October 24, 2024 – Forbes Advisor – Technologist

As of today, the best interest rates on CDs—certificates of deposit—pay up to 5.37%, based on certificate term lengths. Here’s an overview of how CD rates are changing, followed by a guide to the current top CD rates across different terms.

Related: Compare the Best CD Rates

Highest CD Rates Today

A CD is similar to a savings account, but the interest rate is fixed—not variable. The other major difference is that you’ll typically only earn interest on a CD account if you refrain from withdrawing funds during the term. That term could range from a few weeks to several years, depending on the CD you choose.

If you withdraw money from your CD before it “matures” (reaches the end of its term), you’ll likely get hit with steep penalties in the form of reduced interest. For instance, you may forfeit six months’ worth of interest if you withdraw money from a one-year CD before 12 months are up.

If you’re interested in accruing the maximum amount of interest possible, consider long-term CDs, which historically have the highest APYs. But again, long-term CDs are only an option if you’re willing to stash away some cash you won’t be able to touch for years.

Generally, CDs with longer terms carry more severe withdrawal penalties than short-term CDs. For instance, it’s not uncommon to lose a full year’s worth of interest if you transfer funds out of a five-year CD account before the term is over. Therefore, it’s crucial to familiarize yourself with the CD issuer’s penalties before you open your account.

Today’s 3-Month CD Rates

For short-term savings goals, three-month CDs might make sense. The current average rate on a three-month CD sits at 1.32%, but the highest rate is 5.30%. Last week, three-month CDs were earning 1.32% on average.

Today’s 6-Month CD Rates

If you’re interested in a shorter-term CD, today’s best six-month CD rate is 5.25%. That compares with 5.25% a week ago. The current average APY for a six-month CD is 1.86%, the same as last week at this time.

APY provides a more accurate depiction of the yearly interest you’ll earn with a CD because it takes into account compound interest. That’s the interest you earn not only on your deposit (or principal) but also on the interest itself.

Today’s 1-Year CD Rates

The highest interest rate currently being offered on a one-year CD—one of the most popular CD terms—is 5.37%. If you land a one-year CD with a rate in that neighborhood, you’ve found a good deal. One week ago, the best rate was the same.

The average APY, or annual percentage yield, on a one-year CD is now 1.87%, the same as a week ago.

Today’s 2-Year CD Rates

If you can hold out for two years, 24-month CDs today are being offered at interest rates as high as 4.76%. The top rate last week at this time was a similar 4.76%. Two-year CDs now have an average APY of 1.64%. That’s the same as last week at this time.

Today’s 3-Year CD Rates

CDs with longer terms tend to have some of the most attractive interest rates and APYs—if you’re willing to keep your money locked up for years.

Today’s highest rate on a three-year CD is 4.65%, so you’ll want to shop around for that rate or something near it. Last week at this time, the best rate on a three-year CD was also 4.65%.

Today’s 5-Year CD Rates

On a five-year CD, the highest rate today is 4.46%. APYs are averaging 1.57%, the same as this time last week.

The longer the term, the harsher the early withdrawal penalty. It’s not unusual to lose one full year’s worth of interest or more if you break open a five-year CD too soon. Be absolutely certain you understand the penalty before you make your investment.

Today’s Jumbo CD Rates

The best rate on today’s jumbo CDs is 5.25% for a 6-month term. The average APY for this category of CD is currently 1.90%, compared to 1.80% last week.

Most jumbo CDs require a minimum deposit of $100,000—and some even require $250,000. However, there’s no universally agreed-upon definition regarding what qualifies as a “jumbo” CD. Some banks and credit unions slap the label “jumbo” on CDs you can open with $50,000, $25,000 or even less.

Other Top CD Rates by Term

Related: CD Interest Rates Forecast: How Good Will They Get?

How CDs Work

CDs may seem a little exotic as bank accounts go, but how they work is actually pretty simple. You open the account with an amount of money, leave your deposit alone for a period of months or years, and let the compound interest work its magic.

Many CDs and their cousins, the share certificates offered by credit unions, require you to deposit hundreds, thousands or even tens of thousands of dollars to open your account. Other financial institutions have no minimum deposit requirement, meaning you could open the account with as little as a penny.

But banks and credit unions typically won’t allow you to add to your deposit once the term begins and the clock starts ticking. And they’re serious about not letting you crack open your CD or share certificate too soon. The early withdrawal penalties can be so tough they’ll eat into your principal, not just take back some of your interest.

The Beauty of a CD Ladder

Want to earn higher yield, but wary of keeping your money chained up for years? A CD ladder can help you earn good returns and make your investment feel more liquid.

You build a ladder by investing your money in multiple CDs with terms of different lengths. You might buy a one-year CD, a two-year CD, a three-year CD, a four-year CD and a five-year CD. As each of the shorter-term CDs matures, you replace it with a new five-year CD.

Follow this plan, and in a few years you’ll have one better-yielding five-year CD maturing each year. If you’re ever having a bad year, you could take some of the cash from the expiring CD and use it to pay bills instead of pouring it all into a fresh CD.

You must comparison shop to track down the best CD rates. Banks and credit unions compete by offering alluring yields to land your business, so shopping around is a must before you purchase any bank CD or credit union share certificate.

Methodology

Curinos determines the average rates for certificates of deposit (CDs) by focusing on specific CDs and excluding others. Certain types, such as promotional offers, relationship-based rates, private, youth, senior, student/minor, affinity, bump-up, no-penalty, callable, variable, step-up, auto transfer, club, gifts, grandfathered, internet-only and IRA CDs are not considered in the calculation.