The Best CD Rates — May 2021

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Updated on Saturday, May 1, 2021

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).
Check out MagnifyMoney’s top picks for the best CD rates below.

Do you have a savings goal in mind? Tell us about it!

The best CD rates for May 2021

To find the best CD rates, we look for the banks that consistently offer competitive CD rates month over month. This list is updated weekly and the rates are organized by 1-year rates from highest to lowest. Here are the accounts from top banks with consistently competitive CD rates:

3 months – 5 years: Ally Bank – 0.20% APY – 0.80% APY; $0 minimum deposit to open (higher APY with higher deposit)

12 Month High Yield CD from Ally Bank

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on Ally Bank’s secure website

Member FDIC

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’ll earn more in interest and in some cases, earn a higher 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. All deposits at Ally are FDIC insured up to the legal limit.

3-months:
  • 0.20% APY (less than $5k)
  • 0.20% APY ($5k minimum deposit)
  • 0.20% APY ($25k minimum deposit)
18-months:
  • 0.60% APY (less than $5k)
  • 0.60% APY ($5k minimum deposit)
  • 0.60% APY ($25k minimum deposit)
6-months:
  • 0.25% APY (less than $5k)
  • 0.25% APY ($5k minimum deposit)
  • 0.25% APY ($25k minimum deposit)
3-year:
  • 0.65% APY (less than $5k)
  • 0.65% APY ($5k minimum deposit)
  • 0.65% APY ($25k minimum deposit)
9-months:
  • 0.30% APY (less than $5k)
  • 0.30% APY ($5k minimum deposit)
  • 0.30% APY ($25k minimum deposit)
5-year:
  • 0.80% APY (less than $5k)
  • 0.80% APY ($5k minimum deposit)
  • 0.80% APY ($25k minimum deposit)
12-months:
  • 0.55% APY (less than $5k)
  • 0.55% APY ($5k minimum deposit)
  • 0.55% APY ($25k minimum deposit)
6 months – 6 years: Marcus by Goldman Sachs – 0.15% APY – 0.60% APY; $500 minimum deposit to open

High-yield 12 Month CD from Marcus by Goldman Sachs

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Member FDIC

Our advertiser Marcus by Goldman Sachs is the online consumer bank of Goldman Sachs (the large investment bank). Your funds are FDIC insured, and Goldman offers very competitive annual percentage yields (accurate as of 7/9/20). 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:

Term

APY

Minimum Deposit Amount

6 months

0.15%

$500

9 months

0.65%

$500

12 months

0.55%

$500

18 months

0.55%

$500

24 months

0.55%

$500

3 years

0.55%

$500

4 years

0.55%

$500

5 years

0.60%

$500

6 years

0.60%

$500

3 months – 10 years: Discover Bank – 0.20% APY – 0.60% APY, $2,500 minimum deposit to open
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-months0.20%
6-months0.25%
9-months0.30%
12-months0.50%
18-months0.50%
2-year0.50%
30-months0.55%
3-year0.55%
4-year0.55%
5-year0.60%
7-year0.60%
10-year0.60%
1 year – 5 years: Barclays Bank – 0.25%0.25% APY, no minimum deposit to open
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-year0.25%
2-year0.25%
3-year0.25%
4-year0.25%
5-year0.25%
1 year – 5 years: Citizens Access – 0.10% APY – 0.25% APY; $5,000 minimum deposit to open

Online 1 Year CD from Citizens Access

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on Citizens Access’s secure website

Member FDIC

Citizens Access is the online division of Citizens Bank, N.A., aimed at providing more convenient access to better banking products. Both divisions are headquartered in Providence, R.I. Citizens Bank was founded in 1828 and as of September 2019, had $150 billion in assets.Citizens Access’ online CD accounts require a pretty high opening deposit of $5,000. However, all its terms earn at premium rates, making your savings more worthwhile. Citizens Access also offers an easy opening process to build a CD ladder with them. You’ll need to deposit at least $5,000 in each new CD, though.

