Updated December 1, 2017
If you are looking for a better yield on your savings, a high rate CD (certificate of deposit) offered by an online bank could be a good option. Internet-only banks offer much better interest rates than traditional banks. For example, a 12-month CD at Bank of America would require a $10,000 minimum deposit and would pay only 0.07%. At an online bank, you could earn 1.70% with only a $1,000 minimum deposit. (If you would rather get a savings account or money market with no time restriction, look at the best savings accounts or best money market accounts).
This list is updated monthly, and competition continues to intensify. Here are the accounts with some of the best CD rates:
- 6 months – 6 years: Goldman Sachs Bank USA – 0.60% – 2.45% APY, $500 minimum deposit
Our advertiser Goldman Sachs Bank USA is the online consumer bank of Goldman Sachs (the large investment bank). Your funds are FDIC insured, and Goldman offers very competitive rates. Even better: there is only a $500 minimum deposit. So, if you don’t have enough money to meet the minimum deposit of the other banks on this list, or you are looking for another bank for your savings, Goldman Sachs Bank USA is a good option. Here are the rates (which are within a few basis points of the best rates in the market):
- 1-year: 1.65% APY
- 2-year: 1.75% APY
- 3-year: 2.00% APY
- 5-year: 2.40% APY
- 6-year: 2.45% APY
- 3 months – 5 years: Ally Bank – 0.30% APY – 2.25% APY; $0 minimum deposit (higher APY with higher deposit)
Ally Bank is one of the largest internet-only banks in the country. Ally’s former advertising campaign made it very clear: no branches = higher rates
. And Ally has consistently paid some of the highest rates in the country across savings accounts, money market accounts and CDs. For savers with fewer funds, Ally is unique. There is no minimum deposit to open a CD. However, if you have more money, you can earn a higher APY. If you have more than $25,000 to deposit, you can earn between 0.39% APY and 2.35% APY. And one of our favorite features of Ally: they often (although not always) offer preferential rates on renewal. Far too often banks give the biggest bonuses to new customers, but Ally has done a good job of rewarding its existing customers. All deposits at Ally are FDIC insured up to the legal limit.
- 3 months – 10 years: Discover Bank – 0.35% APY – 2.35% APY; $2,500 minimum deposit
Discover is known for cash back credit cards. However, Discover has also quietly built a leading internet bank that offers checking accounts, savings accounts and CDs. Discover has invested in a mobile banking app (not found with other companies, like Synchrony) and strong on-shore customer service. Although Discover does not always have the highest rate, it is very close (within basis points) across all durations. If customer service and digital tools (like apps) are important to you, Discover is an excellent consideration. Note:
Discover offers a wide range of maturities, and you can get a CD rate with a duration as short as 3 months or as long as 10 years.
- 1-Year CD: CD Bank – 1.75% APY, $10,000 minimum deposit
CDBank.com is an online bank that focuses (as its name implies) on CDs. It is a part of TBK Bank SSB, which is a Texas-state savings bank providing commercial and consumer banking products and services. Deposits at the bank are FDIC insured up to the legal limit. You need a $10,000 minimum deposit in order to open the CD.
- 1-Year CD (from a credit union): PenFed – 1.61% APY, $1,000 minimum deposit – must become a credit union member
PenFed is a credit union that offers very competitive interest rates. You need to join the credit union in order to benefit from their products. If you have a military or government affiliation, it is free to join. Otherwise, you would need to join an organization like Voices for America’s Troops, which costs $14.00. Once you are a member, you can open PenFed products (including this certificate) online. Your deposit would be insured by the NCUA, which is the National Credit Union Administration. There is a $1,000 minimum deposit for the one-year certificate – making this a good option if you don’t have the $5,000 required for EverBank. And if you are willing to give up a few points of yield to support a credit union, PenFed is a nice choice.
- 2 Year CD: Synchrony – 1.75% APY, $2,000 minimum deposit
Synchrony continues to offer some of the highest rates in the market. Synchrony used to be a part of GE. The online deposits are used to fund the store credit card portfolio – and the company is publicly traded. Your deposit will be insured up to the FDIC limit.
- 2 Year CD from a Credit Union: US Alliance – 2.02% APY, $500 minimum deposit
US Alliance is a credit union that began its life as a financial institution for employees of IBM. Over the years the credit union has grown, and you can now join if you become a member of the American Consumer Council (which anyone can do). There are a few extra steps to get the account open. But once you are a member, you can take advantage of the highly competitive interest rates on offer. Your money will be protected by the CUNA up to the legal limits.
