{"id":23007,"date":"2026-01-22T23:50:56","date_gmt":"2026-01-22T23:50:56","guid":{"rendered":"https:\/\/budgetadirect.com\/?p=23007"},"modified":"2026-01-22T23:50:59","modified_gmt":"2026-01-22T23:50:59","slug":"short-term-cd-vs-long-term-cd-which-is-best-for-you","status":"publish","type":"post","link":"https:\/\/budgetadirect.com\/?p=23007","title":{"rendered":"Short-Term CD Vs. Long-Term CD: Which Is Best For You?"},"content":{"rendered":"<div id=\"\">\n<div class=\"overflow-hidden relative bg-blue-50 aspect-video w-full rounded-lg\"><\/div>\n<p>\n            staticnak1983\/Getty Images\n        <\/p>\n<\/p><\/div>\n<div xmlns:default=\"http:\/\/www.w3.org\/2000\/svg\">\n<div id=\"block_0a5d66365d98e94a04482c326f30480b\" class=\"key-takeaways sm:border-l-4 border-(--accent) sm:pl-8 my-8 relative\" style=\"--accent: var(--color-blue-medium)\">\n    <!-- htmlmin:ignore --><\/p>\n<h2 class=\"heading-4 mt-0 mb-4 text-crop-none max-sm:flex max-sm:items-center max-sm:gap-4\" id=\"key-takeaways\" data-position=\"0\" data-beam-element-viewed=\"\" data-id=\"br-h2-0-onpage-placement\" data-type=\"h2\" data-location=\"Editorial\" data-name=\"h2_all\" data-text=\"Key takeaways\" data-outcome=\"\">\n    <span class=\"shrink-0\">Key takeaways<\/span><br \/>\n        <span class=\"max-sm:h-0.5 max-sm:w-full max-sm:w-full max-sm:bg-(--accent) max-sm:rounded-full max-sm:block\"\/><br \/>\n    <\/h2>\n<p>    <!-- htmlmin:ignore --><\/p>\n<ul class=\"flex flex-col text-gray-700 mb-0 gap-2 list-disc\">\n<li class=\"pl-4 relative marker:text-(--accent)\">\n                                                            Short-term CDs typically are those that mature within one year, while long-term CDs have terms ranging from three to five years.\n                                                <\/li>\n<li class=\"pl-4 relative marker:text-(--accent)\">\n                                                            Currently, some top-earning long-term CDs have slightly higher interest rates than short-term ones.\n                                                <\/li>\n<li class=\"pl-4 relative marker:text-(--accent)\">\n                                                            You can use a CD ladder to take advantage of the benefits of both short-term and long-term CDs.\n                                                <\/li>\n<\/ul>\n<\/div>\n<p>Certificate of deposit (CD) terms typically range from three months to five years, and their guaranteed annual percentage yield (APY) can make them worthwhile in the current falling-rate environment.\u00a0<\/p>\n<p>The right CD term for you depends on when you\u2019ll need access to the money. If your timeline is flexible, it can pay to choose the term with the most competitive APY.\u00a0<\/p>\n<p>Locking in a lengthier term, however, guarantees you\u2019ll earn the high rate for longer, especially since going rates on new CDs are expected to decline further in 2026.<\/p>\n<h2 id=\"short-term\" data-position=\"1\" data-beam-element-viewed=\"\" data-id=\"br-h2-1-onpage-placement\" data-type=\"h2\" data-location=\"Editorial\" data-name=\"h2_all\" data-text=\"Short-term CDs\" data-outcome=\"\">Short-term CDs<\/h2>\n<p>Short-term CDs typically have terms of up to one year. Putting money into a short-term CD can help maximize the interest you\u2019ll earn on funds earmarked for purchases in the near future, such as an upcoming vacation, home renovations or next year\u2019s holiday gifts. As of January 22, 2026, the average one-year CD earns 1.9% APY but you can find better rates with the best one-year CD rates.\u00a0<\/p>\n<p><strong>Pros and cons of short-term CDs<\/strong><\/p>\n<div id=\"block_131808eec2852eb4fa89862d66e5eb66\" class=\"flex flex-col gap-8 my-6 not-wysiwyg\">\n<div class=\"ProsAndConsTable\">\n<div class=\"ProsAndConsItem\">\n<div class=\"ProsAndConsItem-headerContainer flex items-center gap-2\">\n<div>\n                <img decoding=\"async\" src=\"https:\/\/budgetadirect.com\/wp-content\/uploads\/2025\/06\/circle-check.svg.svg+xml\" alt=\"Green circle with a checkmark inside\"\/>\n            <\/div>\n<p>            <!