Use this free CD calculator to find out how much interest is earned on a CD.
Certificates of deposit (CDs) are safe vehicles for investors hoping to avoid taking on too much risk. If you keep your funds locked up in the bank for an entire term (such as three months or one year), you can expect to end up with your initial deposit plus interest.
A 12-month CD won’t pay the highest CD rates in the market. But in early 2020, there isn’t much of a difference between the annual percentage yields (APYs) on many one-year CDs and five-year CDs. The benefit to a short-term CD, such as a one-year CD is when your account comes due, you’ll have an opportunity to see if a higher-yielding option is available.
Calculate how much interest you can earn using Bankrate’s calculator, and use that information to compare offers to see what works best for you.
Note: The APYs (Annual Percentage Yield) shown are as of March 25, 2020. Bankrate’s editorial team updates this information regularly, typically biweekly. APYs may have changed since they were last updated. The rates for some products may vary by region.
Live Oak Bank is an online bank that offers competitive yields. Though the minimum deposit may be slightly steep for new savers without much money to lock up, it’s still accessible to others looking for a safe place to park their short-term funds.
In addition to CDs, the bank offers a high-yield savings account with no monthly maintenance fees. Established in 2008, Live Oak Bank is a federally-insured financial institution. Supporting small business owners is part of its mission statement.
CIT Bank is CIT’s national direct bank. CIT Bank, N.A. is a subsidiary of CIT Group Inc.
CIT Bank offers eight terms of CDs, four terms of Jumbo CDs and an 11-month no-penalty CD.
In addition to its CDs, CIT Bank offers two savings accounts and a money market account -- so it has a variety of savings options for customers.
CIT Bank also launched its eChecking account in November 2019.
Barclays Bank doesn’t have minimum balance requirements to open its CDs and savings account. That means it’s an option for savers across all levels.
The bank offers nine different CD terms to choose from. It has competitive yields, but it doesn’t tend to offer the highest available APY. Barclays also offers a savings account, which has a competitive APY.
Marcus by Goldman Sachs is a brand of Goldman Sachs Bank USA. Marcus offers a variety of CDs, three no-penalty CD terms and a savings account.
Marcus by Goldman Sachs now has an app available on iOS and one coming to Google Play this spring, according to Marcus’ website.
Amerant Bank offers some of the highest online CD APYs available. Amerant Bank has 26 banking centers -- 18 in South Florida and eight in Houston.
However, the Amerant Bank CD yield mentioned here isn't available in Florida and Texas. Plus, the high minimum amount to get that APY is $10,000, which may be a tough requirement for some savers to meet.
Discover Bank offers a wide selection of banking products. It has been offering deposit products online since 2007.
This includes 12 CD terms, a money market account, a savings account and a checking account. It also features an 11-month no-penalty CD.
Its products tend to offer competitive APYs. So this account offers both a competitive yield and encourages you to keep adding to your savings account.
Limelight Bank is a division of Capital Community Bank. Limelight Bank calls itself a conscientious bank that actively ties its business to eco-friendly initiatives, according to its website.
Limelight Bank has its headquarters in Provo, Utah.
Limelight Bank only offers CDs on its website and requires a minimum deposit of $1,000 on all four of its CD terms. You’ll have to look elsewhere if you’re looking for a CD with a term of longer than three years. Its CDs range from a six-month term to its 3-year offering.
Synchrony Bank offers competitive yields across 12 terms. All standard CD terms typically offered by banks and credit unions are available.
If Synchrony Bank receives your CD deposit within the 15-day period -- and the CD rate increases, you’ll receive this higher rate.
The bank also offers a savings account and a money market account. The savings account has a competitive APY and has no minimum balance requirement.
Sallie Mae Bank offers CDs, a savings account, money market account, credit cards and private student loans. Sallie Mae Bank offers competitive yields on both its CDs and its savings deposit accounts.
Sallie Mae Bank was established in 2005 and is headquartered in Salt Lake City, Utah. In 2014, Sallie Mae became a standalone consumer banking business.
Traditional CDs typically come with early withdrawal penalties that can significantly reduce your earnings. To avoid forfeiting interest for closing out your account before the term officially ends, consider looking for liquid or no-penalty CDs.
Just keep in mind that the yields associated with no-penalty CDs tend to be lower than the rates tied to traditional CDs.
Having a 1-year CD means that your savings will be tied up for 12 months. Generally, you won’t be able to access your funds during that period of time (unless you don’t mind getting hit with an early withdrawal penalty). In exchange, you’ll earn a higher yield than you would from a standard savings account or money market account.
If you’re not planning to touch your money for a year and believe the benefits of a 1-year CD are more attractive than the yield associated with a liquid savings account, then it’s a good time to consider getting a 1-year CD. And if you’re constantly dipping into your savings, a 1-year CD could help you save more money.
Today’s top nationally available 1-year CDs pay 0.76 percent APY. That’s not enough to retire on, but it’s a good vehicle to meet short-term financial obligations (like saving for a down payment on a mortgage) that can let your money grow near the rate of inflation without having to worry about missing out on better deals that arrive after you invest.
