Today certificate of deposit (CD) interest rates are among the highest we've seen in more than a decade thanks to a number of rate hikes by the Federal Reserve. However, the Fed finally cut its target rate this month, so now could be your last chance to lock in a competitive rate.
CD rates vary widely across financial institutions, so it's important to make sure you're getting the best possible rate when looking for a CD. The following is a breakdown of today's CD rates and where to find the best offers.
Historically, longer term CDs offered higher interest rates than shorter term CDs. Generally, this is because banks would pay better rates to encourage savers to keep their money on deposit for longer. However, in the current economic climate, the opposite is true.
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Today, the highest CD rate 4.27% APY, offered by NexBank on its 1-year CD. However, a large opening deposit of $25,000 is required.
The next highest rate can be found at two banks: Synchrony (13 month term) and Marcus by Goldman Sachs (one year). Both banks offer 4.25% APY.
Here's a look at some of the best CD rates available today from our trusted partners:
The amount of interest you can earn from a CD depends on the annual percentage rate (APY). This is a measure of your total return after one year taking into account the base interest rate and how often interest compounds (CD interest usually accrues daily or monthly).
Say you invest $1,000 in a one-year CD with 1.81% APY, and interest compounds monthly. At the end of that year, your balance would grow to $1,018.25 – your initial deposit of $1,000, plus $18.25 in interest.
Now, let's say you choose a one-year CD that offers 5% APY instead. In this case, your balance would grow to $1,051.16 over the same period, which includes $51.16 in interest.
The more you deposit in a CD, the more you earn. If we were to take our one year CD example at 5% APY, but deposit $10,000, your total balance when the CD matures would be $10,511.62, which means you would earn $511.62 in interest. in
Read more: What is a good CD rate?
When choosing a CD, the interest rate is usually top of mind. However, the rate is not the only factor you should consider. There are several types of CDs that offer different benefits, although you may need to accept a slightly lower interest rate in exchange for more flexibility. Here's a look at some of the common types of CDs you can consider beyond traditional CDs:
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Bump-up CD: This type of CD allows you to request a higher interest rate if your bank's rates rise during the term of the account. However, you usually only get to “raise” your rate once.
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CD without penalty: Also known as a liquid CD, a type of CD gives you the option to withdraw your money before maturity without paying a penalty.
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Jumbo CD: These CDs require a higher minimum deposit (usually $100,000 or more), and often offer a higher interest rate in return. In today's CD rate environment, however, the difference between traditional and jumbo CD rates may not be much.
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Brokered CD: As the name suggests, these CDs are bought through a brokerage rather than directly from a bank. Brokered CDs can sometimes offer higher rates or more flexible terms, but they also carry more risk and may not be FDIC insured.