In recent years, savers could do no wrong by depositing money into a certificate of deposit (CD) account. With interest rates on these accounts multiple times higher than they were at the beginning of the decade and with those rates fixed, all savers needed to do was find an online bank to get started. By depositing the right amount of money into the right account, they could earn hundreds if not thousands of dollars with very little risk or effort. 

But the economy is changing again, and thus, the CD landscape isn't quite what it was in 2023 or 2024. In today's climate, with multiple rate cuts already issued and additional ones predicted for later this summer, savers will need to be a bit more strategic in their approach. That doesn't mean that CD accounts should be avoided (rates here still comfortably sit over 4%). But it does mean that savers will need to be more nuanced in their approach. 

That extends to knowing both what to do and what mistakes to avoid making this July and August, specifically. Below, we'll detail three CD account mistakes savers should be aware of right now.

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3 CD account mistakes savers should avoid making this July and August

By understanding and avoiding these specific mistakes this summer, savers can better position themselves for CD account success:

Mistake: Assuming CD rates will only change when the Fed takes action

The chances of a rate cut at the Federal Reserve's July meeting are less than 7%, according to the tool. But they surged to almost 70% for the September meeting. So, yes, rate cuts are likely at some point this summer. Still, prospective CD account holders shouldn't just assume that rate changes will only take place when the central bank takes action. 

Many banks will adjust their rates before the Fed does, perhaps to a significant degree and potentially sooner than expected. So it would be a mistake to pass on a high-rate CD account offer now, while still readily available. Don't think you have more time to shop around than you actually do. If you find a high-rate CD online today, there's a strong argument to be made for locking it in, as rate changes aren't easy to time or predict, especially right now.

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Mistake: Getting distracted by higher, short-term CD rates

It's understandable if you want to earn the highest interest rate possible on your savings accounts while paying the lowest interest rate possible when borrowing. But you shouldn't let the interest rate distract you from your primary goal, which is to earn as much interest as you can, regardless of the time it takes to do so. 

While short-term CD rates can be considerably higher than their long-term counterparts now (think around 25 basis points), those short-term rates will mature in less than a year, potentially leaving you with less attractive options at that point. Long-term CDs, however, will earn a high rate for an extended period of 18 months or longer, allowing you to both grow your principal and protect your money against rate cuts to come, neither of which a short-term CD can offer to the same degree right now.

Mistake: Not calculating the interest-earning potential before depositing money

The caveat with CD accounts is clear: You'll be required to leave your money in the account for the full term to earn the interest, or see it negated by an early withdrawal penalty. If you can't make that commitment, then an alternative like a high-yield savings account may be the better fit. The financial sacrifice required with a CD, however, can be easily determined by calculating the interest-earning potential in advance of any deposit. So don't make the mistake of avoiding this math now, especially with rate cuts looming. By completing these calculations, you'll be better able to determine if a CD is worth it for you now and, specifically, in which amount and for which term.

The bottom line

The value of a CD account has been especially strong in 2022 and beyond and even though rates here are diminishing, savers can still make an account an integral part of their savings plan. But they'll need to avoid making these three simple but easy mistakes right now. By understanding these errors and taking proactive action to avoid them, these CD account holders can position themselves for long-term success, despite any market changes on the horizon.