When you fund any new Citizens Access CD within 10 days after opening, the bank’s CD Rate Pledge will apply, snagging you the highest interest rate offered by the bank for that CD term within those 10 days. Here are their rates:

CD TermAPY
12 months0.10%
2 years0.10%
3 years0.15%
4 years0.20%
5 years0.25%
7 months – 5 years: Lafayette Federal Credit Union – 0.70%1.26% APY, $500 minimum deposit

1 Year Fixed CD from Lafayette Federal Credit Union

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NCUA Insured

Lafayette Federal Credit Union offers both variable rate and fixed rate certificates of deposit, but its crown jewel is certainly its 1-year fixed rate CD, with an APY of 0.80%. For this product, a $500 minimum deposit is required to open an account and to earn the high APY. Lafayette’s CDs will automatically renew upon maturity, unless otherwise requested by the customer.

Lafayette Federal Credit Union opens its arms to anyone who also joins the American Consumer Council or the Home Ownership Literacy Council. It offers its products online, nationwide.

CD TermAPY
1-year0.80%
2-year0.90%
3-year1.01%
4-year1.16%
5-year1.26%
3 months – 6 years: Evansville Teachers Federal Credit Union –0.35%1.15% APY, $1,000 minimum deposit

Evansville Teachers Federal Credit Union offers a slew of certificates. Its 1-year certificate gives savers an opportunity to grow their money over a year at a solid rate, especially longer terms don’t fit their savings timeline. You’ll need at least $1,000 to open this account.

Despite its name, you don’t need to be a teacher to join Evansville Teachers FCU; you can just make a $5 donation to the Mater Dei Friends and Alumni Association. The credit union’s name comes from its founding in 1936 by a group of teachers from Evansville, Ind.

CD TermAPY
3 Month CD0.35%
6 Month CD0.55%
1 Year CD0.60%
18 Month CD0.75%
2 Year CD0.85%
3 Year CD0.95%
4 Year CD1.00%
5 Year CD1.05%
6 Year CD1.15%
3 months – 5 years: NexBank – 0.50%0.75% APY, $10,000 minimum deposit

12 Month CD from NexBank

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Member FDIC

NexBank offers a solid set of personal certificates of deposit., although with little rate variability currently. That makes its best deal its 12-month CD with its 0.75% APY. However, NexBank CDs require a pretty substantial minimum deposit of $10,000, which may make it out of reach for some savers. NexBank CDs rollover automatically.

Based in Texas, NexBank offers online personal banking services to individuals nationwide.

CD Term

APY

3 months

0.50%

6 months

0.50%

12 months

0.75%

18 months

0.75%

24 months

0.75%

36 months

0.75%

48 months

0.75%

60 months

0.75%

6 months – 5 years: Communitywide FCU – 0.65% APY – 0.95% APY; $1,000 minimum balance

12 Month Share Certificate from Communitywide Federal Credit Union

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NCUA Insured

In exchange for a $1,000 minimum deposit, CommunityWide’s 12-month share certificate earns a 0.70% APY. One great feature is flexibility regarding your dividends, which may be compounded in the certificate, deposited to another share certificate or transferred to another account. There is no automatic renewal of CommunityWide’s share certificates.

CommunityWide Federal Credit Union has directly served northern Indiana since 1967, and now offers an online and mobile portal to offer its products nationwide. Membership in CommunityWide FCU is open to members of the Michiana Goodwill Boosters, Marine Corps League of St. Joseph Valley or Habitat for Humanity Helpers, as well as employees, retirees and donors of over 40 companies in the central Midwest region. Spouses and family member of members may also join.

Term

APY

6 Months

0.65%

12 Months

0.70%

60 Months

0.95%

6 months – 5 years: Connexus Credit Union – 0.55% APY – 1.00% APY, $5,000 minimum deposit

12 Month Certificate from Connexus Credit Union

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NCUA Insured

This Wisconsin-based credit union cracks our ranking of the best CD rates for its 12 -month share certificate’s 0.55% APY. It requires a bit of a hefty minimum deposit of $5,000 to open an account, but its APY is fairly generous compared to its competitors. Anyone can join Connexus by joining the Connexus Association and making a $5 donation.