-- htmlmin:ignore --><\/p>\n<h3 class=\"ProsAndConsItem-header\">\n    Pros<br \/>\n    <\/h3>\n<p>    <!-- htmlmin:ignore -->\n        <\/div>\n<ul class=\"ProsAndConsItem-list\">\n<li>Money is available relatively soon, so you may be less likely to need the money earlier and incur an early withdrawal penalty.<\/li>\n<\/ul><\/div>\n<div class=\"ProsAndConsItem\">\n<div class=\"ProsAndConsItem-headerContainer flex items-center gap-2\">\n<div>\n                <img decoding=\"async\" src=\"https:\/\/budgetadirect.com\/wp-content\/uploads\/2025\/06\/remove-circle.svg.svg+xml\" alt=\"Red circle with an X inside\"\/>\n            <\/div>\n<p>            <!-- htmlmin:ignore --><\/p>\n<h3 class=\"ProsAndConsItem-header\">\n    Cons<br \/>\n    <\/h3>\n<p>    <!-- htmlmin:ignore -->\n        <\/div>\n<ul class=\"ProsAndConsItem-list\">\n<li>May earn a lower rate than longer-term CDs.<\/li>\n<li>While you\u2019ll have the funds back relatively soon, they\u2019re not as accessible as in a liquid savings account.<\/li>\n<\/ul><\/div>\n<\/div><\/div>\n<h2 id=\"midrange-cds\" data-position=\"2\" data-beam-element-viewed=\"\" data-id=\"br-h2-2-onpage-placement\" data-type=\"h2\" data-location=\"Editorial\" data-name=\"h2_all\" data-text=\"Midrange CDs\" data-outcome=\"\">Midrange CDs<\/h2>\n<p>Midrange CDs can include those with terms greater than a year and up to three years in length. People may open a midrange CD to save for a new car or for planned life events such as\u00a0getting married or having a baby. As of January 22, 2026, the average APY for a two-year CD is 1.7% but shop around. The best two-year CD rates are likely higher.<\/p>\n<h3><strong>Pros and cons of midrange CDs<\/strong><\/h3>\n<div id=\"block_adae6863c811bab8c57443688510ec40\" class=\"flex flex-col gap-8 my-6 not-wysiwyg\">\n<div class=\"ProsAndConsTable\">\n<div class=\"ProsAndConsItem\">\n<div class=\"ProsAndConsItem-headerContainer flex items-center gap-2\">\n<div>\n                <img decoding=\"async\" src=\"https:\/\/budgetadirect.com\/wp-content\/uploads\/2025\/06\/circle-check.svg.svg+xml\" alt=\"Green circle with a checkmark inside\"\/>\n            <\/div>\n<p>            <!-- htmlmin:ignore --><\/p>\n<h3 class=\"ProsAndConsItem-header\">\n    Pros<br \/>\n    <\/h3>\n<p>    <!-- htmlmin:ignore -->\n        <\/div>\n<ul class=\"ProsAndConsItem-list\">\n<li>May earn a higher rate than shorter-term CDs.<\/li>\n<\/ul><\/div>\n<div class=\"ProsAndConsItem\">\n<div class=\"ProsAndConsItem-headerContainer flex items-center gap-2\">\n<div>\n                <img decoding=\"async\" src=\"https:\/\/budgetadirect.com\/wp-content\/uploads\/2025\/06\/remove-circle.svg.svg+xml\" alt=\"Red circle with an X inside\"\/>\n            <\/div>\n<p>            <!-- htmlmin:ignore --><\/p>\n<h3 class=\"ProsAndConsItem-header\">\n    Cons<br \/>\n    <\/h3>\n<p>    <!-- htmlmin:ignore -->\n        <\/div>\n<ul class=\"ProsAndConsItem-list\">\n<li>Locking up funds for more than a year can be difficult, depending on how many emergencies come up during that time.<\/li>\n<\/ul><\/div>\n<\/div><\/div>\n<h2 id=\"long-term-cds\" data-position=\"3\" data-beam-element-viewed=\"\" data-id=\"br-h2-3-onpage-placement\" data-type=\"h2\" data-location=\"Editorial\" data-name=\"h2_all\" data-text=\"Long-term CDs\" data-outcome=\"\">Long-term CDs<\/h2>\n<p>Long-term CDs generally range between three and five years. These accounts can help you earn significant interest on funds earmarked for use in several years, such as the down payment on a house or putting an addition on your home. Take a look at Bankrate\u2019s picks for the best five-year CD rates and see how they compare to the national average, which is 1.68% APY as of January 22, 2026.