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.
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.
| Institution | APY | Minimum deposit |
|---|---|---|
| Greenwood Credit Union | 2.80% | $1,000 |
| State Bank of Texas | 2.80% | $25,000 |
| BankPurely | 2.75% | $1,000 |
| iGObanking | 2.75% | $1,000 |
| Sallie Mae | 2.75% | $2,500 |
The best 2-year CD rates pay more than three times the national average of 0.82 percent APY, according to Bankrate’s most recent national survey of banks and thrifts.
Today’s top nationally available 2-year CDs pay 2.8 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.
Top account details
- Greenwood Credit Union was founded in 1948. Membership is open to anyone who opens a Share Account and deposits at least $5. The credit union, which is based in Warwick, Rhode Island, earned four out of five years in Bankrate’s latest review of its financial health.
- State Bank of Texas is a family-owned and operated bank founded in 1987. Its CDs are available nationwide and are FDIC-insured. In the latest review of the bank’s financial health, it earned five out of five stars.
- BankPurely is an online division of Flushing Bank, a New York-based financial institution. In Bankrate’s latest review of its financial health, Flushing Bank earned four out of five stars.
- iGObanking, like BankPurely, is a division of Flushing Bank in New York. These online banks are considered the same institution for FDIC coverage purposes.
- Sallie Mae Bank is an online-only institution based in Salt Lake City. The bank — which offers CDs and other deposit accounts in addition to student loans — earned five out of five stars in the latest review of its financial health.
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.
