The current national average rate for certificates of deposit (CDs) ranges from 0.23% to 1.83% APY, depending on the period. However, online banks offer CD rates that are over three times greater. They can offer you more competitive interest rates because they don't have to pay for a physical site.
Top CD Rates for the Term
These are the best CD rates available right now, both in terms of length and APY alone:
|
CD term |
Highest rate |
How it compares |
|
3 months |
5.42% APY |
3x higher than the national average at 1.69% APY |
|
6 months |
3.00% APY |
4x higher than the national average at 1.53% APY |
|
12 months |
5.35% APY |
3x higher than the national average at 1.83% APY |
|
24 months |
4.75% APY |
3x higher than the national average at 1.54% APY |
|
36 months |
4.76% APY |
3x higher than the national average at 1.4% APY |
|
48 months |
4.55% APY |
3x higher than the national average at 1.32% APY |
|
60 months |
4.15% APY |
3x higher than the national average at 1.4% APY |
How Does a CD Work and What Is It?
An example of a savings account with a set term and annual percentage rate is a CD. Regardless of fluctuations in the market, you will always receive the indicated APY on your deposit once you open the account and for the term. You cannot access your funds before the end of the period without paying a penalty fee, which is the trade-off for this guarantee. Any interest that you receive on your CD is subject to taxation.
The bank sets the interest rate on a CD, however the Federal Reserve's Federal Funds Rate has an impact. The CD's rate will fluctuate in tandem with changes in the funds rate.
Are CD Prices Increasing?
Yes, since the Federal Reserve has continued to hike interest rates, CD rates have risen substantially since last year. Opening a CD is worthwhile because the national rate for a 12-month CD is currently 1.83%, up from just 0.13% APY at the beginning of 2020. This is a huge increase of 1.70%.
How to Locate the Top CDs
In exchange for a greater interest rate than you would get on a regular savings account, a certificate of deposit (CD) lets you put away your investment for months or years. Fintechs and online banks typically have the best rates if you're seeking them.
Additionally, bear in mind that the APY on a CD usually increases with the length of the CD. Before you choose the perfect CD for your requirements, you should make a savings strategy because CD maturities can vary from a few months to more than a year.
Choose Your Savings Goals
Generally speaking, the longer you agree to tie up your cash, the more savings CDs give. A CD with a 5-year duration can yield a higher interest rate than one with 6 months. Because of this, CDs are excellent for generating a profit on a modest investment over the short to medium term.
Nevertheless, depending on your savings objective, a short-term CD may still be helpful. Here are two sample savings objectives that are suitable for every kind of term duration.
- CDs with a short term (3–12 months): Future birthday present, rent for the following year, and a short trip
- Long-term CDs (13–60 months): Large trip, home improvements, college tuition, and a graduation gift
You won't have simple access to those funds while your CD is open. A savings account or a less restrictive CD might work better than a conventional CD if you anticipate needing access to those funds:
- No-penalty CDs: The interest rates on certain banks' certificates of deposit (CDs) may be lower than those on regular CDs, but they don't levy penalties for early withdrawals.
- High-yield savings accounts: If you'd prefer more access to your money, go for a high APY savings account, but be aware that the rate isn't fixed like it is with a CD.
Examine the APYs for the Term You Choose
Examine APYs offered by different banks, being sure to compare them using the same term duration for each bank. The primary attributes to be contrasted are:
- APY
- How frequently do you compound your savings
- Options for transferring money across bank accounts
- NCUA or FDIC-insured
What More Should You Know?
If you withdraw your money from a CD before the term expires, most of them levy fees. Bank-specific costs might differ significantly, yet typical withdrawal penalty fees include:
- Six-month CDs: Interest for 90 days
- Interest on one-year CDs: is 180 days
- Three- to five-year CDs: interest paid every 365 days
You typically have a grace period after CD maturity during which you can pay out or renew your CD. These have an average duration of 10 days and range from 7 to 21 days.
How We Select the Greatest CDs
Our goal at Notebanks is to assist informed readers in making the greatest financial decisions. Since "best" is frequently arbitrary, we will also list the drawbacks of every financial product or account in addition to its obvious advantages. So, contact our professionals right away!