Time flies when you plan to open a CD and you want to optimize your returns. Rates for both short- and long-term CDs are starting to decrease, which can affect how much return you can expect to get when the CD term ends.
Currently, top CDs offer annual percentage yields, or APYs, of up to 5.50% for six-month and one-year CDs. But the longer term is not that long. The average APY for a five-year CD is just 4.03%, for example, and experts don’t expect rates to go much higher. However, rates are starting to drop.
But this saving option may still be worth it, depending on your financial goals, especially since the high rate continues to remain in many banks.
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 could make if you deposited $5,000 today:
Don’t expect higher CD rates anytime soon
CD rates have risen steadily over the past two years in response to the Federal Reserve regularly raising the federal funds rate — with short-term CDs above 5% for some banks. When the Fed raises the federal funds rate, banks often follow suit, raising interest rates on consumer products. As a result, this makes borrowing more expensive but drives up income for CDs and high-yield savings accounts.
With inflation approaching the Fed’s 2% target, the last three Federal Open Market Committee, or FOMC, meetings resulted in a halt in rate hikes. In response, banks began lowering their rates on CD terms, and some kept rates steady for weeks. Here’s where APYs stand compared to last week:
|CNET average APY*
|Average FDIC rate
|There is no change
|There is no change
**Percentage increase/decrease from Jan. 2, 2024, to Jan. 8, 2024.
This may not seem like a drastic decrease overall, but when we look at individual CD rates over the past month, we see that the earning potential has decreased significantly. Here’s how the top CD rates compare from the start of December 2023 to the start of January 2024:
|Highest APY in Dec. 4, 2023
|Highest APY in Jan. 3, 2024
CD interest is compounded, meaning that you earn interest not only on your principal balance but also on the interest you have earned so far. So even a small reduction in APY can make a big difference over time in how much you can earn. As lumber rates drop, the longer you wait to open a CD, the more you lose.
Why don’t you wait to open a CD
The best way to protect yourself from an expected rate decrease in the future is to lock in a good APY now. But a certain rate of return 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, early withdrawal penalties prevent you from draining your funds before you need them. Most banks charge a penalty if you withdraw money before the CD matures.
“CDs are a great vehicle for savers because they can take the paralysis out of analyzing where to put your money at the time you leave it there, and you can focus your attention on other areas of your finances,” says Bernadette Joy, a personal finance coach and member of the CNET Financial Review Board.
Even if the rates are high, it’s best to make sure the term of the CD you choose is in line with your financial goals. If you need the money before the end of the term, you may end up paying an early withdrawal penalty fee that will eat into your income — even at a high rate.
Factors to keep in mind when opening a CD account
In addition to a competitive APY, you should also consider the following when comparing CD accounts in any rate environment:
- 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 have to say about the bank you’re considering on sites like Trustpilot to make sure the bank is responsive, professional and easy to work with. “I’ll also try to call the customer service line so you know you’ll get your money quickly when you need it,” Joy said.
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.