Summary of Best 5-year CD rates for January 2020

Bank APY Minimum Deposit Learn More
Citizens Access 2.25% $5,000
Synchrony Bank 2.15% $2,000
Ally Bank 2.15% $0
Barclays Bank 2.10% $0
PurePoint Financial 2.05% $10,000

A certificate of deposit, or CD, is an account that allows you to stash away some cash and earn fixed interest on it for a set period of time.

A 5-year CD can get you one of the highest savings rates while offering safety and a guaranteed return. In exchange for handing over your money for a longer term, banks are usually willing to offer you a higher interest rate. However, with the uncertainty over the future direction of interest rates, it makes figuring out where to park your cash a hard decision. The Federal Reserve isn’t planning to cut rates again in the near future, but that could change.

Although average 5-year CD rates are hovering around 1.10 percent, we’ve shopped around to find the top nationally available CDs for you. Compare these offers, then calculate how much interest you would earn when your CD matures.

Finding the best 5-year CD rates

Savers looking for the best CD rates probably want to venture online. Even if a bank is relatively small or not well-known, as long as it’s a member of the Federal Deposit Insurance Corp. (FDIC), you can rest easy knowing your deposits will be returned. The same goes for credit unions backed by the National Credit Union Administration (NCUA).

One thing to look for, though: ease of use. Banks that make it difficult or time-consuming to deposit and withdraw funds may waste so much of your time that it outweighs the benefit of a few extra basis points of interest on your savings.

[READ: Best banks and credit unions for mobile banking]

Bankrate’s best 5-year CD rates January 2020

  • Best Overall Rate: Citizens Access: 2.25% APY
  • Runner-up Rate: Synchrony Bank: 2.15% APY
  • High Rate: Ally Bank: 2.15% APY
  • High Rate: Barclays Bank: 2.10% APY
  • High Rate: PurePoint Financial: 2.05% APY

Compare: Best 5-year CD rates for January 2020

Best Overall Rate: Citizens Access – 2.25% APY, $5,000 minimum deposit

Citizens Access launched in July 2018. It made its debut with a savings account and CDs. And then in November 2019, it added an 11-month liquid CD and stopped offering the six and 18-month CDs.

The bank offers a competitive yield on its CDs and savings account. All of its products require a $5,000 minimum deposit. Interest payment options are flexible, meaning customers can have interest credited to the principal balance of the CD or transferred to another account, without penalty, before the CD matures.

Citizens Access is a direct bank offering savings products and the new online division of Citizens Bank.

Runner-up Rate: Synchrony Bank – 2.15% APY, $2,000 minimum deposit

Synchrony Bank offers competitive yields across 12 terms. All standard CD terms typically offered by banks and credit unions are available. 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.

The bank is an online-only financial institution that’s part of a company that also issues credit cards. The bank’s relatively new mobile app makes it possible to transfer funds and check account balances at any time from anywhere.

High Rate: Ally Bank – 2.15% APY, no minimum deposit

Ally Bank is an online-only bank that has been around for a little more than 10 years. Its CDs have competitive APYs and few require a minimum deposit.

The bank offers several different types of CDs. In addition to its standard CDs, it has a raise your rate CD and a no-penalty CD. The raise your rate CD allows the interest rate to increase once with the two-year CD or twice with the four-year CD if the balance tier increases on your CD.

Ally Bank’s early withdrawal penalties are less harsh than those that apply at most other banks. For example, the penalty applying to CDs maturing in five years is 150 days of interest (usually it’s equal to at least 180 days of interest).

High Rate: Barclays Bank – 2.10% APY, no minimum deposit

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 income levels. The bank offers nine CD terms. 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.

The bank is headquartered in the U.K. and has a global presence. In the U.S., its products are limited, but the bank overall rates well for its lack of monthly fees and deposit products.

High Rate: PurePoint Financial – 2.05% APY, $10,000 minimum deposit

PurePoint Financial is a division of MUFG Union Bank. It offers nine regular CD terms and three terms for its no-penalty CDs. It also offers an online savings account with a competitive yield.

All of PurePoint Financial’s products have one thing in common: they require a $10,000 minimum deposit to open. So these accounts aren’t a good fit if you’re not ready to deposit that much.

Pros and cons of 5-year CDs

Before getting a 5-year CD, consider the pros and cons to see if it’s the right fit for you.