<\/p>\n<h3><strong>Pros and cons of long-term CDs<\/strong><\/h3>\n<div id=\"block_c1dbf3367320acc6d034bd8fe827d48b\" class=\"flex flex-col gap-8 my-6 not-wysiwyg\">\n<div class=\"ProsAndConsTable\">\n<div class=\"ProsAndConsItem\">\n<div class=\"ProsAndConsItem-headerContainer flex items-center gap-2\">\n<div>\n                <img decoding=\"async\" src=\"https:\/\/budgetadirect.com\/wp-content\/uploads\/2025\/06\/circle-check.svg.svg+xml\" alt=\"Green circle with a checkmark inside\"\/>\n            <\/div>\n<p>            <!-- htmlmin:ignore --><\/p>\n<h3 class=\"ProsAndConsItem-header\">\n    Pros<br \/>\n    <\/h3>\n<p>    <!-- htmlmin:ignore -->\n        <\/div>\n<ul class=\"ProsAndConsItem-list\">\n<li>Can guarantee you\u2019ll earn a high rate for the long term, even if going rates fall on new CDs in the meantime.<\/li>\n<\/ul><\/div>\n<div class=\"ProsAndConsItem\">\n<div class=\"ProsAndConsItem-headerContainer flex items-center gap-2\">\n<div>\n                <img decoding=\"async\" src=\"https:\/\/budgetadirect.com\/wp-content\/uploads\/2025\/06\/remove-circle.svg.svg+xml\" alt=\"Red circle with an X inside\"\/>\n            <\/div>\n<p>            <!-- htmlmin:ignore --><\/p>\n<h3 class=\"ProsAndConsItem-header\">\n    Cons<br \/>\n    <\/h3>\n<p>    <!-- htmlmin:ignore -->\n        <\/div>\n<ul class=\"ProsAndConsItem-list\">\n<li>Locking up your funds for several years could mean you lose out on a better yield if rates rise in the meantime.<\/li>\n<li>Over the years, your CD\u2019s rate might not keep up with inflation, causing your money to lose purchasing power.<\/li>\n<li>Leaving the money untouched for years might prove difficult in the event of unexpected or job loss or large expenses.<\/li>\n<\/ul><\/div>\n<\/div><\/div>\n<h2 id=\"short-term-higher-than\" data-position=\"4\" data-beam-element-viewed=\"\" data-id=\"br-h2-4-onpage-placement\" data-type=\"h2\" data-location=\"Editorial\" data-name=\"h2_all\" data-text=\"Are short-term CD rates higher than long-term CD rates?\" data-outcome=\"\"><strong>Are short-term CD rates higher than long-term CD rates?<\/strong><\/h2>\n<p>Historically, long-term CDs have often earned higher rates than their short-term counterparts. However, in recent years, the opposite was true: From December 2022 until August 2025, for instance, the most competitive one-year CD rates were higher than the top five-year CD rates, based on Bankrate data.<\/p>\n<p>One reason this happened is officials raised the federal funds rate by a considerable 525 basis points in 2022 and 2023 in an effort to tame soaring inflation. When the\u00a0federal funds rate is high, banks don\u2019t want to lock themselves into paying high interest rates on long-term CDs if rates are likely to drop in the near future. Instead, they make short-term CDs more attractive with higher rates.<\/p>\n<p>However, the Fed has been lowering rates in the past two years, and banks have been lowering their APYs, in turn. Along with this, top five-year CDs have recently begun outearning one-year ones.<\/p>\n<h2 id=\"how-much-can-i\" data-position=\"5\" data-beam-element-viewed=\"\" data-id=\"br-h2-5-onpage-placement\" data-type=\"h2\" data-location=\"Editorial\" data-name=\"h2_all\" data-text=\"How much can I earn in a short-term CD vs. a long-term CD?\" data-outcome=\"\"><strong>How much can I earn in a short-term CD vs. a long-term CD?<\/strong><\/h2>\n<p>The longer you leave your money earning interest, the more interest you\u2019ll earn. So even if a one-year CD has a higher rate, you\u2019ll still earn more over time with a lower rate in a five-year CD. That\u2019s just how compound interest works. For instance, if you have $5,000 to put into a CD:<\/p>\n<ul class=\"wp-block-list\">\n<li>For a five-year CD with an APY of 3.50%, you\u2019d have around $5,938 when the CD matures \u2014 since it will have earned around $938 in interest.