The Best CD Rates — May 2021

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

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on Ally Bank’s secure website

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:

Ally Bank’s no-penalty CD rates

Term	APY	Minimum balance to earn the APY
11 months	0.50%	None

7 months – 13 months: Marcus by Goldman Sachs – 0.45% APY – 0.25% APY; $500 minimum deposit to open

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on Marcus By Goldman Sachs’s secure website

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:

Marcus by Goldman Sachs’ no-penalty CD rates

Term	APY	Minimum balance to earn the APY
7-month	0.45%	$500
11-month	0.35%	$500
13-month	0.25%	$500

6 months: Investors eAccess – 0.15% APY; $500 minimum deposit to open

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on Investors EAccess’s secure website

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.

Investors eAccess’s no-penalty CD rates

Term	APY	Minimum balance to earn the APY
6-month	0.15%	$500

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

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on PurePoint Financial’s secure website

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.

PurePoint Financial’s no-penalty CD rates

Term	APY	Minimum balance to earn the APY
11-month	0.15%	$10,000
13-month	0.10%	$10,000
14-month	0.10%	$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 2-year CD rates

Best 3-year CD rates

Best 4-year CD rates

Best 5-year CD rates

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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