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Updated on Monday, November 9, 2020
Five-year CDs offer some of the highest savings interest rates available. In exchange for keeping your money on deposit for half a decade, banks are willing to dole out higher returns on these long-term accounts. For example, in November, the average 1-year CD interest rate is 0.44% APY and the average 3-year CD rate was 0.67% APY, compared to the average 5-year CD rate of 0.84% APY in the same month.
Longer term CDs do exist, but even their yields don’t often exceed 5-year CD rates. The highest yield on a nationally available CD of six or more years is 1.30% APY.
To make sure you’re getting the best CD rates, MagnifyMoney has uncovered the highest 5-year CD rates available nationwide. Using data from DepositAccounts.com, we found that the best 5-year CD rates earned well above the national average interest rate for 5-year CDs. We also took minimum deposit requirements into consideration, to check for wider customer availability.
The 10 best 5-year CD rates in November 2020
1. Generations Credit Union — 1.65% APY, $500 minimum deposit
Generations Credit Union offers our number one rate for a low minimum deposit amount. Dividends are computed daily and paid monthly or at maturity. Withdrawing funds before the CD matures may result in a penalty fee.
Generations Credit Union is a division of Community 1st Credit Union. Anyone who lives or works in the state of Washington is automatically eligible to join Generations. For those outside Washington state, you may join Generations by becoming a member of the Northwest Credit Union Foundation for a $20 fee or the Northwest Energy Coalition for a $40 membership fee.
2. Pen Air Federal Credit Union — 1.25% APY, $500 minimum deposit
Open a 60-month Pen Air Federal Credit Union Certificate Account with a $500 minimum deposit. The penalty for an early withdrawal will equal 180 days of dividends.
Founded in 1936, Pen Air is headquartered in Pensacola, Fla. and has 16 locations in Florida and Alabama. You qualify for Pen Air membership if you are active duty or retired military, a civil service employee, an employee at a partnering Select Employer Group or an immediate family member of eligible individuals. You can also become a member by joining the Navy-Marine Corps Relief Society, Inc.
3. Hiway Federal Credit Union — 1.35% APY, $25,000 minimum deposit
Typically, Hiway Federal Credit Union Certificates require a $500 minimum deposit, but you’ll need to deposit at least $25,000 to unlock the highest rate available on this 60-month certificate. The penalty for an early withdrawal from this account will equal 365 days’ worth of dividends.
Hiway Federal Credit Union was founded in 1931 to serve employees of the Minnesota Department of Transportation. Today, it is based in St. Paul, Minn., and opens up membership to employees of qualifying companies or government agencies; members of Minnesota Recreation & Park Foundation; members of the Association of the U.S. Army; and those who live, work, worship or attend school in the Metro Community Area. You may also qualify through a current member or household member.
4. United Educators Credit Union — 1.00% APY, $500 minimum deposit
You’ll need $500 to invest in this 60-month FlexRate share CD at United Educators Credit Union. As its name might suggest, this rate is a bit more flexible than standard CDs; you can request a rate change once over the life of the account.
Founded in 1957, United Educators is focused on Minnesota educators, community members and their families, but also extends its membership to employees at select groups. Anyone can join the credit union with a one-time $5 donation to the United Educators Foundation.
5. Wings Financial Credit Union — 1.31% APY, $10,000 minimum deposit
Wings Financial Credit Union offers a few options on its certificates, where different rates apply to different balances and can depend on how often you receive dividend payouts. Interest is paid out quarterly. The early withdrawal penalty equals two years’ dividends (730 days), which is the highest penalty on this list.
Wings Financial was founded in 1938 by Northwest Airlines employees. Today, membership is open to those who live or work in the Minneapolis-St. Paul area or the Seattle-Tacoma area; work in the U.S. aviation industry; are related to current members; and members of the Wings Financial Foundation.
6. Partner Colorado Credit Union — 1.30% APY, $500 minimum deposit
Partner Colorado Credit Union offers a solid rate on its 60-month CD, which you can open with at least $500. You’ll lose 180 days’ interest on an early withdrawal.
Founded in 1931, Partner Colorado Credit Union membership is open to a wide range of potential members. This includes current or retired employees of affiliated organizations, family or household members of current members, anyone who lives or works in select Colorado counties and more. You can also join by making a $5 donation — which the credit union will help fund — to the Partner Colorado Foundation.
7. Service Credit Union, 1.30% APY, $500 minimum deposit
Another great high-rate 60-month CD comes from Service Credit Union. It requires at least $500 to open an account and start earning interest. The penalty for early withdrawals equals one year’s worth of dividends, according to Service Credit Union customer service.
Service Credit Union membership is available to residents or those employed in select areas of New Hampshire and Massachusetts, as well as active duty military, veterans and their families and Department of Defense employees and their families. You can also join by becoming a member of the American Consumer Council — free if you use the promo code “Service.”
Service Credit Union was founded in 1957. It has branch and ATM locations in Massachusetts, New Hampshire, Germany and at Grand Forks Air Force Base in North Dakota. You can also access 5,000 shared branches and 30,000 fee-free ATMs within the SUM and CO-OP networks.
