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With rates on certificates of deposit at 23-year highs, you can take home 5% APY and higher on terms from six months to five years, locking in historic earning potential before it’s gone.
CDs guarantee a high rate of return on your principal deposit at the end of an agreed-on term. Typically, the longer the term of your CD, the higher the annual percentage yield on your deposit. Yet with rates at historic highs, you can find APYs that earn at least 10 times the FDIC’s national average savings APY of 0.47%, offering a low-risk way to boost yields on money you don’t need to access immediately.
The best CD rates for March 26, 2024
FDIC-insured digital banks and online accounts are offering the strongest rates of return — up to 5.4% APY on a 12-month term as of Tuesday, March 26, 2024.
CDs come with fixed rates that can protect your earnings from market fluctuations, offering the potential to balance out riskier investments or diversify your portfolio as you save or plan for retirement. And your money saved in these accounts is insured for up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) — or the National Credit Union Administration (NCUA), if your CD is with a credit union.
CD rates in the news
CD rates tend to correlate with the key interest rate set by the Federal Reserve, the U.S.’s central bank. Called the fed rate, this rate sets a benchmark that affects rates on deposit accounts, loans, mortgages and other financial products. Typically, as the Fed rate rises, so do APYs on savings products like CDs and money market accounts — which are at historic highs.
At the conclusion of its rate-setting policy meeting on March 20, 2024, the Fed announced it’s leaving the federal funds target interest rate of 5.25% to 5.50% unchanged, marking the fifth consecutive time it’s held rates steady since July 2023. Policymakers projected cuts to 4.6% by the end of 2024 after December’s meeting and in its post-meeting statement last week, the Fed reiterated earlier concerns about cutting this key interest rate until it sees more data “that inflation is moving sustainably toward 2 percent.”
The Federal Reserve increased the target interest rate 11 times from March 2022 to July 2023 in an effort to combat the highest inflation in four decades coming out of the pandemic. While inflation has cooled, Consumer Price Index data released on March 12 showed a month-over-month increase in consumer prices — a widely used indicator for inflation — and bankers forecast three rate cuts by the end of the year, predicting the first to come after the Fed meets again in June 2024.
With APYs on CDs at their highest in 23 years and cuts predicted for this summer, now is the time to lock in today’s highest rates before they drop.
FDIC averages on CD products: Rates ticking down
The Federal Deposit Insurance Corporation tracks monthly average interest rates paid on certificates of deposit and other savings accounts. The FDIC is the independent government agency created by Congress and charged with maintaining stability and public confidence in the U.S. financial system, including providing insurance on consumer deposit accounts.
Here’s national deposit rates on a $10,000 minimum deposit as reported by the FDIC on March 18, 2024, and compared to previously reported rates on February 20, 2024:
1-month CD — 0.22% (down 1 basis point)
3-month CD — 1.66% (down 3 basis points)
6-month CD — 1.52% (down 1 basis point)
12-month (1 year) CD — 1.81% (down 2 basis points)
24-month (2 years) CD — 1.53% (down 1 basis point)
36-month (3 years) CD — 1.38% (down 2 basis points)
48-month (4 years) CD — 1.29% (down 3 basis points)
60-month (5 years) CD — 1.38% (down 2 basis points)
How a certificate of deposit works
A CD is a type of savings or deposit account that’s offered by banks, credit unions and other financial institutions. Unlike a traditional savings account, a certificate of deposit holds your money for a fixed period of time — terms of one month to five years or longer — paying out the interest your deposit amount earns only after the term expires or «matures.» And typical CD rates are fixed, which means the rate of return doesn’t change. While you can’t add to or access your money until the CD matures, the trade-off is a much higher yield than you’d find with a traditional savings account, making a CD a safe, stable way to save.
How to compare CDs
When choosing the best certificate of deposit for your budget, compare these key factors against your specific savings or financial goals:
Term length. A CD is ideal for saving toward a specific goal with money you’re not likely to need until the account matures. Look to shorter terms for saving toward, say, a family holiday or new appliances. Terms of one to five years or longer can help you lock in today’s highest APYs before interest rates are expected to drop.
Rate of return. Look for the highest APY for the term you’re interested in. The APY is the amount of interest the CD earns in a year — including compounding. Unlike a savings account, CD rates are fixed, meaning they won’t change over your term.
