If you’re tired 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.
With a CD, you receive a guaranteed interest rate for a set period of time. At the end of the term, you have the ability to buy another CD, potentially with an even higher yield if the interest rate environment has improved.
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.
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.
The best 2-year CD rates for November 2019
- Pennsylvania State Employees Credit Union: 3.00% APY; $500 minimum deposit
- Home Loan Investment Bank: 2.50% APY; $2,500 minimum deposit
- MAC Federal Credit Union: 2.40% APY; $1,000 minimum deposit
- Connexus Credit Union: 2.40% APY; $5,000 minimum deposit
- Dover Federal Credit Union: 2.38% APY; $25,000 minimum deposit
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 0.84 percent APY, according to Bankrate’s most recent national survey of banks and thrifts.
Today’s top nationally available 2-year CDs pay 3.00 percent APY. This may be a good place to invest for mid-term financial obligations, like paying off credit card debt.
Compare: Best 2-year CD rates
Pennsylvania State Employees Credit Union – 3.00% APY, $500 minimum deposit
Pennsylvania State Employees Credit Union was founded in 1934 by 22 state workers. Today, there are more than 450,000 members. More than 1,800 employers in the state of Pennsylvania offer membership through the credit union. Anyone who doesn’t meet any other qualifications can join the credit union through the Pennsylvania Recreation and Park Society.
Members who open a 2-year certificate will earn the same yield as those you purchase a 5-year certificate.
Home Loan Investment Bank – 2.50% APY, $2,500 minimum deposit
The bank was established in 1959 and is based in Warwick, Rhode Island.
Bank customers looking for a high-yield should look for the 2-year e-CD, which pays more interest than the bank’s other offering.
MAC Federal Credit Union – 2.40% APY, $1,000 minimum deposit
The credit union was originally founded as Tanana Valley Federal Credit Union and chartered in 1952. MAC Federal Credit Union is based in Fairbanks, Alaska.
Share certificates are available as IRAs. Money market and kids accounts are also available.
Connexus Credit Union – 2.40% APY, $5,000 minimum deposit
Founded in 1935 to serve current and former employees of a local insurance company and their family members. Membership is open to anyone who joins the Connexus Association and makes a $5 donation.
Savers opening a 2-year certificate at the credit union will earn a high yield. Earned interest can be transferred to an external account. Interest is compounded on a quarterly basis.
Dover Federal Credit Union – 2.38% APY, $25,000 minimum to earn APY
Dover Federal Credit Union offers CDs ranging from six months to five years. Most CDs can be opened with just $500, making them more accessible to those without much in terms of savings. Members who deposit more money, however, can earn a higher yield. What’s more, the early withdrawal penalty for CDs with longer terms is less harsh than what you’ll find at other institutions. For withdrawals made on certificates maturing in more than a year, the penalty is equal to 180 days worth of dividends.
The credit union is based in Dover, Delaware and offers membership to employees and retirees of local businesses, volunteers and local military personnel. Others can easily qualify for membership by joining the Friends of Bombay Hook association.
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.
“Brick and mortar banks have a lot of overhead to cover, plus they have a lot of competition from online banks,” says Sheryl Garrett, CFP professional and founder of the Garrett Planning Network. “Don’t just settle for the first CD rate that’s offered by ‘your bank.’ Focus on the fact that it’s ‘your money!'”
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, or NCUA.
Building a CD 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.
With a CD ladder, you divide your deposit amount into CDs with different terms. For example, you could open a three-rung ladder made up of a one-year CD, two-year CD and three-year CD. The one-year and two-year CD rates are generally lower than the three-year CD rates, but you might not want all of your money tied up for three years.
A laddering strategy allows you to take advantage of the higher interest rates you earn on longer-term CDs, while still allowing you access to some of your money at regular intervals. As your one-year and two-year CDs mature, you can access that money for spending or investing in higher-yield assets. Or, you can put them in another three-year CD, and it would become the longest-term rung on your CD ladder.
Carefully consider how a two-year CD can fit into a ladder strategy that combines the benefits of a higher overall yield while still allowing you some access to a portion of your funds when the shorter-term CDs mature.
Best CD rates by term
In general, you’ll find the best CD rates on longer-term CDs. Banks reward consumers for committing their money for deposit. With a five-year CD, for example, you usually end up with a higher yield than what’s available for a two-year CD.
However, when you get a five-year CD, you’re locking that money up for five years. If you access the money before the maturity date, you’ll probably pay an early-withdrawal penalty, making the CD less valuable. Only purchase a longer-term CD if you’re sure you won’t need the money before the term ends.
CD laddering can help you take advantage from higher rates while ensuring earlier access to some of your money. You can also determine whether it makes sense to get a higher yield in return for reducing your liquidity.
| CD offer | 5-year APY | 2-year APY | 1-year APY | Minimum to earn APY |
|---|---|---|---|---|
| Pennsylvania State Employees Credit Union | 3.00% | 3.00% | 1.95% | $500 |
| Home Loan Investment Bank | 2.60% | 2.50% | 2.00% | $2,500 |
| MAC Federal Credit Union | N/A | 2.40% | 2.10% | $1,000 |
| Connexus Credit Union | 2.60% | 2.40% | 2.20% | $5,000 |
| Dover Federal Credit Union | 2.80% | 2.38% | 1.80% | $25,000 |
To recap, see below the best 2-year CD rates
| Institution | APY | Minimum to earn APY |
|---|---|---|
| Pennsylvania State Employees Credit Union | 3.00% | $500 |
| Home Loan Investment Bank | 2.50% | $2,500 |
| MAC Federal Credit Union | 2.40% | $1,000 |
| Connexus Credit Union | 2.40% | $5,000 |
| Dover Federal Credit Union | 2.38% | $25,000 |
