Updated September 25, 2023
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.
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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.
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:
The Federal Reserve indirectly affects CD APYs when it raises rates or cuts them.
The Federal Reserve is making its next scheduled rate decision Sept. 20. Regardless of the Fed’s decision, now might be a good time to consider long-term CDs.
The logic is that longer-term CDs are still offering competitive yields. And odds are that the Fed may be finished or close to being done raising rates. But nobody knows the future direction of rates for certain.
CD APYs have been relatively stable. Shorter-term CDs – with terms of six months to 18 months – generally have higher yields than longer-term CDs right now. But those longer-term CD yields could be peaking soon. So locking one in now could be a good decision for long-term money that you want to keep safe in an FDIC-insured bank.
CD rates can change based on a bank’s needs for deposits, the competitive landscape and they’re indirectly affected by the Federal Reserve’s actions.
“For multi-year CDs, there is limited if any upside in yields from here,” says Greg McBride, CFA, Bankrate chief financial analyst. “The Fed is close to the end of the line on raising rates. … Depending on how active the Fed is, there could be some more room to run on short-term CDs (less than a year) as well as liquid accounts, like money markets and savings accounts.”
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 Sept. 4, 2023, according to Bankrate's weekly survey of institutions:
| CD term | CD national average APY |
|---|---|
| 1 year | 1.76% |
| 2 year | 1.46% |
| 3 year | 1.35% |
| 4 year | 1.43% |
| 5 year | 1.42% |
Note: Average APYs are shown. See the table at the top of the page for APY comparisons.
Some banks have promotional CD rates.There might be certain restrictions on these CDs. For instance, you might have to bring money from outside the bank to be eligible for this APY. Promotional CDs may renew at a different term and at a different APY. (That APY is likely to not be known when you purchase a promotional CD.)
Even some of the largest banks might have some featured CD rates.
| Bank name | CD product | APY | Available until* |
|---|---|---|---|
| Marcus by Goldman Sachs | 10-month CD | 5.05 percent APY | Sept. 15, 2023 |
| U.S. Bank | 11-month CD | 4.95 percent APY | N/A |
| Ally Bank | 14-month CD | 5.00 percent APY | Oct. 17, 2023 |
| Amerant Bank | 15-month CD | 5.35 percent APY | Sept. 30, 2023 |
| Citizens Bank | 6-month CD | 4.50 percent APY** | N/A |
*It’s possible for these offers to end sooner.
** Money from outside Citizens Bank is required for this offer.
These promotional CDs might not be available in certain areas. The promotional offers are as of Aug. 29, 2023
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 Sept. 1, 2023, and may vary by region for some products.)
| Bank | Rate | Minimum Deposit To Open |
|---|---|---|
| Popular Direct | 4.75% APY | $10,000 |
| America First Credit Union | 4.50% APY | $500 |
| First Internet Bank of Indiana | 4.18% APY | $1,000 |
| Bank | Rate | Minimum Deposit To Open |
|---|---|---|
| Bank5 Connect | 5.50% APY | $500 |
| Popular Direct | 5.35% APY | $10,000 |
| America First Credit Union | 5.30% APY | $500 |
| Bank | Rate | Minimum Deposit To Open |
|---|---|---|
| Limelight Bank | 5.60% APY | $1,000 |
| Santander Bank | 5.50% APY | $500 |
| Bread Savings | 5.50% APY | $1,500 |
| Bank | Rate | Minimum Deposit To Open |
|---|---|---|
| First Internet Bank of Indiana | 4.75% APY | $1,000 |
| Popular Direct | 4.75% APY | $10,000 |
| Bread Savings | 4.75% APY | $1,500 |
| Bank | Rate | Minimum Deposit To Open |
|---|---|---|
| Popular Direct | 4.60% APY | $10,000 |
| First Internet Bank of Indiana | 4.59% APY | $1,000 |
| Barclays | 4.50% APY | $0 |
CDs are a good option for longer-term goals or for money that you’re comfortable locking away for a set period of time. Follow the steps below to choose the right CD for you:
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 earns interest on your money for a set period of time. CDs typically pay a fixed rate of return for the duration of the term.