8. Superior Choice Credit Union — 1.30% APY, $25,000 minimum deposit
While you only need $2,500 to open a Superior Choice Credit Union 5-year share certificate, you’ll need at least $25,000 to earn at its most competitive rate. All other balances will earn at a lower APY but would still hover around our list. According to Superior Choice Credit Union customer service, making an early withdrawal from this account will result in a percentage of your balance being charged as a penalty, including accrued interest.
Established in 1932, Superior Choice Credit Union has a handful of branches near its Superior, Wisc., headquarters. You can also access over 30,000 fee-free ATMs and 5,000 branches nationwide and in Canada through the CO-OP Network. The easiest way to qualify for membership to Superior Choice, especially for those who don’t live in Minnesota or Wisconsin, is by joining the American Consumer Council.
9. Lafayette Federal Credit Union — 1.26% APY, $500 minimum deposit
Lafayette Federal Credit Union offers a variety of certificates, but it’s the 5-year fixed-rate certificate you’ll want to turn to for competitive savings. It earns 1.26% APY and requires only $500 to open. You’ll lose 600 days’ worth of dividends if you make a withdrawal from the 5-year term fixed rate certificate.
There are several ways you can become an LFCU member: You can live or work in its serviced areas; work at partner institutions; be an immediate family member of current credit union member; be a member of the Home Ownership Financial Literacy Council; or be a new or existing member of the American Consumer Council (ACC).
LFCU was founded in 1935 and is based in Rockville, Md. Members can take advantage of its branches throughout Maryland, Virginia and Washington, D.C., as well as CO-OP Shared Branches and ATMs nationwide.
10. Affinity Plus Federal Credit Union — 1.25% APY, $500 minimum deposit
To start earning at Affinity Plus FCU’s competitive rate on a 60-month basic certificate, you’ll need an opening deposit of at least $500. Early withdrawals from this account may trigger a penalty of 365 days’ worth of dividends.
Your Affinity Plus FCU membership eligibility depends on the organization where you’re employed or volunteer, your school or place of residence, work or worship or through eligible/current members. You can also easily join by making a one-time $25 donation to the Affinity Plus Foundation. Affinity Plus Federal Credit Union was founded in 1930 and is currently headquartered in St. Paul, Minn.
5-year CDs vs. savings accounts
If you’re simply looking for the highest rates available, 5-year CDs are going to seem much more appealing than a savings account. Even the best savings accounts can’t quite reach the 5-year CD rates you’ll find above. Plus, 5-year CDs lock in their rates at opening for the term of the investment, guaranteeing your rate of return. This can make for a great savings vehicle for conservative investors, who don’t want to ride the waves of an ever-changing economy.
Looking at the numbers, a $5,000 deposit into a 5-year CD at 3.25% APY would result in $881 of extra savings at maturity. Meanwhile, making a $5,000 deposit into one of the best savings accounts at 2.25% APY lands you with nearly $595 in savings after five years.
Savings accounts do provide easier access to your money, though. If you find yourself in a pinch suddenly, you can make a quick ACH transfer online or a withdrawal at a branch or ATM. Withdrawing from CDs isn’t as easy, especially when you account for the money you’ll lose to early withdrawal penalties. As you can see from the accounts above, early withdrawals from a 5-year CD can result in the loss of six months’ to two years’ worth of interest.
5-year CDs vs. other investment options
Investing in individual bonds — Treasury, municipal, or corporate — can be a solid alternative to saving with 5-year CDs. Non-Treasury bonds do have some risk by default as they don’t have the FDIC/NCUA insurance coverage limits. You can use these bonds to build a ladder similar to a CD ladder, so each bond matures a year or so apart.
An alternative to creating a bond ladder is to invest in a mutual fund or ETF of bonds. Unlike a ladder, however, the value of a bond mutual fund or ETF does fluctuate with interest rates. So when interest rates go up, the value of those investments will drop and vice versa.
The best way to maximize your 5-year CD investment
If you’re putting away money for five years, you’re going to want to make it worthwhile. For starters, CDs are best for those who have already maxed out their other savings accounts and have their emergency savings in a liquid savings account for easy access. They’re also better if you have a higher deposit to stash away. That will earn more interest in the long term for more tangible savings.
For example, placing $1,000 in a 5 year CD with a 3.25% APY will yield about $176 in savings by the end. Making a $10,000 deposit, on the other hand, lands you with a little over $1,764 in interest. That $176 is a good chunk of change, but you should make sure it’s enough to justify stashing away $1,000 now instead of perhaps waiting to make a larger deposit.
A great way to utilize a 5-year CD is to include it in a CD ladder. A 5-year, five-CD ladder is a standard and easy-to-track method of saving. You open five CDs, each maturing a year apart. Once a CD matures, you renew it as a new 5-year CD. Eventually, all your CDs will be 5-year accounts, maturing a year apart. You can also choose to withdraw your money whenever an account matures if you need to use those funds. This allows you to take advantage of the longer terms’ higher rates and bigger savings.