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Earning Interest

APY vs. Interest Rate on Savings and CD Accounts — Explained

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

apr vs interest rate
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When you’re signing up for a checking or savings account, the first thing you are likely to review is the account’s APY and interest rate. They may seem similar but they are actually two very different terms.

An interest rate is the percentage of your deposit that banks pay you in order to hold your money with them. APY is an acronym that stands for for annual percentage yield. It refers to the total amount of interest you earn on your savings over a year, and it factors in compounding interest. APY gives a truer picture of how much money you will make from your certificate of deposit (CD), savings or money market account, than by looking at a simple interest rate alone.

The higher the APY, the more money you can expect to earn from your deposit in your CD, money market or savings accounts.

Understanding the various types of interest rates

For deposit accounts, there are two types of interest rates you need to know: simple interest and compounding interest.

Simple interest

Simple interest is easy to calculate — it’s calculated only on the principle you deposit in your bank account. It means if you invest $10,000 at an interest of 2%, for instance, you will earn $200 in interest at the end of the year.

Simple interest rates are typically used with brokered CD accounts purchased through brokerage firms like Fidelity, Vanguard or Charles Schwab, said Ken Tumin, founder and editor of DepositAccounts.com, a fellow LendingTree-owned site. Instead of receiving compounding interest, holders of brokered CDs normally get paid simple interest monthly, quarterly, semi-annually or annually.

Compounding interest

Compounding interest is more complicated, because it takes into account the interest you earn on both the interest and principle. When you leave the interest you earn in a bank account instead of taking it out, the overall interest paid is calculated based on the total balance, including the interest you’ve earned over time. So as each month passes, you are earning interest on an increasingly larger pool of money.

That’s why compounding interest can be such a powerful tool and why you’ll hear many experts encourage folks to save as early and often as they can so that they have more time to enjoy the power of compounding.

Here is how compounding interest works. Let’s say you put $10,000 in savings account that earns an interest rate of 2%. After one year, you will have earned $200. So you’ll start year two with a total balance of $10,200. Now, you’ll earn the same 2% but you’ll be earning it on a higher balance (your original deposit plus $200 in earned interest). At the end of year two, the total interest on your deposit will be $204 — ($10,000+$200) x 2% = $204 — and you’ll be left with a total of $10,404.

Annual Percentage Yield (APY) vs interest

Most deposit accounts where you earn the interest use APY.  It is a number that accurately represents how much you will make from a deposit in a given year, factoring in both the interest rate and compounding period.

If interest is paid on an investment once per year, which means it has an annual compounding period, as shown in the above-mentioned example, the APY and interest rate are the same.

But in reality, most banks offer more frequent compounding periods, which could be quarterly, monthly, weekly or even daily. In these situations, the compounding effect occurs on a much smaller scale but more frequently. As a result, the returns are higher.

Most banks offer an APY, so that account holders don’t have to calculate on their own. But if you are curious to know how an APY is calculated, the Federal Deposit Insurance Corporation (FDIC) provides the mathematical formula on its website.

Read more about the difference between APR and interest rate when it comes to mortgages here.

How to calculate APY

You can use DepositAccount.com’s compound interest calculator to calculate how much return you will eventually get on your investments over certain time periods. But if you’re someone who likes to see how the math works out, we’ll cover the formula as well.

APY = 100*[(1 + (interest rate/compounding cycles)^compounding cycles)) – 1]

Compounding cycles is the number of times a year your interest compounds.

Now if the 2% interest on that investment of $10,000 compounds daily (365 times of a year), at the end of the year, you will earn $202.01 in interest on that deposit. In this case, the APY is 2.0201%.

Here is how we arrived at the result:

APY = 100 * [(1 + (.02/365) ^ 365) – 1]

APY = 2.0201%

The deposit compounds monthly, meaning it has 12 compound cycles:

APY = 100 * [(1 + (.02/12) ^ 12) – 1] = 2.0184%

Blended APY

Blended APY comes into play when there are rate tiers in accounts. That means depending on how much you’ve invested, a portion of your balance earns one interest rate, while another portion earns a different interest rate. A blended APY averages the different interest rates and also factors in compounding.

Some financial institutions reward low balance savers by placing the highest rate with the lowest deposit, but if the balance grows they start using a reverse tier system where they blend the APY as the balance grows, Tumin explained.

These tiered rates are typically applied in money markets, savings and reward checking accounts, Tumin said. There can be more than two rate tiers, which it can make it more complicated to determine the final amount of interest you’ll earn over time.

Banks and credit unions that offer products that apply blended APYs usually list the rate tiers for different ranges of deposits. In this example, the blended APY is neither 1% nor 2%. The exact blended APY is calculated based on how much you have invested.

The formula that you can use to calculate the blended APY is:

Blended APY = (Amount1 * Rate1 + Amount2 * Rate2) / Total Amount

For example, let’s say you open a savings account that gives you 2% APY on your investments below $10,000 and 1% APY on deposits above $10,000.

You have $20,000 to deposit.

So, what we get from the $20,000 is:

Blended APY = ($10,000 * 2% + $10,000 * 1%) / $20,000 = an effective APY of 1.5%

Blended APY vs fixed APY:

Would you be better off picking an account with the blended APY or another account with a fixed APY of 1.5% on your entire balance?

It depends on your total balance.

Let’s say you put $15,000 in that same two-tiered account (2% on your first $10,000; 1% on deposits above $10,000).

Using the same formula from above, your blended APY would be 1.67%, beating a 1.5% APY.

But if you dump $50,000 into this account, your blended APY then would be 1.2%.

In this case, a fixed 1.5% APY would be a better deal for you.

When looking for savings accounts, you should shop around and compare the expected returns based on your initial investment.

Understanding the difference between APY, interest rate and APR

In the family of interest rates, APY has a sister called APR, which stands for annual percentage rate.

APR is often used to describe the interest rate you pay on loans and credit card debt. However, once in a while, you’ll see APR mentioned for deposit accounts, which essentially means a simple interest rate in that context, Tumin said.

When you are shopping for a loan, instead of looking at the interest rate, you should focus on APR, which provides a clearer picture of how much the loan will cost you.

An interest rate is the percentage of a loan amount that it costs to borrow money.

Essentially, APR reflects the amount of interest you pay on the money you borrow from a lender every year, and it also factors in how the interest is applied to your balance and associated fees and other costs. But unlike APY, APR does not take compounding into account.

If a lender charges no additional fees, the loan’s APR and interest rate are identical. But if you have to pay an origination fee for a loan, for example, it will increase the APR on that loan, making it higher than a simple interest rate.

Although lenders often advertise the interest rates, the Federal Truth in Lending Act requires that every lender to disclose the APR, so you can use the APR as a good basis to compare the true costs of loans. However, your monthly payment is calculated based on the interest rate, not APR. Here’s an example that shows how monthly payments are calculated using a loan calculator from LendingTree, the parent company of MagnifyMoney. The fees and other costs, such as discount points and origination fees are often paid at the closing of a loan or will be calculated into your loan balance.