Sometimes, longer CD terms will earn higher interest rates than shorter terms. No matter the term length, withdrawing your money before the term ends will likely result in an early withdrawal penalty.
Banks and credit unions offer a wide range of CDs to fit different financial needs. Take some time to consider which type of CD is best for you.
Traditional CDs are the most common type of CD, and they earn a fixed APY for the entire term. These CDs usually don’t allow you to add more funds after your opening deposit, and they also tend to have strict early withdrawal penalties.
If you withdraw from a CD before it matures, the penalty is usually equal to the amount of interest earned during a certain 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 before the year is up.
When this CD makes sense: Traditional CDs are a good choice if you know exactly when you’ll need the money and there’s no chance of needing it before the term is up. They’re often good for CD ladders or other CD investing strategies in which timing is important.
Most CDs charge you a penalty for accessing the funds before the term is up. However, some banks offer no-penalty CDs — also known as liquid CDs — which allow you to withdraw the money early without being charged a penalty.
A bank may require that you wait at least some time after opening a no-penalty CD — generally around six or seven days — before you’re able to withdraw from the CD, and some banks don’t allow for partial withdrawals. No-penalty CD rates tend to be lower than regular CD rates, but they can be better than some high-yield savings account or money market account rates.
When this CD makes sense: Consider a no-penalty CD if you don’t plan to withdraw the money before the CD matures, but you want to keep some flexibility in case you need access to the funds. As a result, you’re willing to give up a little return for added liquidity.
Bump-up CDs enable you to request an increase in your rate during the CD term under certain conditions. Banks that offer this CD usually allow just one bump-up per term. For example, you may open a three-year CD at a given rate, and the bank offers an additional half-point rate increase when you’re one year into the term. With a bump-up CD, you can request a rate increase for the remainder of the term. Like no-penalty CDs, bump-up CDs often pay lower rates than traditional CDs.
When this CD makes sense: A bump-up CD could be a good option if rates are expected to rise significantly during the term of the CD. Otherwise, you’re likely accepting a lower rate for limited potential upside.
Your CD is safe at either an FDIC-insured bank or an NCUSIF-insured credit union, as long as the amount of money in the account is within the established limits and guidelines. Federally insured deposit accounts are safe whether they’re at online banks, brick-and-mortar banks or credit unions since they’re backed by the full faith and credit of the U.S. government. Just make sure you’re not exceeding the insurance limits.
For federally insured banks and credit unions, the standard insurance limit is $250,000 per depositor or share owner, per insured bank or credit union, for each account ownership category.
Savers looking for a low-risk place to earn a guaranteed rate of return should consider getting a CD. They can be a good choice for short- to medium-term goals, such as saving for a new car or for a down payment on a home.
A CD is worth considering for the following people:
For a person looking to make a purchase in a set number of years, a CD could be a great option for earning a competitive rate of interest leading up to that time.
For a person looking to make a purchase in a set number of months or years, a CD could be a great option for earning a competitive rate of interest leading up to that time.
A CD can help keep you from spending your money on a whim, thanks to its early withdrawal penalty.
Before you choose a CD, weigh the pros and cons to ensure you're making the right investment choice for your financial situation.
Some CDs earn a higher APY than money market accounts or savings accounts.
CDs are a good place to store funds that you don’t want to be able to dip into too easily.
CDs can help you separate money for financial goals or future expenses.
Deposit insurance covers accounts at FDIC banks and NCUA credit unions up to at least $250,000.
A CD can diversify your savings plan with a guaranteed rate.
Your principal remains intact if you keep your money in a CD for the full term.
CDs tie up your money for a potentially long period of time.
Many CDs have early withdrawal penalties.
Money committed to a CD could end up earning a lackluster yield if rates rise substantially. The early withdrawal penalty may negate any benefit of switching to a higher-yielding CD, however.