- 3-Year CD: EverBank – 2.10% APY, $5,000 minimum deposit to open
EverBank has once again increased the 3-year CD rate to a healthy 2.10%. You need at least $5,000 to open the account, and your deposit is FDIC-insured. After EverBank’s acquisition by TIAA-Cref, it has become very aggressive on interest rates, to the benefit of consumers. You can earn these rates on deposits up to $1,000,000.
- 3-Year CD from a Credit Union: Fort Knox Federal Credit Union – 2.40% APY (35 months – almost 3 years)
Fort Knox Federal Credit Union is a credit union that anyone can join. The credit union is well known at MagnifyMoney – it offers a credit card that pays unlimited 5% cash back on gas, which is a great deal. Now its CD rates (called share certificates at credit unions) are competitive as well. There is a $500 minimum deposit to open the account. The dividends are paid and compounded quarterly. At a credit union, your deposits are insured by the NCUA, which has the same legal limits as the FDIC.
- 5-Year CD: Synchrony – 2.35% APY, $25,000 minimum deposit
Synchrony has also increased its 5-year CD rate. You need at least $25,000 to take advantage of the 2.35% APY. If you have less than $25,000 you will get a 2.30% APY rate (but need at least $2,000). After clicking on “Apply Now” you will be taken to their standard CD landing page. Make sure you select the 60-month option. Just remember: if you close the CD early, you would be hit with a 365 day interest penalty. That means if you close the account in the first year, you would actually lose some of your initial deposit. You won’t get rich with a 2.35% APY, but it has been a long time since we have seen rates this high. By comparison, the rate at Bank of America on a 5-year CD is only 0.15%.
3 Questions To Ask Before You Open A CD
1. Should I just open an online savings account instead?
With a CD, the saver and the bank make stronger commitments. The saver promises to keep the funds in the account for a specified period of time. In exchange, the bank guarantees the interest rate during the term of the CD. The longer the term, the higher the interest rate – and the higher the penalty for closing the CD early. With a savings account, there are few promises. You can empty the account without paying a penalty and the bank can change the interest rate at any time.
If you have a high level of confidence that you do not need to touch the money for a specified period of time, a CD is a much better deal. However, if you think you might need to use the money in the next couple of months, a savings account is a much better idea.
You can earn a lot more interest with a CD. Imagine you have $10,000 and know that you do not need to touch the money for two years. In a high-yield savings account earning 1.10%, you would earn $221 over two years. If you put that money into a 1.50% CD, you would earn $302. Given the ease of switching to an online CD, the extra interest income is easy money.
2. What term should I select?
The early withdrawal penalties on CDs can be significant. On a 1-year CD, 90 days is a typical penalty. And on 2 and 3 year CDs, a 6-month penalty is common. The impact of the penalty on your return can be significant. If you opened a one-year CD with a 1.25% APY and closed it after six months, you would forfeit half of the interest and earned only 0.63%. You would have been better off with a savings account paying 1.05%.
The worst case scenario is with the longest CDs. 5-year CDs usually have a one-year penalty for taking out funds early. If you open a 5-year CD and close it quickly, you could actually end up losing money.
Given the early penalties, you need complete confidence that you will not need to withdrawal the money early. Ask yourself this question: “do I have 90% confidence that I will not need access to the cash during the CD term?” If you don’t have confidence, go for a shorter term or a savings account.
3. Should I consider my local bank or credit union?
The interest rates shown in this article are all from online banks that offer products nationally. Our product database includes traditional banks, community banks and credit unions. If traditional banks offered better rates, they would have been featured in this article. The internet-only banks have dramatically better interest rates. That should not be surprising. Because internet-only banks do not have branches, they are able to pass along their cost savings to you in the form of higher interest rates.
However, you can always visit your local bank or credit union and ask them to beat the rates listed in this article. The chance of getting a better deal is extremely low (remember that Bank of America is only paying 0.07%), but you can try.
How To Find The Best Account
If you don’t find an account that meets your needs in this article, you can use the MagnifyMoney CD tool to find the best rate for your individual needs. Input your zip code, deposit amount and term. The tool will then provide you with CD options, from the highest APY to the lowest.
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