One of the fastest ways to grow your money is to make sure it is doing the earning for you, and not the other way around. If you don’t want to take higher risks with your investments, such as with stocks or bonds, a high-yield savings product is your next best bet. Certificates of deposit are a great way to invest your funds and know exactly how much you’ll have at the end of its term length.
GOBankingRates Quick Pick
Today’s featured pick is the 3-month CD account offered by Shoreham Bank. This account has an APY of 5.50%. With a required minimum opening deposit of $1,000, this CD is an excellent choice for those looking to grow their money securely. Read on to learn more about the top CD rates available today.
Top CD Rates Today
Here’s a look at the top CD rates for today:
| CD Term | National Average APY | Highest APY | Where To Invest |
|---|---|---|---|
| 3-month | 1.32% | 5.50% | Shoreham Bank |
| 6-month | 1.88% | 5.34% | Climate First Bank |
| 1-year | 1.98% | 5.72% | Elements Financial |
| 18-month | 1.87% | 5.05% | The Federal Savings Bank |
| 2-year | 1.70% | 5.72% | Elements Financial |
| 3-year | 1.62% | 5.75% | Farmers Insurance Federal Credit Union |
| 4-year | 1.48% | 4.55% | The Federal Savings Bank |
| 5-year | 1.62% | 4.50% | Pima Federal Credit Union |
A History of Top CD Rates: 2010 to 2024
At this point, the economy being a rollercoaster is not news, so it’s not a shock that the landscape of CD rates has evolved significantly over the past decade. Sometimes in order to understand where CD rates are going, it is good to know where they’ve been. Here are some key takeaways from the CD rate timeline:
- In the early 2010s, rates were relatively low, reflecting the aftermath of the 2008 financial crisis. Banks offered CD rates below 0.42%, a trend that persisted for several years as the economy recovered.
- Fast forward to the mid-2010s, and while rates began to inch up, they remained modest, barely crossing 0.60% for longer-term CDs by the end of 2019.
- From 2022 onwards, rates have surged, with the best CD rates now exceeding 5.00%. This shift is largely because of the Federal Reserve’s response to inflation and economic conditions, pushing interest rates higher to stabilize the economy.
- By December 2023, some banks were offering rates of 5.30% or more on 12-month CDs.
- Today, investors have the opportunity to secure much higher returns on CDs than they could have just a few years ago.
- Some of the best CD rates today include, but are not limited to, the 3-month CD from Shoreham Bank which offers the top rate of 5.50% APY and Elements Financial which offers the highest one-year CD rate at 5.72% APY.
How CDs Work
CDs are a type of savings account with a fixed interest rate and a set maturity date. When you open a CD, you agree not to withdraw your money until the term ends, which can range from a few months to several years. If you do decide to take your money out early, you’ll likely have to pay an early withdrawal penalty. Here are some other key points to know:
- CDs offer fixed interest rates for the duration of their term, making them a predictable investment.
- Common CD terms include 3, 6, 12 and 18 months.
- When you open a CD at a bank or credit union, it’s covered by federal insurance — FDIC for banks, NCUA for credit unions — protecting your money up to $250,000 per depositor.
Types of CDs
There are various types of CDs available to savers. Here’s a look at a few:
- No-penalty CD: These CDs allow you to access your funds before maturity without a penalty or fee. This is a flexible option for savers who might need to withdraw funds unexpectedly.
- Fixed-rate CD: This type of CD account offers a set interest rate for the duration of the investment.
- Brokered CD: With this CD, an investor will purchase it for you through a brokerage firm rather than a bank or credit union.
- Promotional CD: Often referred to as a bonus or special-rate CD, it generally comes with a higher-than-normal APY for a limited time or atypical term length. Banks and credit unions offer promotional CDs to attract new customers and deposits, which is good to know if you are looking to start a new account.
Pros To Opening a CD
- Your earnings on a CD are guaranteed, so you know exactly what you’re getting.
- With a CD, it’s harder to dip into your savings on a whim, helping you save more effectively.
- Your CD investment at an insured bank or credit union is protected up to $250,000, offering you a sense of security.
- CDs generally come without monthly maintenance fees, unlike some bank accounts or checking accounts.
Cons To Opening a CD
- Withdrawing your money before the term ends means facing penalties.
- The return on a CD might be lower than what you could earn through other investments like stocks or real estate.
- Automatic renewal features may lock you into a new CD term if you’re not attentive at the end of your current term.
- Opening a CD at a bank may require a minimum deposit, posing a challenge for individuals with modest sums.
Final Take To GO: Are CD Accounts Worth It?
If you are looking to tuck away a lump sum of money for a large purchase or future investment, a CD is a low-risk way to do just that. However, if you are looking to make more money faster, a CD may not be the right fit for you. If you’re not sure which money move to make next, you should assess your risk tolerance and consult with a financial advisor to make the most informed decision.
FAQ
Here are the answers to some of the most frequently asked questions regarding CD accounts and the top CD rates today.- What is the highest paying CD rate right now?
- As of Aug. 27, 2024, the highest paying CD rate is offered by Farmers Insurance Federal Credit Union at an APY of 5.75% for their 3-year Variable Rate Certificate.
- What should you consider when choosing a CD?
- When selecting a CD, consider factors like the term length, interest rate, minimum deposit requirements and the penalty for early withdrawal. CDs are a safer investment, but be aware that you can't access your funds until the CD has reached maturity otherwise you could incur early withdrawal penalties.
- Can you lose money on a CD?
- Generally, CDs are considered a low-risk investment, and it's unlikely you'll lose your principal as long as you choose CDs from FDIC-insured banks or NCUA-insured credit unions. However, withdrawing funds before the maturity date can result in penalties that might reduce your earnings.
Compare CD Rates
- Best 3-Month CD Rates
- Best 6-Month CD Rates
- Best 1-Year CD Rates
- Best 5-Year CD Rates
- Best No-Penalty CD Rates
- Best Jumbo CD Rates
- Best No-Penalty CD Rates
- Best CDs With No Minimum Deposit Requirement
- Best CD Accounts
Elizabeth Constantineau contributed to the reporting for this article.
Methodology: GOBankingRates analyzes deposit rates from banks and credit unions with nationwide availability. The best rates are identified from this group by focusing on annual percentage yield. Institutions listed in the daily chart are insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund.
Rates are subject to change; unless otherwise noted, rates are updated periodically. All other information on accounts is accurate as of Aug. 27, 2024.