Images by GettyImages; Illustration by Hunter Newton/Bankrate
After holding steady for several weeks, the top rates for nine-month and one-year certificates of deposit (CDs) have dropped slightly this week. Other terms that experienced dips in top annual percentage yields (APYs) include 18-month, two-year, three-year and five-year terms.
These drops are minimal and CD rates have likely reached their overall peak, with the Federal Reserve choosing to hold rates steady at its recent rate-setting meeting and noting potential cuts in the coming year. If you’re a saver who’s looking to lock in high rates now, a CD is definitely worth considering.
CD rates often vary widely from bank to bank, so it’s important to shop around for a CD that earns a high APY. The guide below lists average rates and competitive ones for various terms, as well as how to find a CD with the best rate.
Key takeaways
- Today's highest-yielding CD earns a 5.66 percent APY and has a one-year term.
- Top APYs for several CD terms have declined slightly over the past month.
- The best rates are more than triple the national average yields, so it pays to shop around.
Today’s CD rates by term
| CD term | Institution offering top APY | Highest APY | National average APY | Estimated earnings on $5,000 with top APY |
|---|---|---|---|---|
| * Note: Annual percentage yields (APYs) shown are as of Dec. 22, 2023. APYs for some products may vary by region. N/A: Not available; Bankrate doesn’t track national averages for the 6-month and 9-month CD terms due to limited available data. Estimated earnings are based on the highest APYs and assume interest is compounded annually. | ||||
| 6-month | Bank5 Connect | 5.50% | N/A | $136 |
| 9-month | Forbright Bank | 5.60% | N/A | $209 |
| 1-year | CIBC Bank USA | 5.66% | 1.73% | $283 |
| 18-month | Alliant Credit Union | 5.30% | 1.73% | $403 |
| 2-year | TAB Bank | 5.00% | 1.52% | $513 |
| 3-year | Popular Direct | 4.85% | 1.42% | $764 |
| 4-year | Popular Direct | 4.60% | 1.44% | $985 |
| 5-year | SchoolsFirst FCU | 4.60% | 1.44% | $1,261 |
When will CD rates start to drop?
Over the past two years, we’ve seen competitive banks gradually nudge their CD and savings account rates higher. This has been a result of a string of 11 Fed rate hikes that have brought the Fed’s key benchmark borrowing rate to a 22-year high of 5.25-5.5 percent.
As we round out 2023, CD APYs remain high overall, following the Fed’s decision to hold rates steady at its latest rate-setting meeting this month. At that time, the Fed released projections indicating officials expect to have cut rates by 0.75 percentage point by the end of 2024.
Any such drops in the fed funds rate could trigger banks to lower their CD yields, in turn. Opening a fixed-rate CD while rates are at their peak means you’ll continue to earn the high APY even if the going rates for new CDs start to come down.
What’s happened with average CD rates in 2023?
National average CD yields have risen steadily in 2023, as the Federal Reserve has hiked interest rates four times this year. (In all, national averages began increasing after the Fed started hiking rates in March 2022. It raised rates seven times last year.)
How to find the best CD rates
You’ll often find the best CD rates from online-only banks, such as Synchrony Bank, which don’t have the overhead costs of running branches — and which also may offer competitive rates to draw customers away from traditional brick-and-mortar banks. Credit unions, such as Alliant Credit Union, also commonly offer high rates because their profits go back to members. Yields can vary significantly among banks, so it pays to shop around for the best CD rates.
CD FAQs
A CD is a deposit account that earns a fixed rate of return in exchange for locking in your funds for the entire term. CD terms often range from three months to five years, although it’s possible to find ones with terms shorter or longer than that. A CD can be a good place to stash money for savings goals, such as a down payment on a house or a new car. When choosing the best CD term, consider when you’ll need access to the money.
Because a CD typically comes with an early withdrawal penalty, it’s best to only put money into a CD that you won’t need in the meantime for living expenses or emergencies. Money you may need sooner is best kept in a liquid account, such as a high-yield savings account, which provides access to your funds anytime.
Both CDs and share certificates are deposit accounts where your money typically grows at a fixed rate for a set amount of time. The main difference between the two is in the name: CDs are offered from banks, whereas share certificates are offered from credit unions. What’s more, CD earnings are referred to as interest, while share certificate earnings are called dividends. And because credit unions are not-for-profit, their profits are distributed among members (essentially shareholders in the credit union) in the form of dividends. Dividends act the same as yields on CDs, however some credit unions may offer higher rates or lower fees as a result of sharing profits.
CDs and share certificates are insured through banks and credit unions, respectively, that are federally insured. For example, banks are insured by the Federal Deposit Insurance Corp. (FDIC), whereas credit unions are insured through the National Credit Union Administration (NCUA). Under such federally insured banks and credit unions, CDs and share certificates are each insured for up to $250,000 per depositor, per insured bank, for each account ownership category.
Methodology
Bankrate calculates and reports the national average APYs for various CD terms. Factored into national average rates are the competitive APYs commonly offered by online banks, along with the very low rates often found at large brick-and-mortar banks.
In June 2023, Bankrate updated its methodology that determines the national average CD rates. For the process, more than 500 banks and credit unions are now surveyed each week to generate the national averages. Among these institutions are those that are broadly available and offer high yields, as well as some of the nation’s largest banks.
The article you've shared delves into the fluctuations in certificate of deposit (CD) rates, providing insights into the current market trends, the impact of Federal Reserve decisions, and strategies for maximizing CD returns. Here's a breakdown of the concepts and terms mentioned:
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Certificate of Deposit (CD): A fixed-rate deposit account with a specified term. Customers deposit funds for a set period and receive a fixed interest rate until maturity. Early withdrawal typically incurs a penalty.
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Annual Percentage Yield (APY): The effective annual rate of return, accounting for compound interest, on a deposit account like a CD. It reflects the actual yield considering the interest compounding over a year.
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Federal Reserve and Interest Rates: The Federal Reserve influences interest rates, impacting financial institutions. Rate hikes or cuts by the Fed can affect CD yields. The article mentions the Fed's decision to hold rates steady and projections of potential rate cuts in the future.
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CD Rates and Fluctuations: The article discusses the recent slight drops in top APYs for various CD terms, indicating that rates might have reached their peak. It also hints at potential future drops in rates based on the Fed's projections.
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National Average Yields vs. Competitive Yields: Comparison between the average yields across the country and the higher rates offered by specific banks or credit unions. Shopping around for higher APYs is advised.
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CD Terms and Institutions: The article lists various CD terms (e.g., six-month, nine-month, one-year, etc.) and the institutions offering the highest APYs for those terms.
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Finding the Best CD Rates: Tips on finding high-yield CDs, including exploring online-only banks and credit unions, which often offer better rates due to lower overhead costs.
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CD FAQs: Information about CDs as savings tools, emphasizing the importance of choosing a suitable term and considering liquidity needs. It also compares CDs with share certificates, detailing differences in terminology, earnings, and profit-sharing mechanisms between banks and credit unions.
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Federally Insured CDs: Assurance that CDs from banks (FDIC-insured) and share certificates from credit unions (NCUA-insured) are federally insured up to $250,000 per depositor, per insured bank or credit union.
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Methodology for Calculating Average CD Rates: Insights into how Bankrate calculates national average APYs for different CD terms, incorporating rates from online banks and large brick-and-mortar banks.
Understanding these concepts is crucial for individuals looking to invest in CDs or optimize their savings strategy based on fluctuating interest rates and market conditions.