This article contains links to DepositAccounts.com. Like MagnifyMoney, DepositAccounts.com is a subsidiary of LendingTree.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Shen Lu
Shen Lu |

Shen Lu is a writer at MagnifyMoney. You can email Shen Lu at [email protected]

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Best of, Earning Interest

The Best High-Yield Online Savings Accounts in August 2019

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

The Best Online Savings Accounts

Updated August 22, 2019

There are no excuses for sticking with a low-rate savings account these days. Online savings accounts provide consumers with interest rates that are way above those offered by conventional banks. The best online savings accounts can easily earn you an APY of 2.15% or greater, while the average rate offered by a traditional brick-and-mortar bank remains at a paltry 0.26%.

If you’re still skeptical about switching to an online bank, consider the facts. Your funds are just as safe stashed with an FDIC-insured online bank as they would be with the bank branch on Main Street, and you’re likely to get better technical support with an online-only bank website and app. Many offer round-the-clock customer support and online chat features that make it easy to resolve issues without needing to visit a branch in person. Along with higher rates, you may end up saving on the cost of the account. With lower overhead costs, online banks typically charge lower fees.

Every month we review and compile the best savings account offers from online banks. Our ranking factors in features such as a higher-than-average interest rate, no minimum balance requirement, and superior ATM access.

1. High Rate: Goldman Sachs Bank USA – 2.15% APY, no minimum balance (but no ATM access)

High-yield Online Savings Account from Goldman Sachs Bank USA

Our advertiser Marcus by Goldman Sachs, the consumer bank of Wall Street giant Goldman Sachs, offers a 2.15% APY on deposits. There isn’t a minimum balance requirement to earn the APY and there are no transaction fees. Upon opening the account, you can deposit funds via electronic transfer, wire transfer, or deposit by check. You can get access to your funds via electronic transfer or wire transfer. Goldman has been investing heavily in Marcus, its online consumer bank. Marcus is already offering some of the best savings accounts and personal loans in the market, and further expansion is expected. The savings account has consistently been paying one of the highest rates in the market. With a 2.15% APY, you can get one of the highest rates in the market from a well-known brand. The maximum deposit is $1,000,000 and deposits are FDIC insured up to the $250,000 limit.

LEARN MORE Secured

on Goldman Sachs Bank USA’s secure website

Member FDIC

2. High Rate: Barclays Bank – 2.10% APY, no minimum balance

Online Savings Account from BarclaysBarclays is a large, old British bank, based in London and with more than 325 years of history. Although Barclays is huge in the United Kingdom, it is a challenger brand in the US. Barclays offers savings products with highly competitive rates. These deposits are used to fund their rapidly growing American credit card business. The online savings account has a 2.10% APY with no minimum balance to open and no monthly fees. Your deposits are FDIC insured up to the legal limit. The Barclays website has a good look and feel. And you can have the confidence of keeping your money with one of the world’s largest and oldest universal banks.

LEARN MORE Secured

on Barclays’s secure website

Member FDIC

3. High Rate: Synchrony Bank – 2.15% APY, no minimum balance, (and ATM access)

High Yield Savings from Synchrony BankSynchrony Bank pays a healthy 2.15% APY. There is no minimum balance requirement and no monthly fee. In addition to the great rate, you can get an ATM card. Most internet-only banks require you to transfer funds electronically, which can take a few days. If you ever need quick access to your funds, the ATM card makes access easy. You might not recognize the Synchrony brand in the banking space, but it is a large, well-capitalized business. Synchrony used to be a part of General Electric (GE), and was spun out as a separate company. Unfortunately, the digital experience is not the best, but they now have a mobile banking app.

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on Synchrony Bank’s secure website

Member FDIC

4. High Rate: American Express National Bank – 1.90% APY, no minimum balance (and no fees)

High Yield Savings Account from American Express National BankOur sponsored advertiser, American Express National Bank, offers a Personal Savings account, which earns a 1.90% variable Annual Percentage Yield (APY) as of 08/22/2019. The account charges no monthly fees and requires no minimum deposit, making it an affordable account to open. You must fund your account within 60 days of applying for the account, and the FDIC insures your deposits up to $250,000. Overall, the account is a great option for anyone who wants the flexibility of earning a high interest rate on a sum of money you’ve stashed away, minus the withdrawal restrictions of a certificate deposit.

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on American Express National Bank’s secure website

Member FDIC

5. High Rate: Vio Bank – 2.52% APY, $100 to open

High Yield Online Savings Account from Vio BankVio Bank is the online division of MidFirst Bank, a national private financial institution with over $16 billion in assets. Vio Bank was recently created and is not yet as established as Marcus, Barclays, American Express, Synchrony, and Ally Bank. However, this online bank launched strong with a High Yield Online Savings account offering 2.52% APY on all balances. You only need $100 to open the account. You can fund the account via ACH.

There are a few limitations to keep in mind: incoming ACHs take anywhere between two to five business days to post and the online bank may place a hold your ACH for two or three business days. When you’re ready to transfer funds out of the account, you’ll be limited to $5,000 per outgoing ACH. You’ll also be limited to transferring an aggregate monthly total of $20,000 via outgoing ACHs. As is with every other savings account, you’ll also be limited to making six withdrawals per monthly statement cycle. The good news (aside from the high APY) is that Vio Bank doesn’t charge a monthly maintenance fee. Vio Bank also has a mobile banking app where you can conveniently manage your accounts on-the-go. Also, its website is mobile friendly so it should be fairly easy to do your online banking from a smart phone, as well.

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on Vio Bank’s secure website

Member FDIC

6. High Rate: CIBC Bank USA – 2.20% APY, $1,000 to open

CIBC Palladian Savings Account from CIBC USACIBC Bank USA is the U.S. division of a Canadian based bank. This division was established in 1991 and has since acquired over $27 billion in assets. Currently, CIBC Bank USA is offering an online-only savings account with a competitive APY of 2.20%. You’ll only need $1,000 to open the account. While there isn’t a monthly maintenance fee, you may be charged $10 if you make more than six transactions per statement cycle. CBIC Bank USA does have a mobile banking app, but make sure that you download the app for the U.S., not Canada.

LEARN MORE Secured

on CIBC USA’s secure website

Member FDIC

7. High Rate: CIT – 2.30% APY, $100 to open

Savings Builder from CIT BankCIT is a very large bank that you probably never heard of. It has more than $50 billion of assets and makes loans (and leases) to middle market companies and small businesses. To fund those loans, CIT operates an internet-only bank that pays some of the highest interest rates in the country. While CIT isn’t as big as other online banks, they’re currently offering a very healthy APY of 2.30% on their Savings Builder account. You only need $100 to open the account, but you’ll need to meet one of two requirements to earn the high rate. We really like the options that CIT Bank has put in place to earn this high APY. The two ways to continue earning this high rate are:

  1. Make a monthly deposit of $100 or more into this account
  2. Maintain a daily balance of $25,000 or more

Even better: there aren’t any monthly maintenance fees and interest compounds daily. Deposits are FDIC insured.

LEARN MORE Secured

on CIT Bank’s secure website

Member FDIC

8. High Rate: HSBC Direct – 2.20% APY, $1 minimum to open, no minimum balance to earn APY

HSBC Direct Savings from HSBC DirectHSBC Direct is the online division of financial giant, HSBC Bank. Based on the amount of assets HSBC Bank has acquired to date, it is the 14th largest bank in the U.S. While HSBC Direct may sound like a new player to the online banking game, this division was actually around prior to the 2008 financial crisis and offered extremely competitive rates. After the financial crisis, the bank renamed the online division to HSBC Advance and slowly started to decrease its online savings account rates, much like other online banks were doing around that time.

