Rates for certificates of deposit are still holding high and strong. And it’s likely that’s how they’ll stay as the year ends.
“Savings and CD rates will be unchanged going into 2024 with little movement expected before the Fed’s January 30-31, 2024 meetings,” said Ernie Gross, a professor at Creighton University and economist. “Rates on long-dated CDs may rise but only slightly.”
We’ve already seen some banks slightly lower CD rates, but if you shop around, you can still find rates as high as 5.65% for one-year CD terms, while longer-term CDs are slightly lower — averaging 4.05%. So if you have money saved for a future goal, there’s still time to earn a high fixed rate — but the clock is ticking.
Average CD rates
Below is a look at the average CD rates by term based on those tracked by the Federal Deposit Insurance Corporation and those we tracked at CNET. The FDIC includes rates from major national banks, which are historically lower than online-only banks.
Though it’s unusual, short-term CDs have higher APYs than most long-term CDs right now. That means you can earn a decent return for locking up your money for a short time, and you’ll have access to your funds sooner. Since APYs are linked to the yield you’ll earn for a year, CD terms that are shorter than 12 months will have lower returns.
It’s always a good idea to compare rates at different banks and credit unions before opening a CD to get the best offer to fit your financial goals.
Best CD rates
|CommunityWide Federal Credit Union
|First Internet Bank of Indiana
APYs as of Dec. 12, 2023.
Best CD rates by bank
Rita-Soledad Fernandez Paulino
Is now a good time to open a CD?
CD rates rose steadily throughout 2022 and 2023 as the Federal Reserve raised its federal funds rate to combat rampant inflation. And while rates are still high, it’s unclear if we’ve reached the peak of high CD rates.
But Bernadette Joy, founder of Crush Your Money Goals, notes that whether you lock in a high rate now or wait to see if rates creep up again, the real benefit of a CD is locking in a fixed return. Earlier this year, Joy put her money into two one-year CDs that offered a bit over 4% in February, then witnessed rates go even higher.
“I have zero regrets on not waiting — that money in the CD was not money I was planning to spend any time soon, and it actually helped me take the mental gymnastics out of thinking of what to do with the money,” Joy said. And she recently opened an 11-month CD with a 6.15% APY.
Joy said high-yield CDs are a great option for anyone who is nervous about what’s happening in the economy and “needs to save up some cash right now with very little risk.”
If you haven’t considered putting your money into a CD, this savings option can make sense if you have money saved for a goal that you won’t need for a few months or years. CDs work well for many financial goals, such as Joy’s plan to buy a car next year and an extended vacation.
Rita-Soledad Fernández Paulino, who goes by Soledad, a personal finance coach and founder of Wealth Para Todos, plans to buy a house in the future and is using CDs to help grow money for a down payment. While comparing rates, she found a 10-month CD offering a 5% return. Originally, she had her down payment fund spread across Series I bonds, the stock market and a high-yield savings account offering around 4% APY. Soledad has since moved the funds from her high-yield savings account to the short-term CD to earn a bigger return.
To help decide if a CD is the best savings vehicle for your financial goals, categorize your plans into months and years. Any money you plan to use within six months should be in a high-yield savings account, Joy said. If you already have money saved for a future expense and don’t plan to use it for a while — whether that’s in six months or six years — consider putting the money in a CD.
“For someone looking for a conservative way to earn higher-than-average interest on their savings, [a CD] could be a good approach,” said Bola Sokunbi, founder of Clever Girl Finance. “Especially for funds tied to short-term goals that fit into the timeline of whatever CD they select.”
However, it’s important to keep in mind that because CDs are low risk compared to stocks, you may not earn the same high returns that come with riskier investments, Sokunbi added.
How long will CD rates remain high?
The main question for savers is whether high CD rates will stick around much longer. All eyes are on this month’s Federal Open Market Committee meeting to see what the Fed’s next move will be. And though some banks have started lowering CD rates slightly, experts still expect rates to remain relatively high for the next few months.
At some point, the Fed is going to stop raising interest rates and eventually lower them, said Delyanne Barros, founder of The Money Coach.
Keep an eye on the Federal Reserve’s remarks, said Shang Saavedra, a CNET Money expert and founder of Save My Cents. Even though the central bank doesn’t directly influence the direction of CD rates, most financial institutions tend to move rates in the same direction as the Fed.
