With potential rate cuts on the horizon, shorter-term certificates of deposit (CDs) are offering strong yields at the moment — especially 6-month terms.

Right now, you can find 6-month CDs paying up to 4.00% APY, but these rates may not be around much longer. The Federal Reserve has signaled that interest rate cuts are likely in the second half of 2025.

That means now might be one of the last chances to lock in a decent return on a short-term CD.

How much would $20,000 earn?

If you put $20,000 in a 6-month CD with a 4.00% APY, your interest earnings would total about $396 when the CD matures. That’s a guaranteed return with zero risk; your money’s FDIC insured up to $250,000.

The best high-yield savings accounts (HYSAs) are offering slightly higher rates of return — around 4.20% APY. A $20,000 balance in one of these accounts could earn about $415 in six months.

The key difference? Savings account rates can change at any time, while CDs lock in your rate over the term of your deposit. Savings accounts do let you withdraw your money at any time, though, while CDs charge penalties for early withdrawals. It’s a question of what you value more — flexibility or a guaranteed rate of return.

When a CD makes sense

A 6-month CD is a good option if you 1) want a safe, predictable return and 2) won’t need the money for the next six months.

For short-term savings and money you might need to pull out, go for a high-yield savings account. Otherwise, it’s smart to consider a CD so you can lock in your return before rates drop.

Should you consider investing instead?

If your goal is long-term growth and you don’t need the money soon, investing may offer more upside. The S&P 500 Index, which represents over half the U.S. stock market, has returned about 10% annually on average since 1957 — more than double what even the best CDs offer.

But the market can be volatile. For short-term savings or emergency funds, CDs and HYSAs are usually the better choice. For long-term goals like retirement, a diversified index fund may be worth considering.

Thinking longer term? Open a brokerage account today and buy an index fund for hands-off investing.

Lock in a higher rate today

A 6-month CD with 4.00% APY will earn you about $396 on a $20,000 deposit. It’s a strong, low-risk option if you won’t need the money for a while.

If flexibility matters more, or you’re saving for the long haul, you might get better value from a high-yield savings account or the stock market. Otherwise, now’s the time to lock in a high CD rate before it’s too late.

Ready to earn more on your money? See our list of the best 6-month CDs today.

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