Fortunately, HSBC has decided to reenter the online banking space. Since the initial launch in July of 2018, the bank has consistently increased its HSBC Direct Savings Account rate from 1.70% APY to 2.20% APY. You only need $1 to open the account and the APY will be applied to any balance below $2 million. You may fund the account via ACH transfer and the account can be opened online. You will have to deposit new money to the account, which means that you cannot be a member of the HSBC Group in the United States. The account doesn’t have a monthly maintenance fee and all deposits are FDIC insured.

LEARN MORE Secured

on HSBC Direct’s secure website

Member FDIC

9. High Rate: Citizens Access – 2.20% APY, $5,000 minimum balance amount

Online Savings Account from Citizens AccessCitizens Access is the online division of Citizens Bank. This division was recently created to provide the best savings rates to consumers. While the online division is brand new, the bank its backed by isn’t. Citizens Bank has been around for a while and has grown to have over $122 billion in assets. While you need to deposit and maintain a minimum balance of $5,000 to earn the 2.20% APY, you’ll be funding an account that comes with no fees. If your balance happens to fall below $5,000, the APY will drop to 0.25%. One downside to this online-only bank is that they don’t currently have a mobile banking app. This means that you’ll have to do all of your banking through their website. Luckily, their website is mobile-friendly.

LEARN MORE Secured

on Citizens Access’s secure website

Member FDIC

10. Unique Bank + Highest Overall Rate: Fitness Bank – 3.00% APY, $100 minimum to open

Fitness Savings (12,500+ Steps) from FitnessBankFitness Bank is unique and new online bank. It’s a division of Affinity Bank, which has been around since 2002 and has acquired over $318 million in assets. Affinity Bank decided to launch a concept like no other to reward actively fit individuals with the highest APY currently available. While most institutions choose to offer tiered rates based on balance amounts, Fitness Bank offers tiered rates based on the average number of steps you take on a daily basis. To earn the high 3.00% APY, you’ll need to take an average of 12,500 steps or more per day. If you only take an average of 10,000 to 12,499 steps per day, you’ll earn an APY of 2.50% (which is still a great APY). You’ll earn 1.75% APY if you take an average of 7,500 to 9,999 steps per day. Taking an average of 5,000 to 7,499 steps per day will qualify you for an APY of 1.25%. Finally, if you take anywhere between 0 to 4,999 steps on average per day, you’ll only earn 0.50%.

Fitness Bank will track your steps by requiring you to download its Step Tracker app. The bank will then calculate your average steps from the previous month to determine which tier you qualify for. Once the bank determines which rate your activity qualifies you for, you will continue earning that rate for an entire month until the bank recalculates your activity. The activity requirement will be waived for the first month so that you can get your app all set up and start logging in some steps. For this first month, you’ll automatically earn the 3.00% APY.

In terms of actual money, you will need at least $100 to open the account and you’ll need to maintain this balance to waive the $10 monthly maintenance fee. The bank does impose a limit on the amount of money you’re able to transfer in and out of the account via ACH. You cannot transfer more than $15,000 per day in or out of the account. You also cannot exceed more than six certain withdrawals or you’ll incur an excessive withdrawal fee of $10 for each additional withdrawal. In addition to the Step Tracker app, Fitness Bank has a mobile banking app to manage your account.

LEARN MORE Secured

on FitnessBank’s secure website

Member FDIC

11. High Rate: Popular Direct – 2.55% APY, $5,000 minimum to open

Popular Direct Ultimate Savings Account from Popular DirectPopular Direct, the online bank of Banco Popular North America, is currently offering an outstanding APY of 2.55% on their Popular Direct Ultimate Savings Account. You’ll need $5,000 to open this account and you’ll have to maintain a daily end of day balance of $500 to avoid the $4 monthly service fee. This account does not come with an ATM card. In order to access your money, you would need to transfer funds to and from an existing checking account via an ACH transfer, which can take a few days. Your deposits are FDIC insured. Popular Direct has a mobile banking app and provides account holders with access to online banking.

LEARN MORE Secured

on Popular Direct’s secure website

Member FDIC

12. High Rate: BrioDirect – 2.46% APY, $25 minimum balance amount

High-Yield Savings from BrioDirectBrioDirect is powered by Sterling National Bank, which is a large bank in New York with over $29 billion in assets. This online brand recently launched with a high 2.46% APY. You only need $25 to open the account and you’ll need to maintain at least this amount on a daily basis to earn the APY. This account doesn’t have a monthly service fee and can be funded via ACH, wire transfer, or check. There are limitations to the amount of money you can transfer in and out via ACH. BrioDirect limits incoming ACH transfers to $500,000. The bank limits outgoing ACH transfers to $25,000 per transaction and a total of $125,000 per month. You are able to link as many external bank accounts as you’d like to this account. You can also initiate ACH deposits and withdrawals from other banks. You can manage this account online or from Sterling National Bank’s mobile app.

LEARN MORE Secured

on BrioDirect’s secure website

FDIC Insured

13. High Rate: Betterment – up to 2.39% APY, $10 minimum to open

Betterment Everyday Savings - Promo Rate from BettermentBetterment is an investment company and one of the best robo-advisors. Since its creation, the mission of this company has always been to empower its customers to make the most of their money. With this mission in mind, the online brokerage decided to offer a high-yield savings account with an outstanding rate. While this account is not like your typical online savings account, it does come up with an outstanding rate – especially if you take advantage of the promotional rate. How is it different from other savings accounts? For one, Betterment is not a bank and is not FDIC insured. Fortunately, the company has partnered with a number of banks to offer FDIC insurance to accountholders. Essentially, your funds are deposited with the partner banks and will be insured up to $250,000 at each partner bank. One big benefit that Betterment is currently offering is the ability to opt out of depositing your money at a specific bank.

If you’re comfortable with the way this account is structured, you’ll be rewarded with an APY that is up to 2.39%. There is a catch, however, to earn the highest rate. In order to earn the 2.39% APY, you’ll need to join Betterment’s waiting list for the checking product. That’s it! Once you join the list, you’ll be awarded the 2.39% APY through the end of 2019 as long as you stay on the waiting list. If you choose to not join the waiting list, you’ll still earn a great APY of 0.25%. You only need $10 to open the account and there isn’t a minimum balance amount to earn the APY. One thing to note about the promotional and regular APYs – they are still variable rates. Betterment has the right to lower or raise the rates at any time. What Betterment is guaranteeing with the promotional rate is that it will always be 25 basis points above the regular APY. This guarantee will last for the remainder of 2019.

This account doesn’t come with any maintenance fees and you can transfer money from the Betterment Everyday Savings account as many times as you want. If you choose to withdraw money from this account, it’ll be transferred to your linked checking account within 1 to 2 business days. While these types of emerging cash management accounts may not be for everyone, we do feel like they deserve a place on this list due to their outstanding rates.