“When the Federal Reserve believes that inflation is under control and there’s no great risk of us sliding into a significant recession, then it is likely that they would drop interest rates, and other banks would then follow suit as they issue new CDs,” said Saavedra.
What is a CD?
A CD is a low-risk way to earn a guaranteed return on your savings. CDs are considered safe investments because they’re typically insured by either the Federal Deposit Insurance Corporation or the National Credit Union Administration for up to $250,000 per person, per account.
A CD has a fixed interest rate for a specific term, or period of time. You can open a CD at a bank with a one-time deposit, and you’ll receive your principal plus interest when the term ends. If you take money out before the term ends, you’ll usually pay an early withdrawal penalty, which is a period’s worth of interest, depending on the bank.
That’s why it’s important to take into account your unique financial needs. Joy weighs two factors when investing in a CD: liquidity and yield. She measures when she’ll need access to her cash versus how much return she’ll get for the CD term.
CDs are a good option if you want to put aside money for your children, save for a future expense or even for a “rainy day” fund separate from your emergency fund. (We recommend storing your emergency fund in an account you can easily access that earns interest, like a high-yield savings account, instead of a CD.)
CDs are also great for investors who want a guaranteed interest rate with little hassle and low risk. Unlike investments in stocks and bonds, CDs aren’t volatile. And unlike the variable rates you’ll get with checking or savings accounts, CD rates are fixed when you open the account, so if a CD aligns with your financial goals, it could be worthwhile to lock in a high rate, Joy said.
What to know before opening a CD
When you’re ready to open a CD, here are a few factors to consider:
- Term: Think about how long you can leave the money deposited in a CD account. If you’ll need access to your funds before a CD term ends, consider a high-yield savings account with more liquidity, a shorter CD term or a no-penalty CD to avoid paying a withdrawal penalty.
- APY: Look for the highest yield available for the CD term you’ve selected. Online-only banks and credit unions usually offer the best rates, but if a minimum deposit is required, make sure you’re comfortable with the amount or choose another bank that doesn’t have that requirement.
- Type: There are many types of CDs that still give you a guaranteed rate of return while offering more flexibility than a standard CD. But some CD types have lower APYs and limited CD terms to choose from. Consider your financial goals and various CD options to determine what’s best for your money.
- Early withdrawal penalty: Unless you choose a no-penalty CD, most banks charge an early withdrawal penalty if you need to pull money from your CD before the term ends. This is usually a period’s worth of interest, depending on the term and the bank. If you’re worried about not having access to your funds, consider another savings option or a bank with a lower early withdrawal penalty.
- Minimum deposit: CDs allow only a one-time initial deposit, and some banks require a minimum amount to open an account. If this is a problem, consider an account with a lower (or no) deposit requirement.
Alternatives to CDs
If you want to make regular contributions to your savings, or you’re looking for a higher rate, there are other savings options worth exploring.
High-yield savings accounts: If you need the flexibility to deposit and withdraw money regularly, while still earning a high yield, consider a high-yield savings account. Although high-yield savings accounts have variable interest rates — meaning they rise and fall based on the economy and the bank’s preferences — rates are currently above 5% and expected to remain high in the coming months.
The main appeal of a high-yield savings account over a CD is flexibility. While you may be charged an early withdrawal penalty if you take money out of a CD before the term ends, you can access funds in a savings account whenever you need them. This makes it a good spot to stash your emergency fund or money for short-term goals like a holiday fund or concert tickets.
Money market accounts: A money market account functions like a savings account but often has checking account privileges like the ability to write checks or make transactions with a debit card. Money market accounts also have competitive APYs, though most are lower than the best CD rates.
However, most money market accounts require a high minimum balance to earn interest. And even though these accounts usually come with a debit card and check writing, you’ll be limited to a certain number of transactions per month.
Treasury bonds: Both CDs and treasury bonds are low-risk savings options with a fixed rate. While most CDs are insured by the National Credit Union Association or the Federal Deposit Insurance Corporation, bonds are backed by the government or company that sells them.
You’ll have a guaranteed return as long as you don’t withdraw money before the bond or CD matures. If so, you could miss out on future interest and pay a penalty that lowers the value.
