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By Lara Becker
Investors looking for safety and a fixed return often turn to CDs. Indeed, CDs offered by federally insured banks and credit unions are generally protected up to $250,000, and some CDs are still paying 4% APY and up. (You can see some of the best CD offers here from our partner Bankrate.)
But, between the different offerings at various banks, term lengths, balance caps, minimum deposit requirements and more, there’s a lot to consider. We asked 10 money experts: when you’re looking for a CD account in 2026, what missteps should you avoid?
“Chasing the highest rate without understanding the details,” says Michael Crossley, SVP of wealth management at America First Credit Union.
“One of the biggest mistakes is chasing the highest rate without understanding the details. Look closely at the term length, early withdrawal penalties, renewal policies and whether the CD is callable. A strong rate doesn’t help if the product doesn’t fit your financial plan.”
“Locking up too much cash in a single long-term CD,” says Myles Zueger, CFP and certified private wealth adviser at Adams Wealth Partners.
“One of the biggest mistakes is locking up too much cash in a single long-term CD without considering liquidity needs. Early withdrawal can create penalties that eat into the expected return if the CD needs to be accessed earlier than the maturity date…
… Savers should approach CDs as part of a broader cash management strategy rather than a standalone solution. Building a CD ladder, staggering maturities across multiple time horizons, can improve liquidity, reduce reinvestment risk and provide flexibility as rates change.”
Only going with the bank you already have a relationship with, says Ekenna Anya-Gafu, CFP, accredited asset management specialist, AIF and founder of Pacific Canyon Investments.
“Normally, people go with the bank with which they already have a relationship, but don’t look elsewhere outside of that. Although easier, broadening the search typically will put you in a better place. Maximize your bank relationship. Be clear and see if there are better offerings for CDs that your local banker can offer, versus what is shown on the website.”
Overlooking the CD ladder, says Myles J. McHale Jr., founder of Wealthcare Advisors and adjunct instructor at Cannon Financial Institute.
“The biggest mistake that we see when speaking with clients is that they were ‘wowed by the rate’ while not fully understanding or reading all the terms of the CD contract. An investor should strive to create what is referred to as a ‘CD ladder.’ Each rung of your ladder represents a certain maturity date or period that your money is invested. Hypothetically, with $50,000 available: a CD ladder example could look like this:
- 6-month CD — $5,000
- 12-month CD — $10,000
- 18‑month CD — $20,000
- 2-year CD — $15,000
This ‘ladder’ provides balance of yield and flexibility. Should the Federal Reserve decide to raise or lower current rates, you will always have some CDs maturing to reinvest at the new level — without locking up all your short-term dollars at potentially significantly lower rates.”
“Watch out for promotional CDs with ‘teaser’ rates,” says Nayan Lapsiwala, CFP, CFA and director in wealth management at Aspiriant.
“Watch out for promotional CDs with ‘teaser’ rates, as these rates often drop significantly after the first period and are set to auto-renew at a lower rate. Avoid CDs from banks you haven’t heard of if they aren’t FDIC insured. If a CD offers a much higher rate than others, be careful — it could mean the bank has liquidity issues or there are hidden conditions. Also, avoid callable CDs if you want steady returns, because the bank can call (end) them early if interest rates go down.
Look for three main things in a CD: competitive interest rate, flexibility and safety. Check that the CD is FDIC insured. Compare interest rates across banks, especially online banks and credit unions, as they sometimes offer higher rates.”
Not understanding tax implications, says Reid Abedeen, managing partner and registered investment adviser at Safeguard Investment Advisory Group.
“One thing that is often missed is that the interest on the CD in a nonretirement account is taxable even if the owner does not use the interest and after taxes are paid this will not allow the investor to keep up with inflation. This can create unnecessary taxes for the investor and possibly push them into a higher bracket.
They should evaluate the entire picture; we all want to keep up with inflation and pay less in taxes. One thing to consider is using bonds and/or a fixed annuity which will work like a CD and will allow you to defer taxes. Last but not least, there are now index linked CDs which will allow for market gains without risk.”
“Using short term CDs today,” says Michael E. Chadwick, CFP and founder at Fiscal Wisdom Wealth Management.
“[People should avoid] using short term CDs today. Rates are coming down and in the near future, once the recession hits, we will be back to all time lows again. Those who love CDs should lock in higher rates now for longer periods of time with quality banks.
Shop for great rates with solid banks; do this online versus in bank branches, and if bought in brokerage accounts no penalties for cashing in early will apply. Online is superior in a brokerage account, because there are no fees if you want to get out prior to the CD maturing. If you buy in a branch you get no such flexibility. If you buy in a branch a 5-year CD and have to cash out early for whatever reason, the bank will charge you a substantial penalty for early withdrawal.”
“Locking up money without a clear job for it,” says Christopher Holtby, certified private wealth adviser, co-founder and chief fiduciary strategist at Wealth Advisors Trust Company.
“The first mistake is locking up money without a clear job for it. If the funds may be needed for taxes, a home purchase, a medical bill or a planned draw, a CD can turn into a penalty machine. ‘Safe’ becomes expensive the moment life shows up early.
The second mistake is betting on one maturity date. Putting too much into a single term creates reinvestment risk if rates fall, or opportunity cost if rates rise. A ladder is plain and practical: spread the money across staggered maturities so some portion comes due each year or each quarter. That way you keep options. You can roll, you can spend or you can change course.”
“Ignoring the tax drag illusion,” says Marcel Miu, CFA, CFP, founder and lead wealth planner at Simplify Wealth Planning.
“[One mistake] is ignoring the tax drag illusion. People chase a 5% yield without realizing that CD interest is taxed at ordinary income rates. If you are in the 32% federal tax bracket and face a 5% state tax, your total tax burden is 37%. That 5% yield drops to exactly 3.15%. Subtract a long-term average inflation rate of 3%, and your real return is essentially zero.
A CD should only be used for known, fixed liabilities on a specific timeline. For example, if you need a $60,000 down payment for a house in exactly nine months, a 9-month CD is a perfect fit. If you are in a high tax bracket, you should also look at Treasury bills. They offer a similar level of safety but are exempt from state and local taxes, potentially giving you a higher net yield.”
“Putting more money into a CD than someone can comfortably set aside,” says Sheri Jackson, consumer regional manager at BOK Financial.
“A very common challenge is putting more money into a CD than someone can comfortably set aside. Newer CD clients may still be figuring out what needs to stay available for everyday life, while others keep too much in regular savings and miss out on a higher rate.
It also helps to start with a simple question: When might I need this money? That one answer guides everything else. For someone who wants to earn interest but still needs to keep funds within reach, a no‑penalty CD can be a great fit; it offers structure and growth without the worry of early withdrawal fees. For others who don’t need quick access, a traditional CD often makes more sense and typically offers a higher rate. The right banker can help match someone’s goals and their comfort level with the product that gives them the best blend of return and flexibility.”