You could potentially earn better rates of return in the stock market or by investing in other securities.
Savings and money market accounts are more liquid than CDs, meaning the funds you keep in those types of accounts are easier to access without penalties or limitations. This makes savings accounts better for your emergency fund. You could withdraw the savings you’ve placed in a CD, but be prepared to pay a penalty if you take the money out before the CD’s maturity date (unless you’ve purchased a no-penalty CD).
These days, it’s common enough for banks to offer one-year CDs that pay better APYs than their high-yield savings accounts.
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 are deposit products that share some key similarities. Commonly offered by banks and credit unions, both are considered safe as long as they’re held with federally insured institutions. Savers opening a CD or money market account might have to meet higher minimum deposit requirements than they would with a savings account.
Money market accounts offer more liquidity than CDs, though, often providing the ability to write a limited number of checks each month directly out of the account — and some also come with a debit card. These 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 CDs and bonds. CDs from federally insured financial institutions are covered by the Federal Deposit Insurance Corp. (FDIC) for banks and the National Credit Union Share Insurance Fund (NCUSIF) for credit unions.
CDs typically pay a fixed interest rate, so you know how much you’re earning up front. You’re also guaranteed to receive the same interest rate for the entire term and receive your full principal amount back, as long as you don’t make any premature withdrawals.
On the other hand, bonds offer more flexibility and the chance to earn a higher yield. A bond is a loan you make to a government or a corporation to receive some interest. You can sell a bond before it matures without getting hit with an early withdrawal penalty, and 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 fluctuate based 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 qualify for either a full deduction up to your contribution limit or a partial deduction.
Factors that determine whether you’re eligible for an IRA deduction include your modified adjusted gross income, your marital status and whether you’re covered by a retirement plan at work.
Interest earned from CDs is an example of taxable interest, according to the Internal Revenue Service. When you earn $10 or more in interest, 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.
An 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.
CD laddering is a method to stagger the maturity dates on your CDs. This investment strategy involves buying multiple CDs at once that mature at different dates. It’s a way to spread out when the money becomes available and to keep from having all of your money stuck in a long-term CD if rates rise.
"Looking for a regular stream of interest income? Consider a CD ladder where your money is diversified over a range of maturity dates, structured so you get to reinvest at consistent intervals."
- Greg McBride, CFA, Bankrate’s Chief Financial Analyst
When longer CD terms earn higher rates of return, you can grow your savings and earn as much interest as possible by building a CD ladder. In doing so, you would buy several CDs at the same time that have different term lengths. This gives you the chance to invest in longer-term CDs with higher yields as well as short-term CDs that will free up some of your money sooner.
For example, a CD laddering plan of three CDs might have a one-year CD, a two-year CD and a three-year CD.
If you have $15,000 to invest, you could invest $5,000 in each rung:
CD laddering can also shield you from interest rate changes that could otherwise hurt you. If rates are rising, you’ll be able to take advantage of higher yields the next time one of your laddered CDs matures. On the other hand, if interest rates are falling, you’ll be glad you locked up your savings when the bank was paying more favorable yields.
Consider keeping your CD ladder focused on CDs with shorter-term maturities during a rising rate environment so you can more quickly take advantage of higher rates. Conversely, committing to CDs with longer terms makes more sense when rates are decreasing because it enables you to continue earning higher CD yields than the market currently offers.
Bankrate has been around since 1976. It is a leading publisher of rates and personal finance articles. It is also often cited by some of the most respected and well-known publications and websites. The Bankrate promise is that we strive to help our readers make smarter financial decisions, adhering to strict principles of editorial integrity and transparency.
Bankrate’s editorial team is made up of five banking experts. These experts have researched many banks and at least twice a month go to bank websites to make sure readers stay up to date on the latest rates and bank products.
We select banks that have high annual percentage yields (APYs) and that are popular and broadly available, and we include some of the largest banks.