Updated May 22, 2018
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 2.25% with no 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).
The Best CD Rates in May 2018
This list is updated monthly, and competition continues to intensify. Here are the accounts with some of the best CD rates:
Minimum Deposit Amount
Colorado Federal Savings Bank
See a full list of the best CD rates below.
- 12-Month CD: Capital One – 2.25% APY, No minimum deposit
Capital One is famous for its credit card business. It is now getting aggressive with CD rates. There is no minimum deposit, which make these CDs comparable to Barclays’ CDs. Capital One CDs are FDIC insured, up to the federal maximum. And you get the comfort of depositing your money with a very large, publicly traded bank. Here are their other rates:
- 18-month: 2.30% APY
- 2-year: 2.35% APY
- 3-year: 2.40% APY
- 5-year: 2.80% APY
on Capital One’s secure website
- 3 months – 5 years: Synchrony Bank – 0.75% APY – 2.60% APY; $2,000 minimum deposit
- 12-months: 2.25% APY
- 24-months: 2.45% APY
- 36-months: 2.55% APY
- 60-months: 2.85% APY
on Synchrony Bank’s secure website
- 1 year – 5 years: Barclays Bank – 2.20% – 2.80% APY, no minimum deposit
Barclays is one of the oldest banks in the world. Although they’re based in London, they do have a U.S. presence and offer competitive rates on their CDs and savings account. Currently, they’re offering some of the highest CD rates in the market, and they have an edge over the rest of the institutions on this list: they don’t require a minimum balance to earn the APY or open an account. Deposit as little or as much as you’d like into a term of your choice and you can start earning interest as long as the account is funded within 14 days of opening the CD. Additionally, your funds are insured through the FDIC.
- 1-year: 2.20% APY
- 2-year: 2.30% APY
- 3-year: 2.35% APY
- 5-year: 2.80% APY
on Barclays’s secure website
- 6 months – 6 years: Goldman Sachs Bank USA – 0.60% APY – 2.85% APY; $500 minimum deposit
- 2-year: 2.30% APY
- 3-year: 2.35% APY
- 5-year: 2.80% APY
- 6-year: 2.85% APY
on Goldman Sachs Bank USA’s secure website
- 3 months – 5 years: Ally Bank – 1.00% APY – 2.60% APY; $0 minimum deposit (higher APY with higher deposit)
- 12-months: 2.10% APY (less than $5k); 2.15% APY ($5k minimum deposit) and 2.25% APY ($25k minimum deposit)
- 18-months: 2.15% APY (less than $5k); 2.20% APY ($5k minimum deposit) and 2.30% APY ($25k minimum deposit)
- 3-year: 2.40% APY (less than $5k); 2.45% APY ($5k minimum deposit) and 2.50% APY ($25k minimum deposit)
- 5-year: 2.40% APY (less than $5k); 2.50% APY ($5k minimum deposit) and 2.60% APY ($25k minimum deposit)
on Ally Bank’s secure website
- 1-Year CD from a Credit Union: PenFed Credit Union – 2.12% APY, $1,000 minimum deposit
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 $17.00. 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.
- 2-Year CD: Colorado Federal Savings Bank – 2.51% APY, $5,000 minimum deposit
Colorado Federal Savings Bank is new to our list this month. Despite having the state of Colorado in their name, this institution doesn’t have any branches and serves customers nationwide through their online banking platform. They’ve been around since 1990 and have over $1 billion in assets. Currently, they’re offering a 24 month CD for 2.51% APY with a minimum deposit amount of $5,000. While they’re an online-only bank, they don’t currently have a mobile app.
- 2-Year CD from a Credit Union: Greenwood Credit Union – 2.80% APY, $1,000 minimum deposit
- 3-Year CD: Mainstreet Bank – 2.70% APY, $500 minimum deposit
Mainstreet Bank is located in Northwern Virginia and has a nationwide presence through their mobile and online banking platforms. Established in 2004, they currently have over $800 million in assets. With only a minimum of $500, you can open a 3 year CD with a 2.70% APY. All deposits made to MainStreet Bank are insured by the FDIC.
- 3-Year CD from a Credit Union: Latino Credit Union, 2.60% APY, $500 minimum deposit
- 5-Year CD: American Bank – 3.00% APY, $500 minimum deposit
American Bank is a state-chartered bank headquartered in Allentown, PA. They have over $500 million in assets and have experienced steady growth year over year. They’re currently offering the most competitive rate on a 5-year CD provided by an online bank. All you need is $500 to deposit to open the account. They have an online banking platform as well as a mobile app.
- 5-Year CD from a Credit Union: Northwest Federal Credit Union – 3.05% APY, $1,000 minimum deposit
Northwest Federal Credit Union was established in 1947 and has grown to obtain over $3 billion in assets. This credit union is open to anyone willing to join one of their Community Partner Organizations. They give you the opportunity to do so when you go to fill out your membership application. In addition to banking online, this credit union also has a mobile app.
Northwest Federal Credit Union offers incredible rates on their 5 year CDs. Their rates are as follows:
- $1,000-$99,000: 3.05% APY
- $100,000-$249,999: 3.10% APY
- $250,000+: 3.15% APY
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 1.60%, you would earn $322.56 over two years. If you put that money into a 2.51% CD, you would earn $508.30. 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 2.20% APY and closed it after six months, you would forfeit half of the interest and earned only 1.11%. You would have been better off with a savings account paying 1.60%.
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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