Minimum deposit. While you can find CDs without minimum starting deposits, most CDs require $100 to $1,000 to open an account. Generally, if you have the money for a higher initial deposit, you can earn a higher APY — just be sure that amount isn’t a hardship on your budget.
Type of bank or financial institution. Today’s best interest rates are offered by digital banks, with few exceptions among traditional brick-and-mortar banks or credit unions. If you aren’t comfortable with an online-only bank, look to a high-yield savings account or money market account offering a high rate without withdrawal penalties.
Penalties and fees. Life happens, and you might find yourself needing to tap into your money before the CD matures. Early withdrawal penalties are typically expressed in months of interest you’re giving up — for example, 90 days of interest for CD terms of up to 24 months. Typically the longer the term, the higher the penalty fee.
Benefits of a certificate of deposit
Guaranteed returns. With a CD, you make one deposit and earn a guaranteed interest rate over your term that’s yours after the CD matures.
Higher rates than traditional accounts. Many banks and financial institutions offer CDs at rates that are higher than you’ll earn with the average savings or money market account — with digital and online banks offering the highest rates on average.
Range of CD terms. You can find CD terms of three months to five years or more to fit your financial goals. Rates for six-month CDs can outpace the average bank account, and longer terms offer rates comparable to the best high-yield savings accounts.
Drawbacks of a certificate of a deposit
Penalty for early withdrawals. If you need to access your money before your CD term expires, you face fees equal to several months of interest — as much as three to six months’ worth, depending on the account.
Not the highest investment returns. CDs are a safe way to steadily earn interest, but you stand to earn more over the long term through stocks, bonds or securities. And by locking your money in a CD, you could miss out if average rates increase.
You can’t add more money. After your CD locks, you aren’t able to add to your balance until after the CD matures — at which point, you can move your money to another account or roll it over to a new CD.
Alternatives to a certificate of deposit
A certificate of deposit isn’t the only low-risk way to earn interest on your savings. Look to these alternatives that offer safe, steady returns — with the flexibility to add to or withdraw your money without penalty.
High-yield savings account. An HYSA offers a way to quickly grow your savings investment at variable rates of 5% APY or higher with no penalty for withdrawals.
Money market account. Also called a money market savings account, the rate on an MMA can beat those of traditional savings accounts, with the same flexible access to your money.
Bond. A bond is a fixed-interest security that acts like a loan, only you’re lending your money to a company or the government that pays you interest on your investment — at rates that can average higher than an HYSA or MMA.
Frequently asked questions about CDs
How does a CD compare to a high-yield savings account?
CDs can attract higher rates of return than a high-yield savings account in exchange for locking up your money, while HYSAs can earn you more than a traditional savings account with greater access to your money than a CD. Compare how CDs and HYSAs differ in access, flexibility and type of interest earned before deciding on the best for your investment.
How do banks make money with a CD?
Banks charge higher interest rates on money they lend out than the interest they pay on customer deposit accounts. The difference is called a spread, and it’s what banks rely on to make money. Unlike a traditional savings account that allows for flexible movement of your money without penalty, a CD requires you to lock in your deposit over a specified period of time, returning your principal plus interest after the account matures. That lock-in period — and penalties that discourage your early withdrawal — allows a bank to better plan how long it has to make money off your deposit, and it’s typically willing to pay a little more for that reliability.
What is a no-penalty CD?
A no-penalty CD — also called a liquid CD — is like a traditional CD through which you lock in a deposit for a guaranteed rate of return over a stated period of time, but with the flexibility of withdrawing your money without penalty before the CD matures. This flexibility comes with trade-offs, however, including lower rates of return than a traditional CD. With rates at historic highs, a high-yield savings account may offer comparable or even higher rates than a no-penalty CD with the same flexibility.
What is a CD ladder?
A CD ladder is a savings strategy designed to spread out your money across multiple CDs to leverage high rates without tying up your full investment into one long-term CD. The result of CD laddering is access to a portion of your investment at regular, timed intervals. With rates at all-time highs, a short-term CD ladder combines the high rates of return of a long-term CD with the flexible access to your money that a shorter-term CD offers.
Learn how a short-term CD ladder can help you lock in today’s highest rates while enjoying rolling returns — before rates drop.
Editor’s note: Annual percentage yields shown are as of Tuesday, March 26, 2024, at 8:15 a.m. ET. APYs and promotional rates for some products can vary by region and are subject to change.
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