CD rates often move hand in hand with the federal funds rate – when the Federal Reserve raises the federal funds rate, CD rates usually follow suit. As the Fed regularly raises rates from March 2022 to July 2023 to curb inflation, CD rates are rising. With the Fed choosing to hold off on rate hikes for the last three meetings, CD rates peaked at the end of 2023 and have fallen slowly in recent months.
That said, there is still time to get an attractive rate. Today’s top CDs offer annual percentage yields, or APYs, as high as 5.5%, which is greater than the national average of 1.51% to 1.41% for standard CD terms. And because your APY is locked in when you open a CD, you can protect your income against future rate drops if you lock in a rate now.
Experts recommend comparing rates before opening a CD account to get the best possible APY. Enter your information below to get the best CNET partner rates for your area.
The best CD rates today
Here are some of the top CD rates available today and how much you can make by depositing $5,000 today:
|BMO Alto; CommunityWide Federal Credit Union
|Bread Storage; CommunityWide Federal Credit Union; Limelight Bank
|First Internet Bank in Indiana
CD rates remain high, but short-term CDs offer better rates
Generally, long-term CDs offer the highest savings rate, because you agree to lock in your money for a longer period of time. But now short-term CDs, such as six-month and one-year terms, offer the highest prices.
“Based on today’s rates, the sweet spot for CDs is in short-term CDs that offer higher rates than their longer-term counterparts,” says Dana Menard, founder and leading financial planner. of Twin Cities Wealth Strategies. “Also, a short-term lock can make sense if you don’t need liquidity in the short term you lock in rates.”
Here’s where APYs compared last week:
|CNET average APY
|Average FDIC rate
*Percentage increase/decrease from Jan. 16, 2024, to Jan. 22, 2024.
CD rates will remain high after the Fed meeting next week
CD rates are affected by the federal funds rate, which determines how much it costs banks to borrow and lend to each other. When the Federal Reserve raises this rate, banks tend to do the same, raising interest rates on consumer products such as credit cards, as well as savings accounts and CDs. But banks are also raising savings rates to attract new customers, stay competitive and improve their cash flow.
Beginning in March 2022, the Fed regularly raised the federal funds rate to combat rampant inflation, and CD rates rose in response. But since inflation has started to cool, the Fed has chosen to hold off on rate hikes at its last three meetings – and CD rates have been lowered. The last months of 2023 saw many banks starting to lower the rates of CD terms.
The next meeting of the Fed is January 30-31, and experts hope that the central bank will opt for another stop on rate hikes. So, there is still time to lock in a high CD rate, but you won’t have to wait long. Experts expect the Fed to start lowering rates in mid to late 2024. This is one reason why banks may still offer higher rates for short-term CDs, than long-term — banks may be reluctant to lock customers into higher rates for longer periods of time, knowing that rates are likely to fall in the coming months.
Why don’t you wait to open a CD
A fixed rate of return (especially if prices fall) is not the only benefit of opening a CD today.
CDs held by banks that are members of the Federal Deposit Insurance Corporation or credit unions insured by the National Credit Union Administration are protected by federal deposit insurance up to $250,000 per person, per institution in the event of bank failure. This makes them a low-risk way to grow your savings.
Additionally, most banks charge a fee if you withdraw money before the CD matures. This can eat into your income and give you pause if you’re thinking of tapping your funds before you need them. And you can set aside the money without worrying about spending it (plus you’ll earn interest).
What to consider before opening a CD
In addition to a competitive APY, here’s what you should look for when comparing CD accounts:
- How quickly you need the funds: Early withdrawal penalties can wipe out your interest earnings. So be sure to choose a term that fits your savings timeline.
- Minimum deposit requirement: Some CDs require a certain amount to open an account – typically, $500 to $1,000. Some have no minimum deposit requirement. How much money you should deposit will help you narrow down your account options.
- Fee: Charges can destroy your balance. Many online banks do not charge maintenance fees. They have lower overhead costs than banks with physical branches, and they pass these savings on to consumers through higher fees and lower fees. However, be sure to read the fine print for any account you are considering.
- Federal deposit insurance: Confirm that any institution you are considering is a member of the FDIC or NCUA to ensure your money is protected in the event of a bank failure.
- Customer ratings and reviews: Read what customers are saying about the bank you’re considering on sites like Trustpilot to make sure the bank is responsive, professional and easy to work with.
CNET checked 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 evaluate CDs based on APYs, product offerings, accessibility and customer service.
Current banks included in CNET’s weekly CD average are: Alliant Credit Union, Ally Bank, American Express National Bank, Barclays, Bask Bank, Bread Savings, Capital One, CFG Bank, CIT, Fulbright, Marcus by Goldman Sachs , MYSB Direct, Quontic , Rising Bank, Synchrony, EverBank, Popular Bank, First Internet Bank of Indiana, America First Federal Credit Union, CommunityWide Federal Credit Union, Discover, Bethpage, BMO Alto, Limelight Bank, First National Bank of America, Connexus Credit Union.