CD Term

APY

12 months

0.55%

24 months

0.65%

36 months

0.75%

42 months

3.20%

60 months

1.00%

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:

11 months: Ally Bank – 0.50% APY – 0.50% APY; $0 – $25,000 minimum deposit to earn APY

11 Month No Penalty CD from Ally Bank

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Member FDIC

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 (0.55% APY vs 0.50% 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 months0.50%None
7 months – 13 months: Marcus by Goldman Sachs – 0.45% APY – 0.25% APY; $500 minimum deposit to open

7 Month No-Penalty CD from Marcus by Goldman Sachs

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Member FDIC

Similar to its regular CDs, you only need a minimum of $500 to deposit into Marcus Goldman Sachs’ 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 (0.45% APY vs 0.15% 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-month0.45%
$500
11-month0.35%
$500
13-month0.25%
$500
6 months: Investors eAccess – 0.15% APY; $500 minimum deposit to open

6 Month No Penalty CD from Investors eAccess

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Member FDIC

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 0.15% 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-month0.15%$500
11 months – 14 months: PurePoint Financial – 0.15% APY – 0.10% APY; $10,000 minimum deposit to open

13 Month Online No-Penalty CD from PurePoint Financial

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Member FDIC

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 0.10% 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-month0.15%$10,000
13-month0.10%$10,000
14-month0.10%$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 – Affinity Plus Federal Credit Union, 0.55% APY, $500 minimum deposit

12 Month CD from Affinity Plus Federal Credit Union Affinity Plus Federal Credit Union offers an array of certificates with different term lengths, but its 12-month Basic Certificate stands out with a its 0.55% APY and a reasonable minimum deposit requirement of $500.

Members of various Minnesota communities are eligible to join Affinity Plus, but the credit union also opens its membership to anyone who makes a one-time dues payment of $10 to the Affinity Plus Foundation.


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on Affinity Plus Federal Credit Union’s secure website

NCUA Insured

Best 1-year CD from a National bank: Live Oak Bank — 1.60% APY, $2,500 minimum deposit required

18 Month CD from Live Oak Bank Live Oak Bank offers competitive CD rates across the board, starting with its high-yield 6-month CD. Its 1-year CD is among the most competitive as well, with its 1.60% APY. Live Oak Bank requires a minimum CD deposit of $2,500. You’ll lost 90 days of simple interest if you make an early withdrawal from a Live Oak CD less than 24 months and 180 days of simple interest on terms longer than that.

Live Oak Bank offers a variety of financial products including personal deposit accounts, business bank accounts and loans. It was established in 2008 and is headquartered in Wilmington, N.C.


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on Live Oak Bank’s secure website

Member FDIC

Best 2-year CD rates

Best 2-year CD rate from a Credit Union: USALLIANCE Financial– 0.60% APY, $500 minimum deposit

24 Month Certificate from USALLIANCE Financial USALLIANCE Financial constantly offers Certificate Specials for even better rates than it usually offers. Take advantage of its 24-month special for a top 0.60% APY, and just for $500.

USALLIANCE Financial opens up its membership to employees of various companies as well as community members in Connecticut, Massachusetts, New Jersey and New York.


Best 2-year CD from a National Bank: INSBANK Online – 0.70% APY, $2,500 minimum deposit

2 Year CD from INSBANK Online INSBANK Online offers a few CDs, which includes its 2-years term. You’ll need at least $2,500 to open the account. Interest is compounded annually.

INSBANK Online is a division of INSBANK. The bank prides itself on its customer service, providing customers with access to Private Client Advocates.


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on INSBANK Online’s secure website

Member FDIC

Best 3-year CD rates

Best 3-year CD from a Credit Union: American Heritage Federal Credit Union – 0.80% APY, $1,000 minimum deposit

36 Month Share Certificate from American Heritage Federal Credit Union American Heritage Federal Credit Union is currently featuring a standout rate of 0.80% on its 36-month CD offering, requiring a reasonable $1,000 minimum deposit. American Heritage FCU also offers Bump Up CD offerings, which allow you to increase your dividends one time during the term of your CD.

American Heritage Federal Credit Union opens its membership to anyone who also makes a donation to the Kids-N-Hope Foundation.


