The Federal Reserve has cut the Federal Funds Rate twice this year. As a result, interest rates on deposit accounts are falling.
The good news: You can lock in a competitive return on a certificate of deposit (CD) today and maintain your earning power. In fact, the best CDs still pay rates above 4%. Read on for a snapshot of today’s CD rates and where to find the best deals.
CDs today typically offer significantly higher rates than traditional savings accounts. As of January, the best short-term CDs (six to twelve months) typically offer rates of around 4.00% to 4.50% APY.
Today, the highest CD rate is 4.35% APY, offered by Synchrony on its 13-month CD. There is no minimum opening deposit required.
Below is a look at some of the best CD rates currently available from our verified partners.
See our picks for the best CD accounts and rates >>
The 2000s were marked by the Internet bubble and later by the 2008 global financial crisis. Although relatively higher interest rates for CDs were seen in the early 2000s, they began to decline as the economy slowed and the Federal Reserve lowered its target interest rate to stimulate growth . In 2009, in the wake of the financial crisis, the average one-year CD paid about 1% APY, while five-year CDs paid less than 2% APY.
The trend of declining CD rates continued into the 2010s, especially after the Great Recession of 2007-2009. The Fed’s policies to stimulate the economy (particularly its decision to keep its benchmark interest rate near zero) led banks to offer very low interest rates on CDs. In 2013, average rates on six-month CDs dropped to about 0.1% APY, while five-year CDs averaged an APY of 0.8%.
However, things changed between 2015 and 2018, when the Fed gradually started raising rates again. At that time, there was a slight improvement in CD rates as the economy grew, marking the end of nearly a decade of ultra-low rates. However, the outbreak of the COVID-19 pandemic in early 2020 led to emergency rate cuts by the Fed, sending CD rates to new record lows.
The situation reversed after the pandemic, when inflation started to spiral out of control. This prompted the Fed to raise interest rates eleven times between March 2022 and July 2023. This, in turn, led to higher interest rates on loans and higher APYs on savings products, including CDs.
Fast forward to September 2024: The Fed finally decided to cut the fed funds rate after determining that inflation was essentially under control. Today we are starting to see CD rates fall from their peak. Still, CD rates remain high by historical standards.
Take a look at how CD rates have changed since 2009:
Traditionally, CDs with longer terms offer higher interest rates than CDs with shorter terms. This is because tying up money for a longer period of time usually entails more risk (namely missing out on higher interest rates in the future), which banks compensate with higher interest rates.
However, this pattern does not necessarily hold true today; the highest average CD rate applies for a term of 12 months. This indicates a flattening or inversion of the yield curve, which can happen in uncertain economic times or when investors expect future interest rates to fall.
Read more: Short or long term CD: which one suits you best?
When opening a CD, choosing one with a high APY is only one piece of the puzzle. There are other factors that can affect whether a particular CD best suits your needs and your overall return. When choosing a CD, consider the following:
-
Your goals: Determine how long you are willing to put your money away. CDs have fixed terms, and if you withdraw your money before the term ends, you may be subject to penalties. Common terms range from a few months to several years. The right term for you depends on when you expect to need access to your money.
-
Type of financial institution: Rates can vary significantly between financial institutions. Don’t just check this with your current bank; research CD rates from online banks, local banks and credit unions. Online banks in particular often offer higher interest rates than traditional brick-and-mortar banks because they have lower overhead costs. However, make sure any online bank you consider is FDIC insured (or NCUA insured for credit unions).
-
Account terms: In addition to the interest rate, you need to understand the terms of the CD, including the maturity date and withdrawal penalties. Also check if there is a minimum deposit requirement and if so, whether it fits your budget.
-
Inflation: While CDs can provide safe, steady returns, they may not always keep pace with inflation, especially over the longer term. Take this into account when determining the term and amount you want to invest.