<\/li>\n<li>For a one-year CD with an APY of 4.00%, you\u2019d end with a significantly lower amount of $5,200 when the year is up, which includes around $200 in interest.<\/li>\n<\/ul>\n<p>That said, a longer-term CD isn\u2019t always the best option. For instance, if rates start to rise, you\u2019ll have access to your funds sooner in a shorter CD and can reinvest them at a better rate.\u00a0<\/p>\n<p>A\u00a0CD calculator can come in handy when you\u2019re considering different term lengths and comparing rates.<\/p>\n<section class=\"editorial-insight-box --insight-box +mg-vertical-md\" data-template=\"insight_box\">\n<div class=\"card-body border-l-4 border-blue-800\">\n<div class=\"content-wrapper\">\n<p>\n                    Get the best of all worlds with a CD ladder\n                <\/p>\n<div class=\"content wysiwyg wysiwyg--flush\">\n<p>A CD ladder is a savings strategy that takes advantage of the benefits of short-, mid- and long-term CDs. Building a CD ladder involves opening several CDs of varying lengths and staggering the maturity dates at regular intervals. For example, you could build a CD ladder with a one-year,\u00a0two-year and\u00a0three-year CD.<\/p>\n<p>When each CD matures, you can either withdraw your money or reinvest it, continuing the CD ladder. This strategy creates revolving access to a portion of your savings, reducing the risk of incurring early withdrawal penalties. Plus, no matter which type of CD is currently offering the highest rates \u2014 short, midrange or long \u2014 building a CD ladder with a range of terms allows you to take advantage of those competitive rates.<\/p>\n<\/p><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<\/section>\n<h2 id=\"Finding-a-CD-with-the-best-rate\" data-position=\"6\" data-beam-element-viewed=\"\" data-id=\"br-h2-6-onpage-placement\" data-type=\"h2\" data-location=\"Editorial\" data-name=\"h2_all\" data-text=\"Finding a CD with the best rate\" data-outcome=\"\"><strong>Finding a CD with the best rate<\/strong><\/h2>\n<p>Regardless of what term of CD you\u2019re seeking, it can pay to shop around for the best CD rates. Online-only banks \u2014 which don\u2019t have the cost of maintaining branches \u2014 typically offer the best rates.<\/p>\n<p>You may also find comparatively high CD rates at\u00a0credit unions, since their profits go back to members \u2014 which can translate to higher APYs on deposit products as well as lower rates on loans.<\/p>\n<h3><strong>Other factors to consider before opening a CD<\/strong><\/h3>\n<section class=\"editorial-insight-box --insight-box +mg-vertical-md\" data-template=\"insight_box\">\n<div class=\"card-body border-l-4 border-blue-800\">\n<div class=\"content-wrapper\">\n<p>\n                    Avoid the early withdrawal penalty with a no-penalty CD\n                <\/p>\n<div class=\"content wysiwyg wysiwyg--flush\">\n<p>Consider a no-penalty CD if you\u2019re interested in locking in a fixed rate without paying a penalty if you withdraw the money early. No-penalty CDs often come with terms between six and 14 months. In exchange for giving you the ability to access the money, they often pay a lower rate than CDs that have such penalties.<\/p>\n<\/p><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<\/section>\n<h2 data-position=\"7\" data-beam-element-viewed=\"\" data-id=\"br-h2-7-onpage-placement\" data-type=\"h2\" data-location=\"Editorial\" data-name=\"h2_all\" data-text=\"Bottom line\" data-outcome=\"\">Bottom line<\/h2>\n<p>While a CD\u2019s term length can affect its rate of return, you\u2019ll ultimately want to choose a short-term, midrange or long-term CD based on when you\u2019ll need access to the money. Shopping around for the right term and the best yield can help you meet your financial goals.