Best available rates across different account types for Thursday, December 08, 2022
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A certificate of deposit (CD) generally earns savers a fixed annual percentage yield (APY) on money that’s deposited for a set period. Typically, the APY on a CD is higher than a bank’s savings account since it requires your funds to be locked in for the term of the CD. Try not to touch your money before the CD matures, as you can be hit with a costly early withdrawal penalty.
Bankrate conducts market research on over 4,000 banks and credit unions nationwide to find accounts with the best CD rates. Here is Bankrate's list of top banks with overall great rates:
*This includes a 4 percent APY promotional CD. This promotional offer ends Nov. 30.
The following accounts can be found at most banks and credit unions. They’re federally insured for up to $250,000 and offer a safe place to put your money while earning interest.
CDs are best for individuals looking for a guaranteed rate of return that’s typically higher than a savings account. In exchange for a higher rate, funds are tied up for a set period of time and early withdrawal penalties may apply.
Checking accounts are best for individuals who want to keep their money safe while still having easy, day-to-day access to their funds. ATM and other transactional fees may apply.
Savings and MMAs are good options for individuals looking to save for shorter-term goals. They’re a safe way to separate your savings from everyday cash, but may require larger minimum balances and have transfer limitations.
Researching average interest rates provides insight into the CD rate environment and can help in finding a CD with a yield that's much higher than average.
Here are the current average rates for the week of Nov. 22, 2022, according to Bankrate's weekly survey of institutions:
| CD term | CD national average APY |
|---|---|
| 1 year | 1.20% |
| 2 year | 1.17% |
| 3 year | 1.02% |
| 4 year | 1.02% |
| 5 year | 1.07% |
Note: Average APYs are shown. See the table at the top of the page for APY comparisons.
Before opening a certificate of deposit, be sure to read expert advice and tips below to ensure a financially safe decision. Here are Bankrate's top picks for banks with the best CD rates:
Bread Savings is an online bank formerly known as Comenity Direct. Bread Savings offers five terms of CDs. They range from a one-year CD to a five-year CD.
Marcus by Goldman Sachs offers a competitive yield on its CDs. It offers a variety of CD terms and CD types. Its regular CD terms range from a six-month CD to a six-year CD.
In addition to its nine terms of regular CDs, it also offers three no-penalty CDs and a rate-bump CD.
All of these CDs have a $500 minimum deposit requirement.
Capital One offers CDs with terms as short as six months or as long as five years. These CDs have no minimum opening deposit. The bank offers competitive yields, and it doesn’t have a minimum balance requirement.
Synchrony Bank offers many regular CDs ranging from three months to five years. It also added a no-penalty CD and a bump-up CD earlier this year. Synchrony Bank also offers IRA CDs.
Citizens offers five terms of CDs that all require at least a $5,000 deposit. Citizens’ CD terms range from one-year to five-years.
While American Express is perhaps most known for its credit cards, the company also provides savings accounts and CD options. American Express National Bank offers seven terms of CDs. The online bank’s CD terms range from six months all the way to five years.
Amerant Bank offers six terms of CDs. Its shortest CD is one year and its longest CD is five years. You’ll need at least $10,000 to open a CD at Amerant Bank.
Ally Bank offers seven terms of regular CDs. They range from a three-month CD to a five-year CD.
CIT Bank, an online-only bank, is a division of First Citizens Bank. You can open a CIT Bank CD with $1,000 or more. CIT Bank has eight terms of CDs ranging from six months to five years.
When you open a CD, selecting a term is an important step. The term is the length of time that the money stays stashed in the account. For example, opening a CD with a one-year term means you’re making a commitment to the bank that you’ll keep your money in the account for one year.
Here’s where you’ll find some of the top yielding CDs by term. (Note: Annual percentage yields (APYs) shown are as of Nov. 28, 2022, and may vary by region for some products.)
| Bank | Rate | Minimum Deposit To Open |
|---|---|---|
| Citibank | 3.25% APY | $500 |
| Popular Direct | 3.05% APY | $10,000 |
| Synchrony Bank | 2.25% APY | $0 |
| Bank | Rate | Minimum Deposit To Open |
|---|---|---|
| Popular Direct | 4.20% APY | $10,000 |
| First Internet Bank | 4.07% APY | $1,000 |
| Bask Bank | 4.00% APY | $1,000 |
| Bank | Rate | Minimum Deposit To Open |
|---|---|---|
| Bread Savings (formerly Comenity Direct) | 4.50% APY | $1,500 |
| BMO Harris | 4.50% APY | $1,000 |
| Popular Direct | 4.45% APY | $10,000 |
| Bank | Rate | Minimum Deposit To Open |
|---|---|---|
| Popular Direct | 4.55% APY | $10,000 |
| Alliant Credit Union | 4.50% APY | $1,000 |
| BMO Harris | 4.50% APY | $1,000 |
| Bank | Rate | Minimum Deposit To Open |
|---|---|---|
| Bread Savings (formerly Comenity Direct) | 4.75% | $1,500 |
| Sallie Mae Bank | 4.55% | $2,500 |
| BMO Harris | 4.50% APY | $1,000 |
Bankrate regularly analyzes banks, gets insights from top financial experts, and compiles industry data to provide the information you need to make an informed financial decision when selecting a CD.
A CD is a type of account offered by banks and credit unions that pays interest on a deposit amount for a set period of time. These accounts typically pay a guaranteed fixed rate of return for the duration of the CDs term.
Generally, the longer the term, or amount of time you agree to lock up your money, the higher the interest rate. However, withdrawing your money before the term ends will likely result in an early withdrawal penalty.
Financial institutions offer a wide range of CDs to fit different financial situations. Take time to consider which type of CD is best for you.
