Finding the Best CD Rates
by MoneyRates Team | Money Rates Columnist
Searching for the highest yield possible on a certificate of deposit, or CD, is essential to maximizing your savings. CD rates for similar terms can vary widely and that translates into money earned or potential savings lost.
For example, compare a 5-year CD with a deposit of $30,000 and a 2.27% annual percentage yield (APY) to a similar CD for the same term and deposit amount, but with a 1.75% APY. (Two current offers, updated April 21, 2016.) In this example, the interest is compounded annually.
Over the terms of the CDs, the difference in return can be substantial:
|APY||Estimated savings at end of 5-year-term*|
* doesn't include fees
Of course, rates vary and any early withdrawals can cost you, but who wants to turn down almost $900?
To help make finding the highest CD rates easier, we've compiled a searchable database of rates across the country. You can use the tool below to sort by account type, term and amount of deposit to create personalized recommendations, including for so-called "jumbo" CDs or deposits of $100,000 or more.
1 Yr. Term
Rates as of 5/5/2016 See more rates Rates / APY terms above are current as of the date indicated. These quotes are from banks, credit unions and thrifts, some of which have paid for a link to their website. Bank, thrift and credit union deposits are insured by the FDIC or NCUA. Contact the bank for the terms and conditions that may apply to you. Rates are subject to change without notice and may not be the same at all branches.
$0 Minimum to earn APY
1 Yr. Term
Rates as of 5/5/2016
See more rates
Rates / APY terms above are current as of the date indicated. These quotes are from banks, credit unions and thrifts, some of which have paid for a link to their website. Bank, thrift and credit union deposits are insured by the FDIC or NCUA. Contact the bank for the terms and conditions that may apply to you. Rates are subject to change without notice and may not be the same at all branches.
Here are four other key considerations as you shop for the best CD rates:
1. The opportunity cost of higher CD rates vs. withdrawal fees
Generally speaking, the longer the CD term, the higher the yield. But rates can change. If you lock into a CD and interest rates stay the same or fall during the term, it’s no problem. If rates climb in the months or years after, you'll wonder what your options are for taking advantage of higher rates.
How to minimize impact of withdrawal penalties
If this is a major concern, focus on where the withdrawal penalty is low enough that it might make sense to take the hit and then reinvest at the higher rate. Be sure to crunch the numbers before moving your money.
Here's an example that might help: You open a 2-year CD with a 2% APY and an early withdrawal penalty of six months in interest. CD interest rates have since climbed to 5% in this scenario.
Why look for higher rates
If you break your CD to open a new one with a higher rate, it will cost you half your interest to that point, effectively reducing your APY for the first year to about 1%. But, if you’re able to secure that 5 percent interest rate during the second year, your average APY for the two-year term will equal about 3%, or 1% more annually than you would have earned if you stuck with the original CD.
To make this a viable strategy, you should review the potential penalties before you open a new CD. If you find two CDs that are identical in most ways, compare their early withdrawal penalties. The one with the smaller penalty may offer you more flexibility if you need to exit the account sometime during the term.
2. Following trends in CD interest rates
You don't have to be an economist to follow interest rate trends. For most savers, paying attention to the news headlines is enough. Decisions that could move short-term interest rates are made by the Federal Open Market Committee.
Historically, interest rates have dipped lower, lower and then lower again, affecting deposits of all stripes, including CDs. Here's a look at the average yield on a 12-month CD since 2009. This makes shopping around critical in maximizing your savings.
3. The power of the CD ladder
If you’d like your savings to earn maximum interest while still maintaining some regular liquidity, a CD ladder may be the way to go. This consists of multiple CDs with staggered maturity dates, which allows you regular, penalty-free access to a portion of your savings while still earning higher interest rates overall.
Why invest using a CD ladder
This is a great option if you intend to use or reinvest some portion of your savings on a regular basis, but don’t anticipate needing the whole of it at any given time. When done correctly, you can end up with a stable of long-term CDs in which at least one account reaches maturity every few months, offering you the option to access it or simply push it ahead to reach maturity at a chosen point in the future. After seeing your options, narrow down your list for the best long term CD rates.
Length of CD terms
- 1 month
- 2 months
- 3 months
- 6 months
- 9 months
- 1 year
- 1.5 years
- 2 years
- 2.5 years
- 3 years
- 4 years
- 5 years
4. Unconventional CDs
While traditional CDs are by far the most popular type, some banks offer their own twist on the usual product. A raise-your-rate CD is a special type of certificate that allows you to bump up your interest rate one or more times during the term (assuming rates have in fact risen), and indexed CDs forgo a fixed interest rate in favor of a variable rate that moves in accordance with a benchmark indicator.
Foreign CD investments
Even more exotic, CDs that are denominated in foreign currencies allow investors to effectively gamble on the relative values of a nation’s currency. These vehicles may come with more risk than a typical CD though, as they may allow a loss in principal if the chosen currency loses value over the course of the term.
FDIC insurance coverage and CDs
If safety and stability are paramount to you, a conventional CD may be your best choice – so long as you ensure that the bank you choose is insured by the FDIC. FDIC insurance coverage is designed to protect funds up to $250,000 per depositor, per institution in the event of a bank failure, and it has never failed to cover insured deposits since the FDIC’s inception in 1933.
FDIC-insured banks must display the FDIC emblem in their branches or, in the case of online-based banks, on their website. Credit unions also have deposit insurance and are considered just as safe as traditional banks.
Best CD rates found by users like you
Have you been able to find even better CD rates than the ones displayed above? If yes, please share them with us and other MoneyRates users! Please include the details: the name of the bank, APY, term of the CD, when you opened the account, and whether the account can be opened online or only in the branch (if the latter, please include the location of the branch). Thank you!