Since March 2022, the Federal Reserve has raised the federal funds rate 11 times in an attempt to ease inflation. These interest rate hikes caused mortgage rates, credit card APRs and interest rates on other types of loans to go up, putting a strain on borrowers' budgets. But as interest rates rose, so did savings rates. Rates for CDs went up with the Fed hikes, and some of the highest-earning 1-year CD accounts offer APYs of over 5%, while some of the best 5-year CD rates are above 4%.
However, as the Fed ends its rate hiking campaign, the growth of CD and high yield savings accounts rates has also come to end. Rates have been dropping ever since the Federal Reserve began holding interest rates steady. And at its March meeting, the Federal Reserve decided to hold the federal funds rate steady for the fifth consecutive time. This means that the federal funds rate, a key bank lending rate, will remain at a target range of 5.25% to 5.5%, the highest it’s been in 23 years.
And savings rates are expected to decrease even further when the Fed begins cutting interest rates later this year. The Federal Reserve still maintains its projection that there will be three interest rate cuts in 2024, reducing the federal funds rate to a range of 4.5% to 4.75%. Because of this, now is a good time to lock in rates while they remain high.
You can use our tool — powered by Bankrate — to compare CD rates below.
Short-term vs. long-term CDs
It can be easy to choose between a 1-year and a 5-year CD if your money is going toward a particular savings goal. For example, you may be getting married in one year, so it would make sense to open a CD with a similar term. On the other hand, if you’re looking to open a CD with no particular savings goal in mind, you’ll need to consider not only when you’ll need access to your cash, but also what interest rates look like. Typically, long-term CDs offer higher rates than short-term CDs, and since rates on CDs are fixed, you can take advantage of high rates for a longer term. Just make sure you won’t need access to your money before the term is up.
Why open a CD?
A CD, or certificate of deposit, is a type of investment account that holds a fixed amount of money for a fixed term. The APY associated with a CD account is usually higher than that of a traditional savings account, so you’ll be able to earn more thanks to compound interest. Our savings calculator can help you determine just how much you’ll earn in interest once your CD term ends.
Unlike savings accounts, though, you won’t be able to access the cash in your CD before the end of the term, or you’ll be met with a fee. Therefore, it’s a good place to put aside cash you don’t intend on using until a future date – maybe you don’t plan on purchasing a new vehicle for another two years and want to accrue as much savings from interest as possible until then.
CDs are also good options for anyone looking for a fixed, predictable and safe return on their savings. This is because most CD accounts are FDIC or NCUA insured, meaning up to $250,000 per account safe is safe if the bank goes under. The difference depends on whether you open an account with a bank (overseen by the FDIC) or a credit union (regulated by NCUA).
Top 5-Year CD Accounts
First Internet Bank
APY: 4.55%
Minimum Balance: $1,000
First National Bank of America
APY: 4.55%
Minimum Balance: $1,000
BMO Alto
APY: 4.50%
Minimum Balance: $0
Pima Federal Credit Union
APY: 4.50%
Minimum Balance: $250
Dow Credit Union
APY: 4.50%
Minimum Balance: $500
Seattle Bank
APY: 4.50%
Minimum Balance: $1,000
CoVantage Credit Union
APY: 4.35%
Minimum Balance: $1,000
Colorado Federal Savings Bank
APY: 4.35%
Minimum Balance: $5,000
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