A certificate of deposit (CD) offers a secure option for parking your savings while earning a competitive return. However, the interest rates on CDs can vary widely. Let’s explore the current rates for CDs and highlight where to find the most competitive offers.
Where are the best CD rates today?
CDs today typically offer rates significantly higher than traditional savings accounts. As of April 2024, short-term CDs (six to 12 months) generally offer rates around 5% to 5.50% APY.
Medium-term CDs (one to three years) also hover around these high levels, although rates can slightly decrease as the term extends. Meanwhile, longer-term CDs of three or more years tend to offer rates closer to 4%.
The following is a look at some of the best CD rates available today from our verified partners.
Compared to the national average, these CD rates from online banks pay anywhere from three to 22 times more.
Read more: What is a good CD rate?
Historical CD rates
In the 2000s, particularly after the dot-com bubble and leading into the global financial crisis of 2008, CD rates began to decline. The early 2000s saw relatively higher rates, but these began to fall as the economy slowed and the Fed cut interest rates to stimulate growth. By 2009, in the aftermath of the financial crisis, the average one-year CD paid around 1% APY, with five-year CDs at less than 2% APY.
The trend of declining CD rates continued into the 2010s, especially after the Great Recession of 2007-2009. The Fed’s policies to stimulate the economy (particularly keeping its benchmark interest rate near zero) led banks to offer very low rates on CDs. By 2013, average yields on 6-month CDs fell to about 0.1% APY, while 5-year CDs returned an average of 0.8% APY.
However, there was a shift between 2015 and 2018 as the Federal Reserve gradually increased its benchmark interest rate. This period saw a slight improvement in CD rates as the economy expanded, marking the end of nearly a decade of ultra-low rates. Yet, the onset of the COVID-19 pandemic in early 2020 led to emergency rate cuts by the Fed, causing CD rates to fall to new record lows.
Since 2020, particularly from mid-2021, CD rates began to increase once more, following 11 rate hikes by the Federal Reserve since March 2022. This led to higher rates on loans and, correspondingly, higher payouts on savings products, including CDs.
Take a look at how CD rates have changed since 2009:
Understanding today’s CD rates
Traditionally, longer-term CDs have offered higher interest rates compared to shorter-term CDs. This is because locking in money for a longer duration typically carries more risk (e.g., missing out on higher rates in the future), which banks compensate for with higher rates.
However, this pattern doesn’t necessarily hold today, with the highest average rate offered for a 12-month CD. This suggests a flattening or inversion of the yield curve, which can happen in uncertain economic times or when investors expect future interest rates to decline.
Read more: Short- or long-term CD: Which is best for you?
How to choose the best CD rates
When opening a CD, choosing one with a high APY is just one piece of the puzzle. There are other factors that can impact whether a particular CD is best for your needs and your overall return. Consider the following when choosing a CD:
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Your goals: Decide how long you’re willing to lock away your funds. CDs come with fixed terms, and withdrawing your money before the term ends can result in penalties. Common terms range from a few months up to several years. The right term for you depends on when you anticipate needing access to your money.
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Type of financial institution: Rates can vary significantly among financial institutions. Don’t just check with your current bank; research CD rates from online banks, local banks, and credit unions. Online banks, in particular, often offer higher interest rates than traditional brick-and-mortar banks because they have lower overhead costs. However, make sure any online bank you consider is FDIC-insured (or NCUA-insured for credit unions).
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Account terms: Beyond the interest rate, understand the terms of the CD, including the maturity date and withdrawal penalties. Also, check if there’s a minimum deposit requirement and if so, that fits your budget.
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Inflation: While CDs can offer safe, fixed returns, they might not always keep pace with inflation, especially for longer terms. Consider this when deciding on the term and amount to invest.