How to choose a CD term
Twelve months? Five years? Your calendar sets the right term and the shape of the yield curve settles it — in that order.
Begin with the calendar, not the rate
The right term is whichever one matures just before you need the money. A house deposit due in 18 months belongs in an 18-month CD even when the 5-year rate looks better — the early-withdrawal penalty on the longer certificate would swallow the difference and then some.
How to read today's curve
At the moment the long end has regained the lead: the best five-year CDs out-pay the best 12-month, while the 18-to-24-month middle sags beneath both ends. Banks are expecting rates to fall and will pay extra for deposits they can hold through the cuts, so a long lock buys the higher rate and years of protection at once.
When the curve inverts — as it did through 2024–25 — the reasoning reverses: short terms out-pay long ones, and locking in a long term at a slightly lower rate only pays off if the expected cuts actually arrive, because you keep yesterday's yield while new savers get less.
When you honestly cannot tell
Divide the money up. A ladder of two to five rungs means you are never right or wrong with the entire balance — some of it matures each year to catch whatever rates are doing by then.
The terms hardly anyone should choose
Odd promotional terms — 7, 11, 13 months — are generally fine when you open them but renew into the closest standard term at a poor rate. Take one and set a maturity reminder the same day.
Matching the term to a real goal
Emergency fund: no CD at all, or at most a no-penalty CD, since this money's job is availability. House down payment two years out: a 24-month CD maturing a month before you expect to shop, because mortgage pre-approval wants seasoned, accessible funds. College bill in six years: a five-year CD now, rolled into a 12-month CD at maturity, or a zero-coupon CD matched to the exact date. Retirement income: a ladder dropping a matured rung into your hands each year. The pattern never changes — the date picks the term, then the curve picks between the candidates.
Where two terms both suit the date, take the shorter one on an inverted curve (you are paid more to commit less) and the longer one on a normal curve only if the extra yield clears about a quarter point — beneath that, the flexibility is worth more than the spread.
The sweet spot, and why it shifts
At most points in the cycle one term is underpriced by the market — right now the 12-month point, which out-pays every neighbour until you get out to three years. The tell is straightforward: run your eye along the best-rate-by-term strip on the homepage and look for the rate that sits out of line with those around it. That kink marks where deposit competition is fiercest, and it is usually the best risk-adjusted parking spot for money without a strong date of its own.