The average one-year certificate of deposit pays just 1.28% APY, according to the FDIC. But thanks to rising interest rates, some financial institutions are offering much more, even four times more. “Online-only banks and credit unions continue to raise certificates of deposit rates, especially since the Federal Reserve raised the federal funds rate seven times by 2022,” Nerdwallet’s Spencer Tierney wrote in a recent report on historic CD rates. Check out the highest CD rates you can get right now here.
Ted Rossman, a senior industry analyst at Bankrate, says that while other savings vehicles can also yield competitive APY – such as high-yield savings accounts, some of which also pay more than 4.5% – those interested in short-term gains on a lump sum investment can now yield more than in recent years with high-yield CDs. “The advantage of CDs is that the rate is guaranteed,” says Rossman, adding that the best use case for someone in the short-term CD market is likely to be a “retiree looking for a low-risk, fixed-income investment.” “
Why such high rates on CDs now?
The Fed raised fund rates again in February, marking a total of eight consecutive rate hikes since last March. Today, that number stands at 4.50%-4.75%. For CDs, that change is significant – because rising borrowing rates directly affect overall borrowing costs, and financial institutions typically change their rates to attract new deposits and remain competitive.
What’s more, the rising interest rate trend is expected to continue: Rossman says current market conditions and unemployment numbers – now at a 54-year low – suggest the Fed is likely not done raising rates this year, which could increase the potential for further incentives to save. “It looks like the Fed will keep rates high or higher all year, so there is still some room to go up,” says Rossman.
CDs with the highest APY
The following banks and credit unions offer CDs and jumbo CDs at 5% APY or higher. Be sure to read the fine print.
Mountain America Credit Union: 5.25% – 5.35% APY for 12 month CDs
Make the $500 minimum balance requirement for a 12-month CD and earn 5.25% APY. For youth accounts – designed for children and young adults – the rate is even higher. For that, there is only a $5 minimum account opening and balance requirement to earn 5.35% APY. With that higher rate comes a few additional restrictions: The annual deposit limit is $10,000 up to the age of 27 with a $100,000 maximum per account. Penalties and early withdrawal fees apply here.
SELCO Community Credit Union: 5.25% – 5.5% APY for 9 month CDs
Balance requirements are everything to the Accelerator Series of CDs at SELCO. To qualify for the 5.25% APY rate associated with the 9-month Accelerator CD, you must maintain a balance of $25,000 to $99,999 in new funds. For an even higher rate of 5.5% with the credit union’s so-called Jumbo Accelerator CD, you’ll need an opening balance of $100,000 or more. If the rate on any of the CDs increases within the first 30 days, SELCO will adjust.
Allin Credit Association: 5% – 5.05% APY on 60 month CDs
With a minimum deposit of just $1,000, the Allin Credit Union’s Standard CD Set offers a flat 5% rate on 60-month certificates. The jumbo version, which requires a minimum deposit of $100,000, comes with an even higher 5.05% APY rate.
Capital one: 5% APY for 11 month CDs
Capital One’s 360 CD is fairly cut-and-dry. Join no later than March 14 and guarantee 5% APY on the bank’s 11-month CD. There are no minimum balance requirements and you can choose when to pay out monthly, annually or at maturity.
BMO Harris: 5% APY for 12 month CDs
Meet the $1,000 minimum deposit requirement and lock in your 5% APY on BMO’s 12-month CDs. The only catch here is that this rate is not available to residents of Arizona, Illinois, Indiana, Kansas, Minnesota, Missouri, or Wisconsin.
Sallie Mae Bank: 5% APY on 27 month CD
All that is required here is the $1 minimum opening balance to start an account. Just be sure to keep your CD active for the full 27-month period, which automatically renews at the end of the term, to avoid a 180-day simple-interest early withdrawal penalty.
UmbrellaBank. com: 5% on CD of 12 months
A minimum $1,000 account is required to open a 12-month maturity CD with Umbrella Bank. If you’re new to the bank and don’t plan on making deposits over $1 million, this one might be for you. Just make sure you want to do this for the full term to avoid unwanted early withdrawal fees.
CFG Bank: 5% APY on 12 month CD
Bring $500 to the table — in person at one of the Maryland branches or online — and keep that balance to earn 5% APY with this CD from CFG Bank. No additional deposits are required to earn that competitive rate, but rates are subject to change according to the fine print.
Alternative options with better rates?
While 5% is indeed the high ten-year return for CDs, it’s not the most you can get for your money, especially with a long-term lens, says Rossman. “If you’re a 25-year-old, you might be better served in the market,” he says.
Consider the return of a typical index fund, although returns are admittedly not guaranteed here. While the SPDR® S&P 500 ETF Trust (SPY), which tracks the S&P 500, posted a 1-year loss of 4.49% through Feb. 14, the index tracker also posted gains of 8.65%, 10.77% and 12.56% over the 3, 5 and 10 year periods according to Morningstar data.
Some high-yield savings accounts offer APY relatively comparable to some of the top-earning CDs. Here are three offering some of the best rates today (See the full list here):
Varo Savings Account: 5% APY
Make the required $1,000 in electronic deposits for your salary, pension, or government benefits from your employer or government agency, end the month with a positive balance in both a Varo bank account and a savings account, and you’re eligible. But be sure to read the details: Balances that don’t meet the requirements and those over $5,000 only earn 3% APY.
Centier Bank, Connect Savings: 5% APY
Link your current and savings account to qualify for this savings rate. Make sure you make the minimum deposits and follow the steps in the fine print.
MySparDirect MySavings account: 4.35% APY
The rate offered here is still one of the highest on the market. Just fill out your online application form and get started.
One of the main benefits of a high-yield savings account compared to a CD, says Gary Zimmerman, CEO of MaxMyInterest, is the ability for the account holder to access easily. “In our experience, customers are almost always better off keeping their money in regular savings accounts with daily liquidity, rather than tying up their money on CDs,” says Zimmerman, adding that “in an environment of rising interest rates, better off letting your interest rate rise while the Fed raises rates, rather than fixing your rate with a long-term CD.
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