<\/p>\n<div class=\"HelpfulCTA mx-auto flex flex-col items-center gap-6 my-6 py-12 text-base border-y border-gray-200\" data-helpful-cta=\"\" data-beam-element-viewed=\"\" id=\"did-you-find-this-helpful\" data-type=\"cta\" data-location=\"article-bottom\" data-position=\"banner\" data-text=\"Did you find this page helpful?\">\n<div class=\"HelpfulCTA-initial w-full flex flex-col items-center gap-4\" data-cta-initial=\"\">\n<div class=\"HelpfulCTA-question text-lg font-bold text-center text-gray-900\">\n            Did you find this page helpful?<\/p>\n<div id=\"UAGMumkia4\" class=\"hidden\">\n<div class=\"wysiwyg wysiwyg--sm wysiwyg--flush max-w-xs\">\n<p class=\"mb-6 text-base\">\n                            <strong class=\"block font-bold text-gray-900\">Why we ask for feedback<\/strong><br \/>\n                            Your feedback helps us improve our content and services. 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Icon<\/default:title><default:path d=\"M13.165 2.175c.322 0 .57.022.774.065.796.161 1.43.624 1.85 1.345.71 1.216.722 3.067.023 5.499h.516c2.28 0 3.422 0 4.337.548a3.844 3.844 0 0 1 1.721 2.25c.29 1.032 0 2.13-.592 4.336l-.516 1.926c-.312 1.151-.484 1.786-.882 2.324a3.368 3.368 0 0 1-1.442 1.098c-.625.247-1.28.248-2.475.248l-.021.01h-4.595c-.42 0-.636 0-.84-.032a4.19 4.19 0 0 1-.635-.15c-.204-.065-.387-.162-.763-.355l-1.69-.856c-.014.034-.026.069-.043.102a2.334 2.334 0 0 1-1.044 1.044c-.495.247-1.012.248-1.948.248h-.161c-.936 0-1.453 0-1.947-.248a2.333 2.333 0 0 1-1.044-1.044C1.5 20.038 1.5 19.52 1.5 18.585v-7.683c0-.936 0-1.452.248-1.947A2.387 2.387 0 0 1 2.792 7.91c.494-.248 1.01-.247 1.947-.247h.16c.937 0 1.454 0 1.95.247.353.177.653.44.875.763.64-.606 1.788-2.184 3.31-5.142.183-.366.312-.603.538-.819.193-.193.462-.355.72-.441.302-.097.539-.097.873-.097ZM4.739 9.288c-.624 0-1.076 0-1.227.076a.721.721 0 0 0-.323.322c-.075.15-.075.603-.075 1.216v7.683c0 .624 0 1.076.075 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4.175c-.28-.14-.41-.215-.56-.27a1.796 1.796 0 0 0-.344-.085c-.151-.022-.313-.01-.625-.022H7.503Zm11.596.001c-.625 0-1.077 0-1.228.076a.72.72 0 0 0-.323.322c-.075.15-.075.603-.075 1.226v7.68c0 .623 0 1.075.075 1.226.075.14.183.247.323.322.15.075.603.075 1.228.075h.16c.625 0 1.078 0 1.228-.075a.778.778 0 0 0 .324-.322c.075-.151.075-.603.075-1.227V5.423c0-.623 0-1.076-.075-1.226a.722.722 0 0 0-.324-.322c-.15-.076-.603-.076-1.227-.076h-.161Z\" class=\"icon-base\"\/><\/default:svg><\/span> <span class=\"text-base leading-4\">No<\/span><br \/>\n            <\/button>\n        <\/div>\n<\/p><\/div>\n<p>    <!-- Yes Form --><\/p>\n<p>    <!-- No Form --><\/p>\n<div class=\"HelpfulCTA-thankyou flex flex-col items-center gap-2\" data-cta-thankyou=\"\" style=\"display:none;\">\n<p>Thank you for your<br \/>\n            feedback!<\/p>\n<p>Your input helps us improve our<br \/>\n            content and services.<\/p>\n<\/p><\/div>\n<\/div><\/div>\n<p>Read the full article <a href=\"https:\/\/www.bankrate.com\/banking\/cds\/short-term-cd-vs-long-term-cd\/\" target=\"_blank\" rel=\"noopener\" rel=\"nofollow\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>staticnak1983\/Getty Images Key takeaways Short-term CDs typically are those that mature within one year, while long-term CDs have terms ranging from three to five years. Currently, some top-earning long-term CDs have slightly higher interest rates than short-term ones. You can use a CD ladder to take advantage of the benefits of both short-term and long-term<\/p>\n","protected":false},"author":1,"featured_media":23008,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[58],"tags":[],"class_list":{"0":"post-23007","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-homes"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.2 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Short-Term CD Vs. 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