LEARN MORE Secured

on Betterment’s secure website

FDIC Insured

14. High Rate: TAB Bank – 2.40% APY, $1 minimum balance amount

High Yield Savings from TAB BankTAB Bank was established in 1998 to offer businesses financial assistance. Since the bank opened its doors, it’s acquired over $715 million in assets. In September 2018, TAB Bank decided to launch a High Yield Savings account. While the bank originally launched the account with a 1.80% APY, it steadily rose its rate to 2.40% APY in January 2019. Today, TAB Bank has continued to offer the 2.40% APY. The bank doesn’t require a minimum amount to open the account, but you must maintain a daily balance of $1 to earn the APY. You can fund the account via ACH, wire transfer, or check. You’re able to manage the account online or via TAB Bank’s mobile app.

LEARN MORE Secured

on TAB Bank’s secure website

Member FDIC

15. High Rates on two savings accounts: Customers Bank – 2.25% or 2.40% APY, $5,000 or $25,000 to open depending on account

High-Yield Savings Account from Customers BankCustomers Bank was established in 1997 and has grown to be known as a “super-community bank” in Pennsylvania, Washington D.C., Illinois, New York, New Jersey, and New England. The bank has over $9 billion in assets, making it a mid-sized bank. Currently, Customers Bank is offering two outstanding rates on two different accounts. Its Digital Savings Account requires a minimum deposit and balance of $5,000 to earn a high rate of 2.25%. This account doesn’t have any monthly fees. You can open this account here.

If you have $25,000 to deposit, the High-Yield Savings Account is a better fit for you. If you can deposit and maintain a minimum of $25,000 into the account, this bank will reward you with a 2.40% APY. You’ll have to maintain this balance to continue earning the high rate. You must fund the account within 30 days of receiving application approval. This account doesn’t come with any monthly fees.

A few items to be aware of: these accounts don’t come with checks or a debit card. Customers Bank does have ACH transfer limitations of $5,000 per day and $50,000 per statement cycle. You can easily open these accounts online and manage the account via Customer Bank’s website or mobile banking app. Deposits are FDIC-insured.

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on Customers Bank’s secure website

Member FDIC

16. High Rate: MySavingsDirect – 2.40% APY, $1 minimum to open

MySavings Account from MySavingsDirectMySavingsDirect is a division of Emigrant Bank, which is a large bank in New York with over $5 billion in assets. MySavingsDirect is offering a 2.40% APY with a $1 minimum deposit. In the past, Emigrant liked to play games with rates, but we’ve noticed that MySavingsDirect’s rate has been consistent throughout this year. The account can be funded via ACH and MySavingsDirect will only accept a check for your initial deposit. The online experience is dated and the bank doesn’t have a banking app.

LEARN MORE Secured

on MySavingsDirect’s secure website

Member FDIC

17. High Rate: Citi – 2.36% APY*, no minimum opening deposit

Citi Accelerate Savings from CitiCiti has never been known to offer the best savings account rates, but this big bank has decided to change that (for certain people). If you live in AL, AK, AZ, AR, CO, DE, GA, HI, ID, IN, IA, KS, KY, LA, OK, ME, MA, MI, MN, MO, MS, MT, NE, NH, NM, NC, ND, OH, OR, PA, RI, SC, SD, TN, UT, VT, WA, WV, WI or WY, you’re eligible to open Citi’s Accelerate Savings account. This account is currently offering a 2.36% APY and doesn’t require a minimum opening deposit amount. While there isn’t a minimum deposit to open or balance to earn the APY, you will have to maintain an average of at least $500 on a monthly basis to waive to the $4.50 monthly service fee. If you choose to open this account, you’ll be opening it under Citi’s Access Account Package. This package doesn’t have any overdraft fees, but it also doesn’t have any paper checks. There are also additional requirements for the Access Account Package that you’ll need to meet in order to waive the $10 monthly fee: you’ll need to either make one qualifying direct deposit or qualifying bill payment per statement period or maintain a combined average monthly balance of at least $1,500 in eligible linked accounts (the Accelerate Savings account counts as an eligible linked account). If you live in one of the eligible states, we believe that this account is a great option as it’s rare to find a large, trusted bank offering a high rate on a savings account that’s linked to a free checking account.

*Note: If you live in California, Connecticut, Florida, Illinois, Maryland, Nevada, New Jersey, New York, Texas, or Virginia, you will not be eligible for this offer.

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Member FDIC

18. High Rate: Salem Five Direct – 2.20% APY, $100 to open – Be aware of transfer limitations

eOne Savings from Salem Five DirectSalem Five Direct is the online bank division of Salem Five Cents Savings Bank, a community bank based in Salem, Massachusetts. Salem has been around for more than 150 years and all deposits are insured by the FDIC up to the legal limit. You only need $100 to open this account, and there are no monthly maintenance fees. However, they do have a few limitations to be aware of. First, according to their online banking agreement, Salem Five Direct limits the dollar amount of their External Transfers to $5,000 per transaction, $5,000 in aggregate per day, and $20,000 in aggregate per month. So, if you decide to have more than one account with them, like their money market account, they’ll look at the aggregate amount of External Transfers conducted from both the savings account and money market account. Second, account holders are limited to six withdrawals per statement cycle due to Federal Regulations. If you exceed the six withdrawal limit, they’ll charge you $10 per additional transaction. Finally, the web and mobile experiences are not great. But, if you give them a call (which we have done), you will get friendly service from a community bank. While this bank does offer one of the best rates for an online savings account, we want you to be aware of their limitations.

LEARN MORE Secured

on Salem Five Direct’s secure website

Member FDIC

19. High Rate: Ally Bank – 1.90% APY, no minimum balance and you can get a free checking account

Online Savings Account from Ally BankAlly is a bank without branches that had been consistently paying high interest rates on savings accounts. While Ally is still offering rates way above what brick-and-mortar banks are offering, it seems this online bank no longer wants to be seen as the online bank with the most competitive rates. The current APY on Ally’s savings account is 1.90%. Although Ally has dropped its rate significantly, we still favor this online bank. It doesn’t require a minimum balance to earn the APY and, even better, you can open a free checking account (also with no minimum balance requirement and eligible for the 1% cash back offer). This makes access to your savings account incredibly easy – because you can transfer funds online (or via the app) and have immediate access via checks, debit cards and ATMs. With an Ally account, you will have access to their full suite of expanding (and market-leading) products such as CDs, money market account, checking account, and IRA accounts.

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on Ally Bank’s secure website

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20. Runner-Up: For Small Balance Savers Digital Federal Credit Union – 6.17% APY up to $1k

Primary Savings from Digital Federal Credit Union (DCU)Digital Federal Credit Union (DCU) currently offers a nice account for people who are just starting to save. You can earn an APY of 6.17% with their Primary Savings Account. You will only earn that rate on deposits up to $1,000. Once you have more than $1k, you should consider other accounts on this list. It is a credit union – and your deposits are insured by the NCUA up to the legal limit. Anyone can join the credit union by donating to one of their participating organizations such as Reach Out for Schools, which has a membership fee of $10. You’ll be able to join one their participating organizations when you go to open your account with DCU. DCU is also part of a nationwide CO-OP network that allows their members to have access to shared branches and surcharge-free ATMs throughout the U.S.

