renew your maturing CD account if rate cuts look likely?

Sure, Fed rate cuts look imminent. The CME Group's FedWatch tool has a cut listed at around a 30% likelihood for June and around 75% for July. But that shouldn't discourage savers from renewing their maturing CD accounts. Here's why:

The rate cut trajectory could easily change

Optimism from borrowers was high last September when the Fed issued a larger-than-anticipated 50 basis point cut to its benchmark interest rate. And that optimism remained in the final months of the year when the central bank issued additional cuts in November and December. But that rate cut campaign was halted when inflation became problematic again, and now rates will remain the same for at least the first half of 2025. 

In other words, the rate cut trajectory could easily change in the weeks and months ahead. So, avoiding a high-rate CD account on a "maybe," particularly when rates are still available close to 5% now, doesn't make sense for savers. Instead, many would benefit from renewing their maturing CD account with a new one, which will allow them to earn high returns regardless of what happens in the broader rate climate.

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Rate cuts, when they come, are likely to be small

The rate cut issued last fall was an anomaly and shouldn't be expected to be repeated in the same increment anytime soon, barring any major economic factors that cause the Fed to become more aggressive. In other words, when a rate cut is issued again, it's likely to be by just 25 basis points, which won't do much to reduce today's CD rate offers. 

Cumulatively, however, interest rate cuts will add up over time, so it makes sense to offset this by opening the highest-rate long-term CD available now. Consider speaking to your current bank (and review online ones) to determine which will be better for your maturing funds now, so you're ready to act when the account moves into its grace period.

You'll lose the interest-earning opportunity in the interim

Emptying your maturing CD account to put it somewhere else only really makes sense if you urgently need access to the funds … or if you have somewhere equally as beneficial to store it. But the alternatives right now are not nearly as good as another CD will be, even if rates look like they may be cut soon. 

High-yield savings accounts have comparable rates, but they're variable and will change when a rate cut is issued (and perhaps before then, depending on the lender). A traditional savings account, meanwhile, has an average rate of just 0.41% currently, making it multiple times less advantageous than a 4% CD rate. So don't lose the interest-earning opportunity in the interim. A CD could still be the smart move to make for your maturing funds now.

The bottom line

Renewing your maturing CD account in today's unique rate climate is a personal decision that will need to be weighed carefully against your economic needs and the opportunity to continue to earn elevated interest on your money. But, considering that the rate cut trajectory could change, that rate cuts (when they do arrive) are likely to be small and the lost interest-earning opportunity if the funds are moved out of a CD, it can still make sense to pursue new CD accounts now. Just be sure to do so with an amount of money that you can comfortably part with for the full CD term or you'll need to pay an early withdrawal penalty to regain access.

Matt Richardson

Matt Richardson is the senior managing editor for the Managing Your Money section for CBSNews.com. He writes and edits content about personal finance ranging from savings to investing to insurance.