If you’re sick of low interest rates on savings accounts and you won’t need to access your money for a while, it might be time to branch out and explore 2-year CDs.

You can think of CDs as a higher-paying savings account that’s stashed in a safe with a time lock. While you may be able to withdraw the interest before the end of the term, you can’t touch the principal without incurring an early withdrawal penalty.

The higher interest rate comes because banks pay CD account holders a liquidity premium (the additional return an investor expects in exchange for giving up the ability to liquidate their investment quickly) in addition to their normal deposit rate.

The best 2-year CD rates pay more than three times the national average of 0.55 percent APY, according to Bankrate’s most recent national survey of banks and thrifts.

Liquidity premium

The additional return an investor expects, over and above the normal return for a given level of risk, in exchange for giving up the ability to liquidate their investment quickly.

Today’s top nationally available 2-year CDs pay 2.02 percent APY. This may be a good place to invest for mid-term financial obligations, like paying off credit card debt.

Finding the best 2-year CD rates

When looking for a 2-year CD, it might be easier to just sign up with the bank that handles your checking account. But if you want to get the best rate, you’re more likely to do so if you cast a wide net than to just accept what your current bank offers.

“(Large banks have) this huge captive customer base and it becomes pretty easy for them to say, ‘You’re going to need that money in two years. We’ve got a 2-year CD that’s paying 0.4 percent,'” says Dylan Ross, CFP professional, director of communications and financial planning at the Garrett Planning Network in Burlington, New Jersey. “You can easily double that.”

And no matter the size of the bank that’s offering the best terms, as long as it’s a member of the Federal Deposit Insurance Corp., or FDIC, you can feel secure parking your money there. That’s because consumer deposits at all FDIC-insured banks are backed by the full faith and credit of the U.S. government up to $250,000, so if the bank fails, you won’t be on the hook. The same goes for credit unions backed by the National Credit Union Administration.

Here are the top nationally available 2-year CD rates. Compare these offers, then calculate how much interest you could earn when your CD matures.

Top nationally available 24-month CD rates
Institution APY Minimum deposit
Garden Savings Federal Credit Union 2.02% $500
Popular Direct 1.85% $10,000
Congressional Bank 1.85% $25,000
First Internet Bank of Indiana 1.81% $1,000
EverBank 1.81% $5,000

Top account details

  • Garden Savings Federal Credit Union is based in Parsippany, New Jersey. It was established in 1968 and originally served AT&T Bell Laboratories employees. Membership is open to savers nationwide who join the American Consumer Council. Garden Savings earned four out of five stars on Bankrate’s latest Safe & Sound Ratings, which measures the financial health of banks and credit unions throughout the United States.
  • Popular Direct is a subsidiary of Popular Inc., a financial services firm serving the United States, Puerto Rico and the Caribbean that was founded in 1893. Popular Direct accounts are opened through Banco Popular North America, which earned five out of five stars from Safe & Sound.
  • Congressional Bank is headquartered in Potomac, Maryland. Established in 2003, it now has five branches and serves customers throughout the Washington metropolitan area. The bank earned four out of five stars from Safe & Sound.
  • First Internet Bank of Indiana, based in Fishers, Indiana, was founded in 1999 and serves customers across the country. It earned four out of five stars from Safe & Sound.
  • Everbank is based in Jacksonville, Florida. It was established in 1961 and was recently acquired by TIAA, a financial services organization. EverBank earned three out of five stars from Safe & Sound.

A rung in the ladder

In addition to helping you meet your mid-term financial goals, two-year CDs can be used as a “rung” when you’re building a CD ladder.

Done correctly, laddering allows you to benefit from high rates on longer maturities while still getting regular infusions of cash to spend or reinvest.

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