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How to find the right savings account for you

  • Focus on rates, but don’t forget about fees. Snagging the highest interest rate isn’t always your best bet. You also want to ensure the whole account helps you earn consistent returns. For example, a high-rate online savings account might reset to a lower APY after an introductory period. Perhaps the best rate requires a balance that’s too high or too low for your needs. And watch out for monthly fees that could eat into your savings.
  • Compare, compare, compare. Use our savings account comparison tool to calculate how much you could earn with different accounts. You can filter by ZIP code and size, which can help large-balance savers find better options than no-minimum options.
  • Carefully consider CDs. CDs allow savers to earn more on their savings by agreeing to lock up their funds for a set period of time. With CDs, you make your initial deposit at a set APY and wait for the CD term to mature. With most CDs, you can’t touch the original deposit amount before maturity without paying a penalty. Since CDs are less liquid than a standard savings account, they’re good for setting aside money you won’t need to access in the near term. Typically, we recommend using CDs for long-term goals, like accumulating a down payment for a home.

How the Fed impacts online savings rates

The interest rates offered by banks are tied to the federal funds rate, which is set by the Federal Reserve’s Federal Open Market Committee (FOMC). This includes the deposit account rates that grow your money in savings and other deposit accounts. When the federal funds rate rises, you might see that reflected in the deposit interest rates at most banks.

As the Fed hiked rates over recent years, online banks were far quicker to raise their rates in turn than traditional banks. Just look at the average APY offered by big banks — 0.26% vs. 1.52% on average for online banks as of December 2018.

We’ve enjoyed successive Fed rate hikes for the last few years, but the trend is waning. As we continue into 2019, the odds of a rate hike this year have reached zero. The Fed did nothing at its January meeting, and didn’t raise rates at the March meeting either.

The bleak federal funds rate outlook doesn’t necessarily mean that banks will start slashing their own deposit account rates. Online banks are extremely competitive and need to remain so if they want to maintain their edge.

In the January Goldman Sachs earnings call, Goldman Sachs Executive Vice President and CFO Stephen M. Scherr noted it has no plans to walk back on rates for its online savings account Marcus, aiming to keep its rank among the top savings rates in the country.

We heard much of the same from fellow online bank Ally Bank, whose CFO Jennifer LaClair said during its January earnings call that it’s still important to take the “competitive landscape” into account.

Still, other earnings calls indicated that banks are in as much of a holding pattern as consumers are. When asked about the bank’s deposit rate outlook in the event of a Fed rate slowdown, Bank of America CFO Paul Donofrio noted, “At some point, the broader retail rates will rise. We just don’t know when. So, I think we’re just going to have to wait and see.”

As for what that all means to you, chances are that if you keep your deposits with an online bank, you’ll still get the most competitive rates regardless of a Fed pause or rate decrease. You might see an overall decrease in online savings rates (moreso in the competitive rate-chasing CD space), but they’ll still outperform most brick-and-mortar rates any day.

The bottom line

So what’s a saver to do? At the end of the day, you want the account that makes the most sense for you. Choose the one that lets you save and manage your money in the best ways possible. The most efficient way to consistently grow your money is to open an online savings account. These accounts will offer the best interest rates compared to brick-and-mortar banks, no matter where the federal funds rate goes this year — plus, they’re easily accessible in case of emergency. If you don’t need immediate access to your money and you have some extra cash lying around, open a high-yield CD as a more long-term savings alternative.

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Continue reading The Best High-Yield Online Savings Accounts in August 2019

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LaTisha Styles
LaTisha Styles |

LaTisha Styles is a writer at MagnifyMoney. You can email LaTisha at [email protected]

Lauren Perez
Lauren Perez |

Lauren Perez is a writer at MagnifyMoney. You can email Lauren here

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Earning Interest

The Best CD Rates – August 2019

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

The Best CD Rates
iStock.

Updated August 9, 2019

If you’re looking for a better yield on your savings and have time to burn, a high-rate CD at an online bank would be a great option. With a CD, you agree to lock up your funds in an account for a specific period of time, and in return the bank offers a higher yield than you’d find on a standard savings account. If you’re not keen on the idea of completely locking your money away for a set amount of time, you may want to consider a no-penalty CD. These accounts give you the benefit of locking down a rate for a set amount of time without requiring you to lock in your money for the length of the term.

CDs are often seen as the next level up after savings for that reason. If you’ve maxed out your savings account with enough funds to see you through the next year or so, it can be wise to start shoveling savings into a CD to maximize your returns.

For the best CD rates in the industry, check out online banks. They tend to offer much better interest rates than traditional banks, thanks to the lack of typical brick-and-mortar costs.

For example, let’s say you find a 12-month CD at a big brick-and-mortar bank that requires a $1,000 minimum deposit and pays 0.05% APY. If you were to open that account with just the minimum, you’d earn 50 cents after a year. Even a bigger deposit of $10,000 would only yield $5 at maturity.

At an online bank, on the other hand, you could earn 2.80% often with a minimum deposit of $1,000. Opening the account with $1,000 would yield $28, while a $10,000 deposit would earn $280 in a year, a much better return on your money no matter how you look at it. (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 from top banks

To find the best CD rates, we look for the banks and credit unions that consistently offer competitive CD rates month over month. This list is updated monthly, and competition continues to intensify. Here are the accounts from banks with consistently competitive CD rates:

3 months – 5 years: Ally Bank – 0.75% APY – 2.60% APY; $0 minimum deposit to open (higher APY with higher deposit)
Ally Bank

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Ally 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 0.75% APY and 2.60% 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. A good example of this is a 1% cash back promotion Ally is currently offering to new and existing customers. All deposits at Ally are FDIC insured up to the legal limit.

3-months:
  • 0.75% APY (less than $5k)
  • 0.75% APY ($5k minimum deposit)
  • 0.75% APY ($25k minimum deposit)
18-months:
  • 2.35% APY (less than $5k)
  • 2.45% APY ($5k minimum deposit)
  • 2.50% APY ($25k minimum deposit)
6-months:
  • 1.00% APY (less than $5k)
  • 1.00% APY ($5k minimum deposit)
  • 1.00% APY ($25k minimum deposit)
3-year:
  • 2.35% APY (less than $5k)
  • 2.45% APY ($5k minimum deposit)
  • 2.50% APY ($25k minimum deposit)
9-months:
  • 1.25% APY (less than $5k)
  • 1.25% APY ($5k minimum deposit)
  • 1.25% APY ($25k minimum deposit)
5-year:
  • 2.60% APY (less than $5k)
  • 2.60% APY ($5k minimum deposit)
  • 2.60% APY ($25k minimum deposit)
12-months:
  • 2.40% APY (less than $5k)
  • 2.40% APY ($5k minimum deposit)
  • 2.40% APY ($25k minimum deposit)
6 months – 6 years: Goldman Sachs Bank USA – 0.60% APY – 2.65% APY; $500 minimum deposit to open
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Our advertiser Marcus by Goldman Sachs is the online consumer bank of Goldman Sachs Bank USA (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, GS is a good option. It also doesn’t hurt that they also offer some of the best CD rates in the market today. Here are their rates:

CD TermAPY
6-months0.60%
9-months0.70%
12-months2.40%
18-months2.40%
2-year2.45%
3-year2.50%
5-year2.60%
6-year2.65%
12 months – 3 years: BBVA – 2.50% APY* – 1.90% APY; $500 minimum deposit to open
BBVA

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BBVA has been around since 1964. This bank had humble beginnings in Birmingham, Alabama as Central Bank & Trust Company. This small community bank went through several name changes and pioneered several banking initiatives in Alabama (including opening on a Saturday and introducing the first ATM and debit card in the state). In the early 90s, the bank changed its name to Compass Bancshares. In 2007, it had its biggest change to date. The bank was acquired by a Spanish company (Banco Bilbao Vizcaya Argentaria) and renamed BBVA Compass. Recently, BBVA dropped the Compass and is now just called BBVA. Through all these changes, BBVA has grown to acquire over $92 billion in assets.