Banks and credit unions set their own CD rates based on multiple factors, including inflation, and the rates set by competitors. Changes in treasury yields and Federal Reserve interest rate decisions are taken into account as well.
Some banks have a 10-day best rate guarantee, meaning you could end up with a better rate if the bank raises theirs within days of your decision to open and fund your account. But generally, once you open and fund a fixed-rate CD, you’re stuck with that APY until your term ends. Over time, the bank may raise or lower the advertised rate for new account holders, but your rate will remain the same.
If you do your research, you’ll find that some institutions offer bump-up or step-up CDs that allow rates to change either upon request or at certain intervals during the term. Rates for these CDs, however, tend to be lower than those tied to fixed-rate CDs.
When reviewing CD rates, pay close attention to the annual percentage yield (APY). The APY includes the effects of compounding. Compound interest is the interest you earn on interest.
Calculate how much interest you’ll earn as you compare APYs.
Right now, average CD rates remain at historic lows. However, if you shop around, you can find better deals than what’s offered by the primary bank managing your checking account. Researching rates at several local banks, as well as reputable online banks, will usually yield the best rate.
As long as you choose a 1-year CD with a fixed rate – and keep the funds in the CD for the duration of the term – you won’t lose money. If you withdraw before the term of the CD allows, you may be subject to an early withdrawal penalty.
Also, each depositor at a Federal Deposit Insurance Corp. (FDIC) bank is insured to at least $250,000 per FDIC-insured bank. According to FDIC.gov, no depositor has lost a single cent on FDIC-insured funds as a result of a bank failure. If you’re concerned about your FDIC insurance eligibility, you can use the FDIC’s Electronic Deposit Insurance Estimator.
The standard share insurance amount is $250,000 per share owner, per insured credit union, for each ownership category at National Credit Union Administration (NCUA) institutions.
It’s also important to factor in inflation. If the rate of inflation is higher than your CD yield, your purchasing power goes down.
Before you buy a 1-year CD, it’s important to find out how it stacks up against other types of investment vehicles. Read on to find out how 1-year CDs compare to more liquid accounts, like savings accounts and money market accounts.
CDs with terms lasting for one year often pay more interest than traditional savings accounts. Here’s why: You’re rewarded with a higher yield in exchange for agreeing to leave your money tied up for a set period of time.
What’s more, if you keep money locked up in a CD, it’s harder to access those savings. With a liquid savings account, there is usually no consequence for withdrawing funds (unless you make more than six withdrawals or transfers per statement cycle). Since your CD may have an early withdrawal penalty, you’ll probably think twice about raiding your savings.
Another benefit 1-year CDs have over savings accounts is the guaranteed rate that applies for the full term. Savings account rates can change at any time as a result of changes in an interest rate environment or a bank’s priorities. That means over time, your rate of return could decline.
Note that there are downsides to choosing a 1-year CD over a savings account. Because CDs traditionally are not liquid accounts, it’s best to keep your emergency fund in a savings account. That way, you can easily access the funds you need to cover an unexpected expense without paying a penalty. Additionally, just as savings account interest rates can go down, they can also go up. By locking your money up in a CD, you could miss out on an opportunity to earn more interest.
Another option is parking your cash in a money market account. At some banks, the money market account requires a higher minimum deposit and pays more interest than the institution’s savings account.
Compared to money market account rates, however, 1-year CD rates tend to be higher. In many cases, you can qualify for one of the top 12-month CD deals without having to fork over a large amount of cash. At banks with a tiered interest rate structure, you may have to deposit more money to earn the top money market account rate.
Like savings accounts, money market accounts are worth considering if you’re not interested in tying up money for months or years at a time. You can easily withdraw your savings at any time without penalty, and at some banks, you’ll have access to a debit card. Keep in mind that money market accounts are usually limited to a maximum of six convenient transfers or withdrawals per month or per statement cycle because of Regulation D. There may be a fee for exceeding this limit.
While a 5-year CD might have a higher APY, a shorter-term CD can be a better option. CD rates could change significantly in a year and you might not want to miss out on a good deal. Given the current interest rate environment, however, going with a long-term CD like a 4-year or 5-year CD doesn’t make sense for many people.
“The current yields are barely ahead of what inflation is likely to be over the next five years,” McBride says. “So, there’s no guarantee of preserving your buying power, much less growing it by tying your money up for that long a period of time at this point.”
Carefully weigh the pros and cons, and consider using a CD laddering strategy to take advantage of different CD term lengths.
Banks usually offer CDs across multiple terms. Depending on the institution, you may have the option of choosing an account maturing in less than a year. There are also CDs that mature in as many as 10 years.
Carefully consider your financial goals and needs. Weigh your options and make an informed decision about what CD is right for you. You might be perfectly fine with a short-term, 1-year CD. Or you may find that you’re better off opting for an account with a longer term.
|Financial Institution||APY||Minimum Deposit||Learn More|
|Live Oak Bank||1.90%||$2,500|
|Marcus by Goldman Sachs||1.85%||$500|
|Sallie Mae Bank||1.50%||$2,500|
(* Review links for some online banks may point to the parent bank's most recent review by Bankrate.)
Use this free CD calculator to find out how much interest is earned on a CD.
Find out how to maximize returns on your CD with CD laddering.
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