Short-Term CD Vs. Long-Term CD: Which Is Best For You?

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Certificate of deposit (CD) terms typically range from three months to five years, and their guaranteed annual percentage yield (APY) can make them worthwhile in the current falling-rate environment. 

The right CD term for you depends on when you’ll need access to the money. If your timeline is flexible, it can pay to choose the term with the most competitive APY. 

Locking in a lengthier term, however, guarantees you’ll earn the high rate for longer, especially since going rates on new CDs are expected to decline further in 2026.

Short-term CDs

Short-term CDs typically have terms of up to one year. Putting money into a short-term CD can help maximize the interest you’ll earn on funds earmarked for purchases in the near future, such as an upcoming vacation, home renovations or next year’s holiday gifts. As of January 22, 2026, the average one-year CD earns 1.9% APY but you can find better rates with the best one-year CD rates. 

Pros and cons of short-term CDs

Pros

• Money is available relatively soon, so you may be less likely to need the money earlier and incur an early withdrawal penalty.

Cons

• May earn a lower rate than longer-term CDs.
• While you’ll have the funds back relatively soon, they’re not as accessible as in a liquid savings account.

Midrange CDs

Midrange CDs can include those with terms greater than a year and up to three years in length. People may open a midrange CD to save for a new car or for planned life events such as getting married or having a baby. As of January 22, 2026, the average APY for a two-year CD is 1.7% but shop around. The best two-year CD rates are likely higher.

Pros and cons of midrange CDs

Pros

• May earn a higher rate than shorter-term CDs.

Cons

• Locking up funds for more than a year can be difficult, depending on how many emergencies come up during that time.

Long-term CDs

Long-term CDs generally range between three and five years. These accounts can help you earn significant interest on funds earmarked for use in several years, such as the down payment on a house or putting an addition on your home. Take a look at Bankrate’s picks for the best five-year CD rates and see how they compare to the national average, which is 1.68% APY as of January 22, 2026.

Pros and cons of long-term CDs

Pros

• Can guarantee you’ll earn a high rate for the long term, even if going rates fall on new CDs in the meantime.

Cons

• Locking up your funds for several years could mean you lose out on a better yield if rates rise in the meantime.
• Over the years, your CD’s rate might not keep up with inflation, causing your money to lose purchasing power.
• Leaving the money untouched for years might prove difficult in the event of unexpected or job loss or large expenses.

Are short-term CD rates higher than long-term CD rates?

Historically, long-term CDs have often earned higher rates than their short-term counterparts. However, in recent years, the opposite was true: From December 2022 until August 2025, for instance, the most competitive one-year CD rates were higher than the top five-year CD rates, based on Bankrate data.

One reason this happened is officials raised the federal funds rate by a considerable 525 basis points in 2022 and 2023 in an effort to tame soaring inflation. When the federal funds rate is high, banks don’t want to lock themselves into paying high interest rates on long-term CDs if rates are likely to drop in the near future. Instead, they make short-term CDs more attractive with higher rates.

However, the Fed has been lowering rates in the past two years, and banks have been lowering their APYs, in turn. Along with this, top five-year CDs have recently begun outearning one-year ones.

How much can I earn in a short-term CD vs. a long-term CD?

The longer you leave your money earning interest, the more interest you’ll earn. So even if a one-year CD has a higher rate, you’ll still earn more over time with a lower rate in a five-year CD. That’s just how compound interest works. For instance, if you have $5,000 to put into a CD:

• For a five-year CD with an APY of 3.50%, you’d have around $5,938 when the CD matures — since it will have earned around $938 in interest.
• For a one-year CD with an APY of 4.00%, you’d end with a significantly lower amount of $5,200 when the year is up, which includes around $200 in interest.

That said, a longer-term CD isn’t always the best option. For instance, if rates start to rise, you’ll have access to your funds sooner in a shorter CD and can reinvest them at a better rate. 

A CD calculator can come in handy when you’re considering different term lengths and comparing rates.

Finding a CD with the best rate

Regardless of what term of CD you’re seeking, it can pay to shop around for the best CD rates. Online-only banks — which don’t have the cost of maintaining branches — typically offer the best rates.

You may also find comparatively high CD rates at credit unions, since their profits go back to members — which can translate to higher APYs on deposit products as well as lower rates on loans.

Other factors to consider before opening a CD

Bottom line

While a CD’s term length can affect its rate of return, you’ll ultimately want to choose a short-term, midrange or long-term CD based on when you’ll need access to the money. Shopping around for the right term and the best yield can help you meet your financial goals.