While this, now, giant bank has not historically offered competitive rates on its deposit accounts, it’s begun competing in the online space by offering online-only CDs with decent rates. Currently, BBVA is offering a competitive 2.50% on its 12 Month Online CD*. The bank does mention that this CD available for a limited time, so you may want to lock in your money in this CD sooner rather than later. You’ll need a minimum of $500 to open the CD. The early withdrawal penalty on this CD is pretty unique. It’s $25 plus 1% of the amount withdrawn. While BBVA does have other CD terms, this CD currently has the best rate.

*Note: This rate is only available to individuals who live in certain states. If you live in Alabama, Arizona, California, Colorado, Florida, New Mexico, or Texas, you will not qualify for this rate. Instead, you’ll qualify for a 2.00% APY.

CD TermAPY
12-months2.50%*
15-months2.00%
18-months1.90%
3-years1.90%
3 months – 10 years: Discover Bank – 0.35% APY – 2.70% APY, $2,500 minimum deposit to open
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Discover is best 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 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: you can even get a CD rate with a duration as short as 3 months. However, you would be better off opening a high yield savings account if you plan on saving the money for less than a year. Keep in mind that all CD terms come with an early withdrawal penalty if you choose to withdraw money before your maturity date. If your Discover CD is less than one year, the penalty is worth three months of simple interest. If the term is between one to three years, the penalty is worth six months of simple interest. Four-year CDs have a penalty that is worth nine months of simple interest. Five year CDs have a penalty that is worth 18 months of simple interest and seven to 10-year CDs have a penalty that is worth 24 months of simple interest.

CD TermAPY
3-months0.35%
6-months0.65%
9-months0.70%
12-months2.40%
18-months2.40%
2-year2.45%
30-months2.45%
3-year2.45%
4-year2.45%
5-year2.50%
7-year2.60%
10-year2.70%
1 Year – 3 Years: Rising Bank – 2.40% APY – 2.50% APY; $1,000 minimum deposit to open
Rising Bank

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Rising Bank launched in February 2019 as the online division of Midwest BankCentre. Midwest BankCentre has been around since 1906 in Missouri and has acquired over $1 billion in assets. This bank decided to assert itself as a top competitor in the online banking space by offering competitive rates. While most online banks have pulled back on rate offerings, Rising Bank continues to offer a top 2.40% APY on its 1-year CD. However, unlike some of the top online banks like Ally Bank and Goldman Sachs, Rising Bank requires a minimum deposit of $1,000 and caps balances at $500,000 on its CDs. If you have less than $1,000 to deposit into a CD, you’re better off choosing another online bank. If you have more than $500,000 to deposit into a CD, you may also want to consider another online bank. Aside from its rates, Rising Bank also distinguishes its CDs with the early withdrawal penalties. If you need to withdraw from the 1-year CD early, you’ll only incur a penalty that is 90 days’ worth of interest. If you need to withdraw early from the 18 to 36-month CDs, the penalty is 180 days’ worth of interest. One thing to be aware of is that Rising Bank compounds interest every three months. Other online banks compound interest monthly, so this is a bit of a downside. Once this CD matures, you can withdraw the full balance to close the account. If you don’t withdraw the full balance ten days after the maturity date, Rising Bank will automatically renew your CD. Rising Bank has a mobile app for your convenience.

CD TermAPY
1-year2.40%
2-year2.45%
3-year2.50%
3 months – 5 years: Synchrony Bank – 0.75% APY – 2.60% APY; $2,000 minimum deposit to open
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Synchrony used to be a part of GE, and now has an online bank that pays competitive rates. The online deposits are used to fund their store credit card portfolio – and the company is publicly traded. If you have $2,000 or more to deposit into a CD, Synchrony will offer you some of the best CD rates. However, if you have less than $2,000, you’re better off going with one of the other online banks above. Your deposit will be insured up to the FDIC limit. In a rising rate environment, this is a great way to get a high interest rate without locking yourself into a long term.

CD TermAPY
3-months0.75%
6-months1.00%
9-months1.25%
12-months2.40%
15-months2.85%
18-months2.50%
24-months2.50%
36-months2.55%
48-months2.55%
60-months2.60%
1 year – 5 years: Barclays Bank – 2.40% – 2.60% APY, no minimum deposit to open
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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.

CD TermAPY
1-year2.40%
2-year2.45%
3-year2.50%
4-year2.55%
5-year2.60%
3 Months – 5 Years: Nationwide by Axos Bank – 0.75% APY – 2.56% APY; $500 minimum deposit to open
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Nationwide is most commonly known for its insurance products. However, in 1998, Nationwide registered with the FDIC as Nationwide Trust Company, FSB. In 2006, the company changed its banking name to Nationwide Bank. In 2018, Nationwide Bank reverted to Nationwide Trust Company, FSB after Axos Bank acquired the deposits business. Now, with Axos Bank powering the banking services, this brand is able to offer top of the line products to banking customers. Currently, Nationwide by Axos Bank is offering a pretty strong APY on its 12-month CD. Especially when you compare the rate against some of the top online banks. This CD does come with an early withdrawal penalty that is equal to six-months’ worth of interest. The bank has decided to focus on offering top rates on 12, 18, and 24-month CDs. See the full list of CD rates below:

CD TermAPY
3-months0.75%
6-months1.55%
9-months1.55%
12-months2.20%
18-months2.30%
24-months2.40%
36-months2.45%
48-months2.50%
60-months2.56%

The best no-penalty CD rates

No-penalty CDs are unique because these accounts allow customers to withdraw from their CD without incurring an early withdrawal penalty. These CDs are an attractive offer to customers as it provides no risk if they choose to withdraw their money early. Here are some of the best no-penalty CD rates that are available nationwide:

6 months: Investors eAccess – 2.15% APY; $500 minimum deposit to open
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Investors eAccess is the online division of Investors Bank, a large bank headquartered in New Jersey that was established in 1926. The parent bank currently has over $26 billion in assets. The online division was launched earlier this year and decided to introduce itself by offering a strong rate on its inaugural product, the eAccess Money Market account. It seems this online bank is slowly offering different deposit accounts, but one thing that sticks out is that it’s offering these new products with high rates. Currently, Investors eAccess is offering two types of CDs: a 6-month No-Penalty CD and a 10-month regular CD. The 6-month No-Penalty CD is comes with a strong 2.15% APY. You need at least $500 to open the account and you’re free to withdraw from the principal amount after the first seven calendar days from opening the account without incurring any penalties. If you choose to withdraw the full amount (including any interest earned) before the maturity date, you won’t incur any penalties, but the full withdrawal will close the account. Regardless of how much you choose to withdraw from the account, the bank will send you the funds via an official Bank Check. The check will be made out to the account owner and mailed First Class to the address on file.