SEE DETAILS Secured

on American Heritage Federal Credit Union’s secure website

NCUA Insured

Best 3-year CD from a National Bank: Comenity Direct – 0.85% APY, $1,500 minimum deposit

3-Year CD from Comenity Direct Comenity Direct is the internet-only arm of Comenity Capital Bank, a Utah-based bank with roots dating back to 1986. Comenity Direct offers an array of certificates of deposit, with term lengths of 1 year, 2 years, 3 years, 4 years and 5 years, all featuring attractive APYs.

There is a $1,500 required minimum deposit for all CDs. Comenity Direct charges no monthly maintenance fees on its CDs, although there is a $25 fee per outgoing wire transfer, $15 fee per paper check request and a $5 fee per paper statement request. Like most CDs, there are fees associated with early withdrawal. Once your CD matures, you can choose to automatically renew it or cash out without penalty within a 10-day grace period.


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on Comenity Direct’s secure website

Member FDIC

Best 4-year CD rates

Best 4-year CD rate from a Credit Union: Hiway Federal Credit Union – 1.00% APY, $10,000 minimum deposit

48 – 59 Month CD from Hiway Credit Union You’ll need a $10,000 minimum deposit to snag this rate from Hiway Federal Credit Union. Smaller deposits as low as $500 will still earn interest, just at lower interest rates; on the other hand, a $25,000 or larger deposit will snag an even higher rate. The early withdrawal penalty for this range of CDs equals 365 days’ dividends.

Hiway Federal Credit Union was founded in 1931 to serve the financial needs of Minnesota Department of Transportation employees. Today, membership is extended to members of select communities, employees of select employer groups, relatives and roommates of eligible individuals and members of the Minnesota Recreation and Park Foundation or Association of the U.S. Army.


SEE DETAILS Secured

on Hiway Credit Union’s secure website

NCUA Insured

Best 4-year CD rate from a National Bank: Hyperion Bank – 0.90% APY, $500 minimum deposit

48 Month CD from Hyperion BankHyperion Bank offers a large selection of CDs, with terms ranging from 30 days up to 60 months. Currently, its 4-year CD stands out for its 0.90% APY and low minimum deposit of just $500, making it one of the most attractive 4-year CDs currently available.

Based in Philadelphia, Hyperion Bank offers its products and services to consumers online, nationwide.


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Member FDIC

Best 5-year CD rates

Best 5-year CD rate from a Credit Union: Wings Financial Credit Union – 1.01% APY, $10,000 minimum deposit

5 Year Dividend Paid Quarterly Certificate from Wings Financial Credit Union Wings Financial Credit Union offers an array of CDs, with its crown jewel being its 5-year CD. With this CD, bigger deposits will earn you a higher APY, with a minimum deposit of $10,000 doling out a 1.01% APY.

Wings Financial Credit Union is open to anyone who also joins the Wings Financial Foundation.


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on Wings Financial Credit Union’s secure website

NCUA Insured

Best 5-year CD rate from a National Bank: First Internet Bank – 0.96% APY, $1,000 minimum deposit to open

60 Month CD from First Internet Bank First Internet Bank of America boasts a robust rate of 0.96% APY on its 60-month CD, making it one of the best 5-year CDs currently offered. There is a minimum deposit of $1,000 required for this account, and there is no monthly maintenance fee.

First Internet Bank has roots dating back to 1999, and it claims to be the first FDIC-insured institution to operate entirely online.


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on First Internet Bank’s secure website

Member FDIC

The cities that are most likely to use CDs for their savings

We recently looked at the 100 largest U.S. metros to find the cities with the highest percentage of households that own certificates of deposit.

Among the 100 largest U.S. metros, San Francisco came out on top, with 25.4% of households owning certificates of deposit. That’s more a little more than twice as many households, on a percentage basis, than Greensboro, N.C., our bottom-ranked city, where only 12.5% of households own CDs.

Typically, households in large cities are more likely to sock money away in CDs. Chicago, Los Angeles, New York and Washington, D.C. — among the 10 largest metros in the U.S. — all make our list of top 10 cities where people own CDs. There are some exceptions: Odgen, Utah ranks No. 4 in the nation for CD saving: 21.9% of Ogden households have CDs.

Variability in local CD rates may explain some of the differences, as the highest rates available by state can vary by as much as one percentage point. In fact, in Jan. 2019, Utah had the highest average local 1-year CD yield in the country.

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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