Traditionally, interest rates were often higher on certificate of deposit (CD) accounts with longer terms and lower on those with short terms. And the logic was clear. Since savers were being asked to part with their money in the account for a longer period, they were frequently rewarded with better rates than they'd otherwise receive by just keeping their money in an account for a few months. 

But the volatile rate climate of the last five years, in which rates dropped to near zero and then surged multiple times higher during the peak of inflation, has caused this dynamic to change. Now, with lenders unsure about the long-term trajectory of the rate climate, rates are often higher on short-term CDs than long-term ones.

This means you can get an interest rate of around 4.50% with a CD that will mature in six months or less, making it an attractive home for your money and especially so if you're looking for a place to park a large, five-figure sum like $20,000. Before getting started with a $20,000 short-term CD this July, however, there are some considerations that savers should account for. Below, we'll break down what to focus on right now.

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$20,000 short-term CDs: 3 things to consider this July

Don't put $20,000 (or any amount of money) into a short-term CD this month before first familiarizing yourself with these items:

It can give you short-term protection against market fluctuations

The inflation rate rose to 2.7% in June, the Bureau of Labor Statistics revealed last week, after also creeping up in May. With high interest rates remaining frozen and concerns over inflation, economic policies and the stock market pertinent now, then, it could be smart to give your $20,000 some short-term protection against market fluctuations ahead. With a CD that matures in 12 months or less, you can do just that, earning a fixed interest rate in the interim while also giving yourself time to better gauge the economic outlook. This is always an advantage a CD can provide, but it's a particularly advantageous one to have right now.

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You'll make more with a lower rate long-term option

Yes, short-term CDs come with slightly higher rates than long-term CDs do currently. Thanks to the extended interest-earning timeline the latter type comes with, though, you'll make more there than you would with the higher rate, short-term alternative. In other words, don't let the short-term CD rate blur your judgment. If your end goal is to earn as much interest as possible, even if it requires more time to do so, then you'll generally be better with the long-term option. That said, the interest rate climate is fluid, and if rate cuts are issued later this summer, things could change. So be prepared to act now while high-rate CD opportunities are still plentiful.

It may require foregoing your regular bank

Regardless of whether you ultimately decide to park the $20,000 into a short-term CD or a long-term one, either decision will likely see you having to forego the use of your regular bank. The local bank that you frequently visit is unlikely to have the high CD rate offers that online banks do. And if your goal is to earn as much interest as you can on your money, then you'll likely need an online bank to accomplish that. This can be tricky when depositing a large amount, like $20,000, into an account with a bank that you can't visit in person, so take the time to compare your options before jumping in. With most lenders requiring CD account holders to pay an early withdrawal penalty to regain access to their funds, it's important to make the right decision here.

The bottom line

It may have been a painstaking and lengthy process to save $20,000, so don't automatically jump at the first short-term CD offer you receive this July. Instead, understand the realistic protections it can (and can't) offer against today's market fluctuations, calculate the interest earnings against what's available with long-term options and understand the reality that the best rates and offers may only be available online. By taking this informed approach this month, you can maximize your chances of CD success with your $20,000 or any amount of money that you're contemplating putting into a CD now.