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Updated on Wednesday, July 1, 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 June, the average 1-year CD interest rate is 0.65% APY and the average 3-year CD rate was 0.92% APY, compared to the average 5-year CD rate of 1.13% 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 CD of six or more years is 1.56% APY. Five-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, 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 June 2020
#1 Lafayette Federal Credit Union — 1.51% 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 1.51% 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, though which is the biggest penalty on this list.
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 members of current credit union members; be a member of the Home Ownership Financial Literacy Council; or be a new or existing member of the 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.
#2 Generations Credit Union — 1.97% APY, $500 minimum deposit
Generation Credit Union offers a competitive 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.
#3 RiverLand Federal Credit Union — 1.95% APY, $1,000 minimum deposit
Taking one of our top spots is RiverLand Federal Credit Union, with its high rate and low minimum deposit pairing on its 60-month certificate. If you have $10,000 to put away, you can opt for a Step-Up Certificate at the same rate, which allows you to increase your APY to the going rate once over the life of the CD.
RiverLand membership is open to employees and members of the credit union’s partner employer groups. You can also join as a member of the Arts Council of New Orleans, which requires a year-long pledge. But once you’re a member of RiverLand, you’re a member for life.
#4 Georgia’s Own Credit Union — 1.70% APY, $500 minimum deposit
While you need just $500 to open Georgia’s Own Credit Union’s 60-month certificate, its competitive rate applies to all balances. Interest is credited monthly or compounded quarterly. If you make an early withdrawal from the 60-month certificate, you stand to lose 450 days’ interest.
Georgia’s Own Credit Union offers membership to community members in select Georgia areas, employees and retirees of Premier Partners, members of the Getting Ahead Association and family members of current members. If you live outside the areas served in Georgia, you can join by becoming a member of Georgia’s Own Foundation with a $10 donation.
#5 Financial Partners Credit Union — 1.45% 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 1.45% APY. The penalty for an early withdrawal equals 180 days’ interest.
Financial Partners Credit Union was founded in 1937 by a handful of aviation workers. Today, it has branches throughout California, with its headquarters located in Downey, Calif. Financial Partners Credit Union membership is open to select California community members and employees of select employer groups.
#6 Pen Air Federal Credit Union — 1.60% 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.
#7 TruStone Financial Credit Union — 1.70% APY, $500 minimum deposit
Open a TruStone Financial 60-month certificate with just $500 to start saving — or $25 if you’re under the age of 18. Its 1.70% 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).
#8 State Department Federal Credit Union — 1.51% APY, $500 minimum deposit
To snag a State Department Federal Credit Union 60-month share certificate, you’ll need only $500 to deposit. Dividends are compounded daily, which grows your money more efficiently. Early withdrawals from the account will cost either 180 days of dividends on the amount withdrawn or the amount of dividends earned since the date of issuance, whichever is smaller.
Of course, State Department FCU membership is open to employees of The U.S. Department of State. You may also be eligible through select organization membership, an immediate family member or the American Consumer Council. Groups may also apply for SDFCU membership.
Founded in 1935, SDFCU is headquartered in Alexandria, Va. It also offers its customers access to the CO-OP Shared Branch network for branches and ATMs.
#9 Western Vista Federal Credit Union — 1.61% APY, $10,000 minimum deposit
For a $10,000 investment, you’ll earn this attractive APY from Western Vista Federal Credit Union. Don’t have quite that much to put away? Deposits anywhere from $500 to $9,999 will still get you a competitive rate that just misses the top 10.
If you live, work or worship in one of the Wyoming communities that Western Vista serves, you are eligible to become a member. For those who don’t live in Wyoming, you can join Western Vista by making a small contribution to its charitable foundation.
#10 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. 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.
Superior Choice Credit Union was established in 1932. It has a handful of branches near its Superior, Wisc., headquarters, including one in nearby Duluth, Minn. You can also access over 30,000 fee-free ATMs and 5,000 branches nationwide and in Canada through the CO-OP Network.
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.