Images by GettyImages; Illustration by Hunter Newton/Bankrate
Key learning points
- The current industry-leading APY across terms is 5.55% on a one-year CD.
- In addition to choosing a CD based on its APY, make sure you choose a term that fits your financial goals.
- National average prices are only a third of what you can earn with a competing CD.
INcertificate of deposit (CD)typically offer a fixed interest rate for the entire term, so locking in a high-yield CD can benefit savers when rates eventually start to fall. Current high-yield CD interest rates remain high because they closely track the federal funds rate, which is between 5.25 and 5.5 percent. As inflation continues to cool, it willIt is widely expected that the Federal Reserve will cut interest ratesin 2024 – and CD rates could in turn fall.
Currently, the highest annual CD percentage rate (APY) offered is 5.55 percent in one year. The total top APY is now slightly higher than earlier this month, although top rates have fallen slightly in recent months.
The table below from Bankrate shows the highest rate andthe national averagetoo many popular expressions. It also shows how much you can earn in interest with a $5,000 deposit per term.
Today's CD prices after maturity
| CD term | Institute that offers top APY | Highest APY | Landsgennemsnit APY | Estimated earnings of $5,000 with top APY |
|---|---|---|---|---|
| Note: Annual percentage yields (APYs) shown are as of February 15, 2024. APYs for some products may vary by region. N/A: Not available; Bankrate does not track national averages for the nine-month CD period due to the limited data available. Earnings estimates are based on the highest APYs and assume interest increases annually. * As an example; the minimum deposit for this CD is $10,000. | ||||
| 3 months | America First Credit Union | 5,50 % | 1,26% | $ 67 |
| 6 months | Bask Bank | 5,35% | 1,62% | $ 132 |
| 9 months | America First Credit Union | 5,30% | N.v.t | $ 197 |
| 1 year | Salem Five Direct | 5,55% | 1,74 % | 278 USD* |
| 18 months | Alliant Credit Union | 5,15 % | 1,76 % | 391 USD |
| 2 years old | TAB-bank | 5,00 % | 1,51 % | $ 513 |
| 3 years old | Indiana's first online bank | 4,75 % | 1,42 % | $ 747 |
| 4 years old | Indiana's first online bank | 4,54% | 1,48% | $ 972 |
| 5 years | ScholenEerste FCU | 4,60 % | 1,42 % | $ 1.261 |
To remind:Opening a CD now will ensure you lock in a high APY before rates continue to drop.
How to choose the right CD
Choose a CD term that corresponds to when you need the money, such as a down payment on a house in three years or a vacation in a year. While you shouldn't lock up money in a CD that you may need sooner for living expenses or emergencies, you should be aware of the penalty for early withdrawal of a CD. Look for a high APY, as national averages are well below competitive CD rates.
CD prices from 2022 to 2024
National average CD yieldsrose steadily in 2023 as the Federal Reserve continued to raise rates at the fastest pace since the 1980s. In total, Fed officials have raised rates eleven times between 2022 and 2023, bringing the Fed Funds rate to its current target range of 5.25-5.5 percent. Along with these rate increases, average CD APYs rose to their highest levels in many years, with APYs on some competing CDs rising as much as 7 percent.
This year is expected to be a top year for CD savers. Bankrates financial analyst Greg McBride, CFA, predicts two Fed rate cuts in 2024, but he says CD rates will continue to outpace inflation. “Savers will have another good year with returns expected to rise and inflation expected to fall further,” he says.
McBride also emphasizes the importance of shopping for the highest APY. “Top-performing offers will still provide a notable advantage [over lower-performing offers],” he adds.
Frequently asked questions about CD
Although the Federal Reserve is widely expected to cut interest rates in 2024,As a result, banks can reduce deposit ratesCD yields are expected to remain strongexceed inflation. Overall, average returns remain higher than they have been in years, while the highest APYs in many areas are more than triple the national averages.
Opening a competitive CD now means you won't miss out on a high APY when rates start to drop later this year. Because a CD is typicalearns a fixed rate, you'll continue to earn the same dividend for life, even if rates for new CDs start to fall.
Before you put money in a CD, make sure you can give up the money for the entire term; get the money early and you'll probably get hit by onepenalty for early termination. That's why a CD is not a good place for your musicemergency fund. Other factors to consider include:
- Annual Percentage Yield, or APY:Not all banks are equalwhen it comes to APYs, so it's worth seeing what different banks have to offer.Online banks onlyThey are known to produce high returns, so they are a good place to start your search.
- When you need access to the money:CDs typically have terms ranging from three months to five years, although you can sometimes find terms as short as one month and as long as ten years. Make sure you select an expression that matcheswhen you want the moneyfor a planned purchase or other investment.
- Minimum parliamentary requirements:Some banks, such asAlly BankInSynchroonbank, require no fixed minimum deposit, while others may require $1,000, $5,000 or even as much as $10,000. When shopping around, look for a CD with a minimum deposit that matches your savings goals.
- Federal deposit insurance:Before opening a CD, check whether the bank is insuredFederal Deposit Insurance Corp. (FDIC). Likewise, if it is a credit union, make sure it is insuredNationale Credit Union Administration (NCUA). This way, your money is insured for up to $250,000 per month if the financial institution closes its doors. depositor, per insured bank or credit union, for each category of account holders.
Your money is protectedon a CD when it is located at a bank insured by the Federal Deposit Insurance Corp. (FDIC) or a credit union insured through the National Credit Union Administration (NCUA). When institutions are covered by this federal insurance, CDs and stock certificates are each insured for up to $250,000 per month. depositor, per insured bank or credit union, for each category of account holders.
CDs typically require you to tie up your money for a set period of time, and withdrawing the money before the end of the term usually results in apenalty for early termination. This penalty causes you to lose some of your interest – and possibly some of your principal, the money you originally deposited into the account.
Methodical
Bankrate calculates and reports the national average APYs for various CD terms. The national average rates incorporate the competitive APYs commonly offered by online banks, along with the very low rates often found at major brick-and-mortar banks.
In June 2023, Bankrate updated its methodology that determines national average CD rates. This process now surveys more than 500 banks and credit unions each week to obtain national averages. These institutions include those that are widely available and offer high returns, as well as some of the largest banks in the country.
