Compared to savings accounts and short-term time deposits, 10-year CDs offer more competitive interest rates.
They’re also virtually risk-free. Once your account matures, you’ll earn a specific rate of return.
But a 10-year CD isn’t a good fit for every saver. Before buying one, consider why you should lock up your savings for a decade.
Today’s top nationally available 10-year CDs pay 2.35 percent APY. This may be a good place to invest for long-term financial goals, like funding your child’s college education or leaving him money to use post-graduation.
When to buy a 10-year CD
Experts expect interest rates to continue rising. If they were on the decline, investing in a 10-year CD could work.
“If interest rates were going down, then a 10-year CD would be more beneficial because they’re locking into a higher interest rate,” says Danielle Howard, owner of Wealth By Design, a boutique firm in Basalt, Colorado offering financial planning and investment advice.
A 10-year CD could also seem appealing if you’re afraid of taking risks with money. Anyone in that camp should ladder CDs, or pair a 10-year CD with short-term certificates of deposit.
As the CDs mature, roll your savings into accounts with better rates. Use a CD ladder calculator to maximize your returns.
Why a 10-year CD is a bad idea
The best 10-year CD rates are just as high as the top 60-month CD rates. So leaving your funds tied up for five additional years doesn’t make sense.
Inflation is another concern. “If inflation’s higher than the interest that you’re earning, you’re actually losing buying power as the money sits in there for 10 years,” says Alan Dole, a wealth manager and financial planner with Equity Concepts, an investment and financial services firm in Richmond, Virginia.
Finding the best 10-year CD rates
Since few banks and credit unions offer 10-year CDs, finding the best rates may be challenging.
Compare offers with deposits backed by the federal government. Look closely at deals from online financial institutions.
Here are some examples of bank and credit union 10-year CDs. Remember, few institutions offer certificates in this term, but you may find a better deal in your own search.
|North American Savings Bank||1.01%||$1,000|
- Discover Bank is an internet-only bank headquartered in Greenwood, Delaware. Until August 2000, it was known as the Greenwood Trust Company, which was incorporated in 1911. The bank earned five out of five stars on Bankrate’s latest Safe & Sound Ratings, which measures the financial health of banks and credit unions throughout the United States.
- Elements Financial is one of Indiana’s biggest credit unions. It has seven branches, most of which are located in Indianapolis. Membership is available to members, retirees, students and employees of more than 100 organizations (and their family and household members). Becoming a member of a not-for-profit organization called Tru Direction, Inc — and paying a one-time $5 fee — is one of the easiest ways to join Elements Financial. The credit union earned four out of five stars from Safe & Sound.
- MySavingsDirect is an online division of Emigrant Bank, a New York-based institution founded in 1850. Customers who purchase MyTerm CDs can choose a term length between 60 and 120 months. Emigrant Bank earned four out of five stars from Safe & Sound.
- LegacyTexas Bank is headquartered in Plano, Texas. In 2015, it merged with another North Texas-based financial institution called ViewPoint Bank. LegacyTexas Bank is a subsidiary of LegacyTexas Financial Group, Inc. It earned four out of five stars from Safe & Sound.
- North American Savings Bank was established in 1927. At the community bank — which is based in Grandview, Missouri — account holders can buy long-term CDs that mature within 60 to 120 months. North American Savings Bank earned four out of five stars from Safe & Sound.
Consider your lost opportunity cost
Don’t purchase a 10-year CD without evaluating other low-risk investment products like high-yield money market accounts. “Where else could you put that money that would earn you more?” Dole asks.
Savers could buy a 10-year CD and close the account before it matures. Just make sure the benefit of an early exit outweighs the cost of the withdrawal penalty.
“Worst case scenario, if I need to get out of this, am I comfortable with either paying that penalty or losing the interest along the way?” Howard asks.