Traditional CDs are the most common and have a fixed APY for the CD’s term. These CDs usually don't let you deposit additional funds before the CD matures and also tend to have strict early withdrawal penalties.
When this CD makes sense: You know exactly when you need the money and there’s no chance you need it before. Great for CD ladders or another CD investing strategy where timing is important.Traditionally, CDs are known as time deposit accounts. So if you withdraw from a CD before it matures, you’ll usually incur a penalty that’s equal to a certain amount of interest earned during a period of time. For instance, a bank may impose a penalty of 90 days of simple interest on a one-year CD if you withdraw from that CD earlier than a year. However, some banks offer no-penalty CDs — also known as liquid CDs — which allow you to withdraw your money early without having a penalty fee cut into your interest earnings.
A bank may require that you wait at least some time, generally around six or seven days, before you’re able to withdraw from a no-penalty CD and some banks may not allow for partial withdrawals. No-penalty CD rates tend to be lower than regular CDs but can be higher than some high-yield savings accounts or money market accounts.
These types of CDs allow you to request an increase in your rate during the CD term under certain conditions. Institutions that issue this CD option usually only allow one bump-up per term. For example, imagine purchasing a three-year CD at a given rate, and one year into the term, the bank offers an additional half-point rate increase. With a bump-up CD, you're allowed to request a rate increase for the remainder of the term. The disadvantage is that bump-up CDs often pay lower initial rates than traditional CDs.
The Federal Reserve's interest rate decisions can impact the rates that banks offer on CDs. When the Fed raises or lowers the federal funds rate, banks typically respond by moving savings and money market account yields in the same direction. CDs tend to track Treasurys closely. In 2019, a year when the Fed lowered rates three times, CDs generally decreased before or after a Fed rate cut.
Two emergency Fed rate cuts in March 2020, and decreasing Treasurys that year, caused high-yield CDs to decrease.
So far in 2022, the U.S. central bank has raised rates several times in a bid to rein in inflation. Even before the Fed's first move in March, some banks that pay competitive yields began offering higher APYs on CDs.
The national average for CD rates has been increasing during most of the year. The Federal Reserve and competition among banks are two reasons CD rates have been increasing rapidly this year.
The Fed, whose policies directly affect savings account rates and can also influence CD rates, continues to raise rates – causing competitive banks to raise CD APYs to attract deposits.
Savings and money market accounts are more liquid than CDs. That means the funds you store in those types of accounts are easier to access and have fewer withdrawal penalties and limitations. This makes savings accounts better for your emergency fund. You could withdraw the savings you’ve stashed in a CD, but be prepared to pay a penalty if you take your money out before the CD’s maturity date (unless you’ve purchased a no-penalty CD).
At some banks, it’s common to see a one-year CD with a higher APY than a high-yield savings account.
The differences between CDs and high-yield savings accounts are:
The gap between interest rates tied to CDs and savings accounts has narrowed. But CDs are more likely to pay a higher yield than savings accounts or money market accounts.
CDs and money market accounts have some similarities. Both are types of savings products that banks and credit unions offer. Both are considered safe, as long as they’re insured by the FDIC at banks or the NCUSIF at credit unions. Savers opening a CD or money market account might have to meet higher minimum deposit requirements than they would with a savings account.
However, money market accounts offer more liquidity than CDs, often providing the ability to write a limited number of checks per month directly out of the account. Some money market accounts offer a debit card. Those liquidity features aren't something you'll find with CDs.
In exchange for less liquidity, however, CDs typically offer a higher interest rate than money market accounts.
Investors have a lot to consider when deciding between a CD and a bond. Traditional CDs from banks are insured by the Federal Deposit Insurance Corp. (FDIC), or from the National Credit Union Share Insurance Fund if you’re getting a CD from a National Credit Union Administration (NCUA) credit union. CDs are safe investments that typically pay a fixed interest rate. In other words, you know how much you’re earning upfront. You’re also guaranteed to receive that amount of interest for the term and get your full principal amount back, as long as you don’t make any premature withdrawals.
If you’re interested in having more flexibility and you want the chance to earn a higher yield, you may want to consider investing in a bond. A bond is a loan you make to a government or a corporation to receive a rate of return. You can sell a bond before it matures without getting hit with an early withdrawal penalty, but you may get back more or less than your original investment if interest rates have moved. With municipal bonds, the interest you earn is often exempt from taxes.
There are many different types of bonds, and some are riskier than others. Bonds aren’t protected by FDIC or NCUSIF insurance like CDs are. And the value of your bonds will vary depending on what’s happening with interest rates. If interest rates are rising, the price of your bonds will likely fall and vice versa.
Yes, you will be taxed on the interest earned on a CD that contains non-qualified money – money that you already paid income tax on. However, if the money is in a traditional IRA CD, you will pay taxes when the money is withdrawn. This is because traditional IRAs are tax-deferred accounts.
In some cases, you can deduct your CD on your taxes. If you’re eligible to contribute to a traditional IRA CD, you may be eligible for a full deduction up to your contribution limit or a partial deduction. Your modified adjusted gross income, your marital status and whether you’re covered by a retirement plan at work are some of the factors that will determine if you’re eligible for an IRA deduction.
Interest earned from CDs is an example of taxable interest, according to the Internal Revenue Service. When you earn $10 of interest or more, you should receive Copy B of Form 1099-INT or Form 1099-OID. Even if you don’t receive a 1099, all taxable and tax-exempt interest must be reported on your federal income tax return. Also, interest may be called dividends.
One exception to this would be, for instance, if the funds were rolled over from a 401(k) into a traditional IRA CD and those funds have never been taxed. If you’re withdrawing from a traditional IRA CD in that situation, the money that you withdraw will count as income.