If you want to move some of your money from regular savings into a CD, but you just don’t feel comfortable with the year-long commitment, 3-month and 6-month terms are available from most banks and credit unions that sell CDs. Or you may want to opt for a rate that’s not quite as high, but that will last further into the future. You may be able to score a higher rate on one of those. If you can leave your funds untouched for longer than a year, it’s worth shopping the longer terms, such as 18-month, 2-year, or 3-year. Fortunately, there is no shortage of alternatives, depending on your situation: If rates drop, you may wish you’d chosen a longer CD: Alternatively, if rates begin declining, you may regret not locking in your great rate for a much longer duration.Ī 1-year CD won’t be the best savings option in all cases, of course.If rates rise, you may miss out on a higher rate: If rates go up while you own your CD, it means you may have been able to score a higher rate if you had locked in later.You cannot make additional deposits or add money. You can’t add to your deposit: Once you decide on your initial deposit amount for a CD, that’s a final decision.Early withdrawal of the funds will incur a penalty: If you find you need the funds in your CD sooner than the maturity date, you’ll be hit with an early withdrawal penalty that will reduce your earnings.Potential deterrent to spending temptations: If you find it hard not to dip into your savings, the early withdrawal penalty on CDs can serve as a useful roadblock to unwanted spending.Extremely safe, with almost no risk: When you open a CD at an FDIC-insured bank or NCUA-insured credit union, you are federally protected on up to $250,000 in deposits, even if the institution fails.Fully predictable earnings and date of withdrawal: Since a CD’s rate and term are fixed, you know exactly when you’ll be able to withdraw the funds and exactly how much interest you’ll have earned by that date.Higher APY than liquid accounts: Banks and credit unions are willing to pay higher rates on CDs, where they know the money will stay put, than on savings, money market, and checking accounts, where you can withdraw funds more often.This is a big advantage if rates are predicted to fall.
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Fixed interest rate for a full year: Once you open a CD, you lock in the rate you’ll receive for the full term, no matter what the Federal Reserve does or how other interest rates move.If rates drop, you may wish you’d chosen a longer CD If rates rise, you may miss out on a higher rate Pen Air Federal Credit Union – 5.36% APYĮarly withdrawal of the funds will incur a penalty.Colorado Federal Savings Bank – 5.40% APY.Garden Savings Federal Credit Union – 5.50% APY.In cases where more than one institution pays the same rate, we've prioritized CDs by the shortest term, then the CD requiring a smaller minimum deposit, and if still a tie, alphabetically by institution name. You can find our ranking of the top-paying CDs with terms of 10-14 months below. But as soon as the Fed appears ready to end its rate-hike campaign, it will mean CD rates have reached their peak. If the Fed does opt to raise rates further, CD yields would most likely rise, too. So far the Fed has increased the federal funds rate 10 times, and though it held rates steady at its June 13-14 meeting, the majority of Federal Open Market Committee participants suggested more hikes are likely in 2023, as inflation is still stubbornly sitting above the Fed’s target level. Today’s CD rates are higher than we’ve seen in more than 15 years, pushed to record levels by the Federal Reserve’s aggressive rate-hike campaign that began in March 2022 to tame decades-high inflation.
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