TermAPYMinimum balance to earn the APY
6-month2.15%$500
7 months – 13 months: Goldman Sachs Bank USA – 2.25% APY – 2.15% APY; $500 minimum deposit to open
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Similar to its regular CDs, you only need a minimum of $500 to deposit into Goldman Sachs Bank USA’s no-penalty CDs. This makes these CDs highly attractive to customers with smaller deposits. If you choose to open one of these CDs, you’ll only be locked in for seven days after you fund the account. After the seventh day, you’re free to withdraw your funds, but keep in mind that you’ll need to withdraw the full amount. These CDs are an excellent option if you want your money to remain liquid or if you want to invest your money into an interest-earning account for a short amount of time. One thing to note is that the 7-month no-penalty CD has a much higher rate than the regular 6-month CD (2.25% APY vs 0.60% APY). The high APY makes Goldman’s 7-month no-penalty CD a fantastic option if you want to earn interest in a short amount of time. Here is Goldman’s full list of no-penalty CD rates:

TermAPYMinimum balance to earn the APY
7-month2.25%
$500
11-month2.20%
$500
13-month2.15%
$500
11 months: Ally Bank – 1.80% APY – 2.20% APY; $0 – $25,000 minimum deposit to earn APY
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Unlike the other two banks that offer multiple terms, Ally Bank only offers one term on its no-penalty CD. While Ally doesn’t require a minimum deposit to open, it does reward higher balances with higher APYs. This no-penalty CD is great for low-balance individuals who want to keep their money liquid. However, if you’re okay with locking your money into a CD for 12 months, you’re better off going with Ally’s regular 12-month CD as it has a higher APY (2.40% APY vs 1.80% APY) and doesn’t have a certain balance requirement to earn that high rate. If you still choose to open Ally’s 11-month no-penalty CD and you need to withdraw money before the terms ends, you’ll need to withdraw your funds in full and won’t be able to do so until seven days after funding the account. Here are the tiered rates for Ally’s no-penalty CD:

TermAPYMinimum balance to earn the APY
11 months1.80%Up to $5,000
11 months2.05%$5,000
11 months2.20%$25,000
11 months – 14 months: PurePoint Financial – 1.65% APY – 2.00% APY; $10,000 minimum deposit to open
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PurePoint Financial is the online division of Union Bank. Both the parent bank and this online division are backed by financial giant, Mitsubishi UFJ Financial Group (MUFG). Under the MUFG Union Bank umbrella, this institution has acquired over $130 billion in assets. As its online division, PurePoint Financial has been able to offer its customers highly competitive rates not only in CDs, but in an online savings account.

Currently, PurePoint Financial is offering an extremely competitive rate of 2.00% on its 13-month no-penalty CD. It also offers an 11-month and a 14-month no-penalty CD, but those two accounts have lower rates than its 13-month no-penalty CD. Keep in mind that you’ll need at least $10,000 to deposit into any of these CDs. If you do choose to withdraw money from this CD before the term is up, you’ll need to withdraw the full amount. You’ll also have to wait seven days after you fund the account to withdraw any of the money. Here’s a full list of PurePoint Financial’s no-penalty CDs.

TermAPYMinimum balance to earn the APY
11-month1.65%$10,000
13-month2.00%$10,000
14-month1.75%$10,000

The highest CD rates from banks and credit unions by term

The following banks and credit unions are currently offering the highest CD rates for each term.

Best 1-year CD rates

Best 1-year CD rate from a Credit Union: State Department Federal Credit Union – 2.52% APY, $500 minimum deposit
24 Month Certificate from State Department Federal Credit Union

State Department Federal Credit Union was established in 1935 by a group of the United State Department of State employees. While it was originally intended to help those employees, membership has expanded to include a lot more people. You can become a member of this credit union if you’re a U.S. Department of State employee, are a part of one of the credit union’s organization affiliates, through group membership, or an immediate family member of an existing member of the credit union. If you don’t qualify through any of those ways, you can choose to become a member of the American Consumer Council (ACC) when you apply for membership to this credit union. Once you become a member of this credit union, you’ll be able to open the 12 Month Certificate with a minimum of $500 and start earning 2.52% APY. If you need to withdraw money from this CD early, you may be charged a penalty that is worth 180 days of interest.


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Best 1-year CD rate from a National Bank: ableBanking – 2.30% APY, $1,000 minimum deposit
1 Year CD from ableBanking

ableBanking is an online bank with competitive rates. It is a division of Northeast Bank, which is based in Maine. Together, the banks have acquired over $1 billion in assets. If you have at least $1,000, you can open ableBanking’s 1-year CD that currently has an APY of 2.30%. If you need to withdraw your money before the CD’s maturity date, you’ll incur an early withdrawal penalty of 90 days’ worth of interest.


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Best 2-year CD rates

Best 2-year CD rate from a National Bank: Georgia Banking Company – 2.60% APY, $500 minimum deposit
2 Year Certificate from Georgia Banking Company

Georgia Banking Company is a community bank with over $421 million in assets. While it opened its doors in 2001 to the Atlanta, GA community, it recently started offering its deposit products nationwide. This means that U.S. residents can open Georgia Banking Company’s 2-year Certificate and start earning 2.60% APY with at least $500. This term has an early withdrawal penalty that is worth 180 days of interest.


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Best 2-year CD rate from a Credit Union: MAC Federal Credit Union – 2.80% APY, $1,000 minimum deposit
24 Month CD from MAC Federal Credit Union

MAC Federal Credit Union was established in 1952 to serve active duty personnel and civil service members associated with Fort Wainwright. In 2001, the credit union expanded to serve the Fairbanks community. Now, they serve customers nationwide through online and mobile banking. You can become a member a number of ways including residence, employment, and relation to an existing member. You can also become a member if you are part of, or choose to be part of, the Polar Bear Chapter of the Association of the United States Army. Once you’re a member, you can open the 24 Month CD with a minimum deposit of $1,000 and start earning the 2.80% APY. This CD has an early withdrawal penalty that is equal to 90 days of interest.


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Best 3-year CD rates

Best 3-year CD rate from a Credit Union: Mac Federal Credit Union – 3.00% APY, $1,000 minimum deposit
36 Month CD from MAC Federal Credit Union

MAC Federal Credit Union is also offering a competitive rate on its 36-month CD. With a minimum deposit of $1,000 and begin earning 3.00% APY. This credit union does not disclose its early withdrawal penalty. While this credit union currently has the best 3-year CD rate, becoming a member and opening an account doesn’t seem to be as simple as it is at other institutions. You’ll need to fill out a contact form and wait for someone from the credit union to reach out to you. If depositing your money into a 3-year CD with the highest rate is all you care about, then it may be worth going through this credit union’s process. If ease of access is more important to you, then you may want to consider another option for a 3-year CD.