Pros:

  • Limited liquidity. This can be a benefit to those who might be tempted to spend their savings. “Not only will you earn interest on your account, but there’s also a psychological advantage to placing money in a CD rather than in an easily accessed savings account,” says Logan Allec, a CPA and owner of personal finance site Money Done Right.
  • Safety. CDs from federally insured banks and credit unions are backed by the U.S. government up to $250,000 — meaning your investment is ultra-secure.
  • High returns. Banks are generally willing to provide a higher interest rate than you could find in a traditional savings account or a CD with a shorter maturity.
  • Wide selection. You can choose from thousands of banks and credit unions to find a CD with the interest rate, maturity date and terms that fit your needs.
  • Fixed, predictable returns. Once you put your money in a CD, you’re guaranteed a set return at a specified date — which can help you plan your financial goals.

Cons:

  • Limited liquidity. Although a pro for some savers, this is a drawback for those who need to access their funds before the CD’s term is up. You’ll typically have to pay a penalty for making early withdrawals.
  • Inflation risk. The money in your CD may lose its purchasing power over time, as inflation overtakes your interest gains.
  • Low relative returns. “While the money in your CD is generally [more stable] than money invested in the stock market, you may not earn as much with your CD as you would in the market,” Allec says. “A low-risk investment, like a CD, brings you a lower return.”
  • Reinvestment risk. When you park your money in a 5-year CD, it’s a long wait before you can tap those funds. If interest rates rise in the meantime, you’ll miss out on investing in a higher-rate CD.

Alternatives to 5-year CDs

  • CDs with a shorter maturity: These allow you to earn interest and potentially take advantage of rising rates once they mature. Check out 1-year and 18-month CDs if you don’t want to lock away your money for five years.
  • Savings accounts: These offer total liquidity, so you can get your hands on your money as soon as you need it and pay no penalties. Traditional savings accounts may come with a lower interest rate than CDs, but “if you are comfortable putting your money into an online bank, you may be able to find some interest rates that could come close to that of a 5-year CD,” Allec says.
  • Money market accounts: These accounts allow you to access your money (with no penalties) while still providing a higher return than most savings accounts. To open a money market account, many institutions require a relatively high minimum balance—but that can also mean getting a higher interest rate.
  • Bonds: If you’re interested in taking a bigger risk, you may consider investing in bonds. There are many types available, including municipal, corporate and agency bonds.

5-year CD FAQs

Who should open a 5-year CD?

The Federal Reserve cut interest rates three times in 2019. CD rates, which have been falling all year long, are likely to continue to fall. Long-term investment vehicles like 5-year CDs technically offer a higher yield than their shorter-term counterparts. But due to the flat yield curve, you won’t be earning much extra interest by opting for a long-term CD over a mid-term account.

A 5-year CD is best for retirees and savers who don’t need access to a portion of their funds for half a decade. It all depends on your time horizon and financial goals. A 5-year CD could also be a good addition to a CD ladder for savers who want to take advantage of the opportunity to earn a higher yield but still want liquidity and access to cash at set intervals.

Why should I get a 5-year CD?

You should get a 5-year CD if you want some of the best CD yields available. Usually, the longer the time horizon, the higher the APY is on a CD. If you’re satisfied with the APY on the 5-year CD and like to know that you have a certain amount of money at a fixed rate for the next five years, a 5-year CD may be a good option for you.

A 5-year CD could also be a part of a CD ladder, which contains shorter-term CDs. For instance, a 1-year, 2-year, 3-year, 4-year and a 5-year CD could be a part of a ladder that staggers maturities and APYs.

Is a 5-year CD versatile?

With a 5-year CD, savers earn a premium in addition to the normal risk-free rate they get on a conventional savings account. The catch, of course, is that you’ll pay a penalty if you try to withdraw your money.

But assuming you can find a CD with a low penalty of just a few months’ interest, higher interest rates offered on 5-year CDs may make them a good pick over shorter maturities, even if you think you might need to cash in the CD early.

Is a 5-year CD worth it?

There are two factors that determine whether a 5-year CD makes sense for you: your time horizon for this money and whether you’re getting a competitive annual percentage yield (APY).

The length of time is important because you want to make sure that you don’t incur an early withdrawal penalty. You also want to be aware of inflation and try to have a CD that is earning a yield that can keep up.

Can a 5-year CD lose value?

A 5-year CD could lose value if you incur an early-withdrawal penalty. That fee could eat into your principal amount. But if you keep the 5-year CD for the full term, you will earn the stated interest – assuming the product you’re in is a fixed-rate CD.

Each depositor is insured to at least $250,000 per FDIC-insured bank by the FDIC. The standard share insurance amount is $250,000 per share owner, per insured credit union, for each ownership category at National Credit Union Association (NCUA) institutions.

Learn more about other CD terms:

Learn more about CDs:

— Bankrate’s Matthew Goldberg also contributed to the update of this story.