2025 CD Rates Surge Above 5%: Why Investors Are Turning to Certificates of Deposit

Diccon Hyatt, a seasoned financial and economic journalist, has extensively covered the pandemic-era economy through hundreds of clear and insightful articles. His work focuses on how economic trends affect personal finances and the broader market. Previously, he contributed to U.S. 1, Community News Service, and the Middletown Transcript.

The Federal Reserve's recent pause in its aggressive anti-inflation interest rate hikes has spotlighted fixed-income investments like certificates of deposit (CDs), making them increasingly appealing to investors — a trend clearly reflected among Investopedia readers.

Key Insights

• Interest in CDs among Investopedia readers has reached record highs.
• Top-tier CDs currently offer yields exceeding 5%, attracting savers seeking secure returns.
• Despite rising CD popularity, many investors still prefer stocks for additional funds, indicating a balanced approach to portfolio growth.

With CD rates soaring beyond 5% in 2024, fueled by the Federal Reserve's rate hikes since 2022, more investors are placing their money into these secure, fixed-income options. Investopedia's recent survey of 976 U.S. adults, conducted between April 14 and May 2, reveals the highest-ever percentage of readers increasing their CD investments since the survey began in August 2021.

Although CD interest is surging, stocks remain the preferred investment for many when considering where to allocate an extra $10,000, narrowly surpassing CDs in the latest survey results. Previously, CDs had held the top spot.

The Federal Reserve’s hikes in the benchmark fed funds rate over the past 15 months have pushed borrowing costs and interest rates higher, directly benefiting CD yields. On Wednesday, the Fed paused rate increases for the first time since March 2022, maintaining current levels.

Fed officials anticipate further rate hikes totaling 50 basis points this year and do not expect to reduce rates until 2025, suggesting that attractive yields on savings instruments like CDs may persist.

Savers can capitalize on today's elevated interest rates through several options: CDs, high-yield savings accounts, and money market accounts, each with distinct advantages and trade-offs.

CDs lock in a guaranteed interest rate for a fixed term but often impose penalties for early withdrawal. High-yield savings accounts offer greater liquidity but variable rates that can fluctuate. Money market accounts combine features of savings and checking accounts, including debit access and check-writing capabilities, providing flexible access to funds.

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