Other types of CDs to consider
Several types of CDs offer more flexibility than a standard CD. For example, an add-on CD lets you add funds after your initial deposit, while a bump-up or step-up CD will give you a higher yield if rates go up. A no-penalty CD allows you to withdraw your money without incurring an early withdrawal penalty.
If there’s a chance you’ll need access to the money in your CD before the term ends, a no-penalty CD is a good option. No-penalty CDs typically offer lower yields than traditional CDs because you can take your funds out before maturity, said Chelsea Ransom-Cooper, managing partner and financial planning director at Zenith Wealth Partners. If you’re looking for flexibility and a better return, another option would be a money market account, Ransom-Cooper added. Here’s a look at rates for no-penalty CDs.
A bump-up CD allows you to take advantage of a higher rate for your CD term if one becomes available after you open your account. However, the APY still may be lower than a standard CD.
The advantages of a bump-up CD are determined by the rate environment. If you think rates might go up and don’t want to be stuck with a low APY, this could be a fail-safe technique.
But because inflation is starting to recede and interest rate hikes might be coming to an end soon, you should evaluate if this kind of account makes sense for you.
What is a CD ladder?
CDs require you to lock up your money for a set period, and you may be reluctant to set aside all of your funds for multiple years. A CD ladder can give you more flexibility. By depositing your money into multiple CDs with varying terms, you’ll get access to some of your funds as each CD term expires. Then, you can decide how you want to use that portion of the money and if you want to reinvest it into a longer-term CD.
Short-term CDs of one year or less have higher rates than most long-term CDs right now. But if long-term CD rates are as good as they’re going to get, it’s worth considering a mix of short- and long-term CDs. Here’s an example of how a CD ladder can work with a one-, three- and five-year CD if you deposit $1,000 into each account:
|Balance at maturity
Although you could earn more interest by investing all your money into the 12-month CD, this strategy helps you get some of your funds back sooner. That means if interest rates increase, you can access some of your money and reinvest it into a higher APY account, while still earning a good return on your initial CD deposits.
Pros and cons of CDs
CD ladder: You can open several CDs at different term lengths to take advantage of rates and maintain flexibility.
Risk of a lower return: If rates go up, you’re locked into a lower APY unless you have a bump-up CD.
How to open a CD
Here’s a step-by-step guide to help you open a CD.
- Compare banks and rates: You can open a CD at your local physical branch or online. Most retail banks and credit unions also offer CDs or share certificates, as do online-only banks. Make sure the bank or credit union you choose is FDIC- or NCUA-insured to protect your funds. All the banks we track above are FDIC- or NCUA-insured.
- Choose the CD type and term: When you’re ready to open an account, you’ll choose the CD type and term you want. Be sure to compare rates and weigh all options based on your financial savings goals.
- Complete an application: Just like with a checking or savings account, you’ll fill out an application with your personal information, including your name, birth date, Social Security number and address.
- Fund your account: When opening a CD, you’ll need to make a one-time deposit. You won’t be able to make any additional contributions, so you should only open the CD when you have the funds available.
After you’ve set up your account, you’ll begin earning interest. When your CD matures at the end of the term, you can withdraw your funds or reinvest them into another CD at the current rate.
Our CD methodology
CNET reviews CD rates based on the latest APY information from issuer websites. We evaluated CD rates from more than 50 banks, credit unions and financial companies. We selected the CDs with the highest APY for five-year terms from among the organizations we surveyed and considered rates for shorter terms if five-year terms were identical or unavailable. All information is reviewed by experts for accuracy.
Banks we reviewed
Alliant Credit Union, Ally Bank, America First FCU, American Express National Bank, Barclays, Bask Bank, Bethpage, BMO Alto, Bread Savings, Capital One, CFG Bank, CIT, CommunityWide Federal Credit Union, Connexus Credit Union, Discover, EverBank, First Internet Bank of Indiana, First National Bank of America, Forbright, Lending Club, Limelight Bank, Marcus by Goldman Sachs, MYSB Direct, NexBank, Popular Bank, Quontic, Rising Bank and Synchrony.
The editorial content on this page is based solely on objective, independent assessments by our writers and is not influenced by advertising or partnerships. It has not been provided or commissioned by any third party. However, we may receive compensation when you click on links to products or services offered by our partners.