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Best 3-year CD rate from a National Bank: Georgia Banking Company – 2.65% APY, $500 minimum deposit
3 Year Certificate from Georgia Banking Company

Georgia Banking Company makes our list of best CD rates again with its 3-year Certificate. With a minimum deposit of $500, you’ll be able to open this CD and start earning the 2.65% APY. The early withdrawal penalty on this term is worth 180 days of interest.


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Best 4-year CD rates

Best 4-year CD rate from a Credit Union: Hanscom Credit Union – 2.85% APY, $1,000 minimum deposit
48 Month CD from Hanscom Federal Credit Union

Hanscom Federal Credit Union was established in 1953 and has acquired over $1 billion. To become a member of this credit union, you can qualify through employment, military status, family relations, or by being a member or becoming a member of one of the credit union’s sponsoring member organizations. Once you become a member of Hanscom Federal Credit Union, you’ll be able to open its 48-month CD. You’ll need to deposit a minimum of $1,000 to earn the 3.10% APY. The early withdrawal penalty for this term is equal to 180 days dividends on the withdrawn amount.


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Best 4-year CD rate from a National Bank: Georgia Banking Company – 2.70% APY, $500 minimum deposit
4 Year Certificate from Georgia Banking Company

Georgia Banking Company is also offering the best CD rate on a 4-year CD. With a minimum deposit of $500, you can earn 2.70% APY. This is definitely worth it if you’re okay with locking your money away for four years and don’t want to deal with the field of membership required by credit unions. This CD does have an early withdrawal penalty that is equal to 180 days of interest.


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Best 5-year CD rates

Best 5-year CD rate from a Credit Union: State Department Federal Credit Union – 2.98% APY, $500 minimum deposit
60 Month Certificate from State Department Federal Credit Union

In addition to offering a high rate on a 1-year CD, State Department Federal Credit Union is also offering one of the best rates on a 5-year CD. You’ll need a minimum of $500 to open the account once you become a member and start earning the 2.98% APY. The early withdrawal penalty on this term is worth 360 days of interest.


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on State Department Federal Credit Union’s secure website

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Best 5-year CD rate from a National Bank: Home Loan Investment Bank, F.S.B. – 2.60% APY, $2,500 minimum deposit
5 Year e-CD from Home Loan Investment Bank, F.S.B.

Home Loan Investment Bank, F.S.B. was built with the intention of offering home loans to residents of Rhode Island. However, it has grown to offer much more than home loans. The bank currently has over $301 million in assets and continues to innovate by offering new accounts like e-CDs. Home Loan Investment Bank, F.S.B. is offering a high APY of 2.60% on a 5-year e-CD. You’ll need $2,500 to open the account. The early withdrawal penalty is six months’ interest on the amount withdrawn. This penalty applies to all CD terms from this bank.


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on Home Loan Investment Bank, F.S.B.’s secure website

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Questions to ask before you open a CD

1. How are CDs different from savings accounts?

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 rate – and the higher the penalty for closing the CD early. With a savings account, you’re limited to six withdrawals or transfers per month. Otherwise, you can empty the account at any time without paying a penalty. You can’t lock in the interest rate on a savings account, though, since the bank can change the interest rate at any time.

2. Am I better off keeping my cash in savings?

CDs work best if you’re confident you won’t need to access a certain amount of money for a specified period of time. Let’s say you have $10,000 laying around that you can safely say you won’t need to use for two years. In a high-yield savings account earning 2.45%, you would earn $496.00 over two years with annual interest compounding — and potentially even more, if your bank compounds interest more frequently. If you put that money into a 2.90% 2-year CD, you would earn $588.41 (compounding yearly) once the account matures. The extra interest income is easy money, considering the ease of opening an account online. However, if you think you might need to use the money in the next couple of months, especially if your finances are already a little rocky, a savings account is a much better idea for its better flexibility.

It’s important to note that deposit rates are a bit in flux right now, due to the uncertainty surrounding the federal funds rate (more on that below). But we’re currently seeing some high, favorable interest rates on 1-year CDs, rates that outstrip savings account rates.

If you can afford to part with the funds, “choosing a 1-year CD now does make sense rather than keeping the money in a savings account,” says Ken Tumin, founder of LendingTree-owned DepositAccounts.com. “However, it is possible that 1-year rates could go below some savings account rates.”

That’s why it’s important to compare rates before you sign up for a certain account.

Tumin also notes that there is an added tax benefit to opening a 1-year CD now over a savings account. With a 1-year CD, you can choose to have interest paid at maturity, or in 2020 on accounts opened now. Taxes would be owed on that interest for 2020, but not paid until 2021. Savings accounts, on the other hand, pay out interest each month. So a savings account opened today will generate interest income for the 2019 tax year.

3. What CD term length should I select?

The early withdrawal penalties on CDs can be significant. On a 1-year CD, 90 days’ worth of interest is a typical penalty, although it can reach as high as 180 days. On 2- and 3-year CDs, a 6-month penalty is about average. The impact of the penalty on your return can be significant: if you opened a one-year CD with a 2.65% APY and closed it after six months, you would forfeit half of the interest and earn only 1.32%. You would have been better off with a savings account paying 2.25%.

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 risk of early withdrawal penalties, it’s important that you’re completely confident that you will not need to withdraw the money early. Check that you already have enough savings in a flexible emergency fund to cover you for the next few years in the event of an accident or surprise trip to urgent care. Ask yourself whether your deposit would be put to better use paying off any debts. If you’re not completely convinced you can sock away that much money for such a commitment, go for a shorter CD term or a savings account.

As of right now, if you’re trying to jump on the best rates and have cash to stash away for years, your best bet is to lock in a 5-year CD to get the best rates possible.

“It doesn’t look like we’ll see another Fed rate hike in the first half of the year,” says Ken Tumin. “In the last month or two, we’re seeing some drops in CD rates.”

However, this downward movement looks like more of a correction being made by banks who may have boosted their CD rates too far too fast, instead of signaling the start of an industry-wide drop in rates.

“We won’t see a big drop until we see signs that the Fed will start cutting rates,” Tumin notes.

Tumin suggests finding long-term CDs with small or mild withdrawal penalties, like Ally. That way, in the event you do need to break into your funds (whether for an emergency or to move to a new, higher rate), you won’t lose the majority of your savings. So while there are still 5-year CDs out there with 3% APY and higher, you’re going to want to lock those in for the long term.

4. Should I consider my local bank or credit union?

The interest rates shown in this article are all from credit unions and online banks that offer products nationally. However, 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. 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 and lower fees.

If you’re worried about early withdrawal penalties, credit union CDs might be your best bet; on average, they tend to have lower penalties than banks. Pair that with high credit union CD rates, and you’ve got a winning savings combo. (Interestingly, while internet banks tend to offer the best CD rates, they also tend to assess bigger early withdrawal penalties than brick-and-mortar banks.)

How to find the best CD for you

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.

Even though CDs are traditionally pretty structured, you still have hundreds of options available to you. If your savings goal is years in the future, look closer at longer terms like 5- and even 10-year accounts. If you don’t quite have thousands of dollars to stash away, you can find a bank that requires a lower minimum deposit, if at all. You can also find select no-penalty CDs, which tend to be around one year long or less.

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Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at [email protected]

Lauren Perez
Lauren Perez |

Lauren Perez is a writer at MagnifyMoney. You can email Lauren here