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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 March, the average 1-year CD interest rate is 1.19% APY and the average 3-year CD rate was 1.55% APY, compared to the average 5-year CD rate of 1.84% APY in the same month.
Longer-term CDs do exist, but even their yields don’t often exceed 5-year CD rates these days. The highest yield on a CD of six or more years is 3.05% APY. 5-year CDs are also useful components to a CD ladder. When you build a ladder with CDs maturing a year apart, you can renew each one into a 5-year CD at maturity. This locks in the higher long-term rates for years to come.
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, similar to MagnifyMoney, a LendingTree owned company, 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 2020
|Institution||APY||Minimum deposit amount|
|Hiway Federal Credit Union||2.10%||$25,000|
|Pen Air Federal Credit Union||2.20%||$500|
|Financial Partners Credit Union||1.90%||$1,000|
|Andrews Federal Credit Union||2.60%||$1,000|
|Lafayette Federal Credit Union||2.02%||$500|
|Interior Federal Credit Union||1.76%||$500|
|American 1 Credit Union||2.00%||$500|
|Affinity Plus Federal Credit Union||2.00%||$500|
|TruStone Financial Credit Union||2.00%||$500|
|Home Loan Investment Bank, FSB||1.75%||$2,500|
Hiway Fedral Credit Union — 2.10% 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 the 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 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.
Pen Air Federal Credit Union — 2.20% 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.
Financial Partners Credit Union — 1.90% APY, $1,000 minimum deposit
Place your money under the top 5-year CD rate with Financial Partners Credit Union. Its 60-month Savings Certificate requires just $1,000 to get started saving at its competitive 1.90% APY. The penalty for an early withdrawal equals 180 days’ interest.
Financial Partners Credit Union was founded in 1937 and has branches throughout California. It’s headquartered in Downey, Ca.
Andrews Federal Credit Union — 2.60% APY, $1,000 minimum deposit
Andrews Federal Credit Union offers the chance to snag a top interest rate, but with a slightly shorter term with its 55-Month Share Certificate. You’ll need at least $1,000 to open the account. The penalty for early withdrawals from a 55-Month Share Certificate will equal 365 days of dividends.
Andrews Federal Credit Union was founded in 1948 and is headquartered in Suitland, Md. Andrews FCU membership serves residents of Washington, DC, Maryland, Virginia and New Jersey, including Joint Base Andrews and Joint Base McGuire/Dix/Lakehurst. It also serves military installations abroad in central Germany, Belgium and The Netherlands. You may also qualify for membership through employment at Select Employee Groups throughout Maryland, Virginia and New Jersey.
Lafayette Federal Credit Union — 2.02% APY, $500 minimum deposit
Lafayette Federal Credit Union offers a variety of both Variable- and Fixed-Rate Certificates, but it’s the 5-year Fixed-Rate Certificate you’ll want to turn to for competitive savings. It earns 2.02% 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, which is the biggest penalty on this list.
Lafayette Federal Credit Union is based in Rockville, Md. and has its own branches in Maryland, Virginia and Washington, D.C. in addition to CO-OP Shared Branches and ATMs. Membership is available to those who live or work in Maryland, Virginia or Washington, D.C., employees of an approved agency or company, members of the Home Ownership Financial Literacy Council and immediate family members of current members. You can also join if you are an existing member or become a member of the American Consumer Council.
Interior Federal Credit Union — 1.76% APY, $500 minimum deposit
It won’t take much to open a CD at Interior Federal Credit Union. All you need is at least $500 to get a 5-year CD started. You’ll have two options: a regular CD, and a Jumbo CD which requires a $100,000 minimum deposit. The early withdrawal penalty on either CD is 365 days’ worth of interest, so make sure you’re able to keep it in the account for the full term length.
“Interior” could refer to a lot of different things in its name, but in this credit union it’s in reference to the Department of Interior, which is the original employer group that this credit union was founded to serve. If you don’t work for the DOI, you can also qualify by making a donation to the New Mexico Wildlife Federation for free.
American 1 Credit Union — 2.00% APY, $500 minimum deposit
With only a $500 minimum deposit, you can get this competitive rate offered by American 1. A penalty for early withdrawal may apply.
American 1 first started as the Jackson Co-Op Federal Credit Union in Jackson, Michigan. Joining is simple. You’ll pay just $3 to join Community 1, which gives you access to all of American 1’s banking products as well as a discount program.
Affinity Plus Federal Credit Union — 2.00% 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, Minnesota.
TruStone Financial Credit Union — 2.00% APY, $500 minimum deposit
Open a TruStone Financial 60-month Certificate with just $500 to start saving — or $25 if you’re under 18. Its 2.00% APY is a worthy one, especially since interest is compounded daily. The penalty for an early withdrawal will equal 365 days’ dividends.
TruStone Financial Credit Union was first established in 1939 as the Minneapolis Federation of Teachers Credit Union by a handful of Minneapolis teachers. Trustone membership is now open to more than just teachers, including members and employees of select groups, members of select Wisconsin or Minnesota communities, immediate family members of existing members and members of the TruStone Foundation (which requires a $10 minimum donation).
Home Loan Investment Bank, F.S.B — 1.75% APY, $2,500 minimum deposit
Check out Home Loan Investment Bank’s competitive 5 Year e-CD, which allows customers nationwide to benefit from the bank’s rates. The bank’s e-CDs require $2,5000 to open, a slightly higher minimum deposit than its standard CDs. The early withdrawal penalty will equal six months’ worth of interest.
Home Loan Investment Bank was founded in 1959 and maintains branches throughout Rhode Island and Massachusetts.
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 $882 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.