Certificates of deposit are a low-risk way to lock in today's highest rates that can outpace inflation, protecting your money with safe, reliable growth at more than 10 times the 0.45% national average you'll find with an everyday deposit account.
And unlike your everyday savings, CDs come with fixed rates that won't change over your certificate's term, offering a predictability you won't find with other investments.
With the Federal Reserve expected to cut the benchmark interest rate soon, now's the time to lock in historically high yields — or build a CD ladder across a series of terms — guaranteed to pay out strong returns well after APYs drop.
Here's where to buy FDIC-insured CDs with the highest APYs today and signup in minutes.
Today's best rates of return are found at FDIC-insured digital banks and online accounts paying out up to 5.40% APY with minimum deposits at NexBank, Bask Bank and Sallie Mae and up to 5.05% APY with no minimums at BMO Alto, Barclays and other trusted providers as of Tuesday, July 23, 2024.
Online-only banks and digital accounts may not sound as familiar as bigger names, though each partners with an FDIC-insured bank to offer deposit accounts that are protected for up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA) — just like those at your neighborhood bank.
Dig deeper: How much should you keep in a CD?
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 your initial deposit and interest you've earned after the term expires or "matures."
Typical CD rates are fixed, which means you're guaranteed a rate of return that doesn't change. While you can't add to or access your cash until the CD matures, the trade-off is a safe, stable way to earn a much higher yield than you'd find with a traditional savings account.
Dig deeper: How CDs work — including 7 types for boosting your savings
CD rates strongly track with the key interest rate set by the Federal Reserve, the U.S.'s central bank. This Fed rate is the benchmark that affects rates on deposit accounts, loans, mortgages, credit cards and other financial products. Typically, as the Fed rate rises, so do APYs on savings products like CDs, high-yield accounts and money market accounts — surging up to 5% and higher today to accelerate your savings.
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.
At the conclusion of its fourth rate-setting policy meeting of 2024 on June 12, 2024, the Federal Reserve kept the federal funds target interest rate steady at a 23-year high of 5.25% to 5.50%, marking the seventh consecutive time the Fed's held the benchmark rate unchanged since July 2023.
In its post-meeting statement, the Federal Reserve acknowledged "there has been modest further progress toward the Committee's 2 percent inflation objective," but also that the "economic outlook is uncertain, and the Committee remains highly attentive to inflation risks."
The Federal Reserve is focused on a 2% inflation goal that's ideal for keeping employment high and prices low. Despite speculation in March of three rate cuts by the end of the year, the Fed reiterated from its May statement that its rate-setting committee "does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent."
Officials now estimate one rate cut this year with an additional four cuts anticipated in 2025.
It's expected that the Federal Reserve will hold the Fed rate at 5.25% to 5.50% at its next policy meeting on July 30 and July 31, 2024. The CME FedWatch Tool, which measures market expectations for Fed fund rate changes, predicts a 97.4% chance that the Fed will keep rates where they are.
The latest jobs report released July 5 exceeded expectations, showing a 42nd consecutive month of job growth. Employers added 206,000 new jobs in June, returning the job market to pre-pandemic conditions and calling into question the odds of a September 2024 Fed rate cut.
Adding to the good news is data signaling a continued cooling of inflation, falling from a peak of 9.1% in June 2022 to rates that have ranged from 3% and 4% since May 2023. The consumer price index released on July 11 revealed consumer prices rose 3% year over year in June, down from 3.3% in May, slowing more than expected. Producer price index data released on July 12, however, reported a sharper increase in wholesale prices — or the prices manufacturers pay to producers of goods and services — than forecast for June. The index increased 2.6% for the 12 months ending in June, the largest year-over-year gain since March 2023, which could further influence an already cautious Fed to skip July for a rate cut in September or later in the year.
Speaking to Congress on July 9, Federal Reserve Chair Jerome Powell said the Fed's hold on benchmark interest rates at their highest in two decades has resulted in "considerable progress" toward lowering inflation, but echoed previous concerns at the timing of anticipated rate cuts. "Reducing policy restraint too late or too little could unduly weaken economic activity and employment," he said, while lowering rates too soon could "stall or even reverse the progress we've seen on inflation."
Powell reiterated this sentiment during an interview in Washington, D.C., on July 15, acknowledging the economy appears to be on the way to a "soft landing," but declining to commit to a rate cut for July: "We're going to make these decisions meeting by meeting."
The Powell-led rate-setting panel will announce a rate decision at the conclusion of its meeting on July 31 at 2 p.m. ET.
Dig deeper: When’s the next Federal Reserve meeting? The FOMC — and how it affects your finances
The Federal Deposit Insurance Corporation tracks monthly average interest rates paid on certificates of deposit and other savings accounts. Created by Congress, the FDIC is an independent government agency charged with maintaining stability and public confidence in the U.S. financial system and providing insurance on consumer deposit accounts.
Here's how FDIC national deposit rates on a $10,000 minimum deposit compare between June and July 2024, showing steady and low rates across the board.
The FDIC is an independent government agency charged with maintaining stability and public confidence in the U.S. financial system and providing insurance on consumer deposit accounts.
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. Often the longer the term, the higher the penalty fee.
Dig deeper: When is it worth it to break a CD? A finance expert's thoughts on early withdrawals and breaking even
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.
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 and your term.
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.
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 4.5% 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.
Higher-risk investments. Stocks, index funds and mutual funds average higher returns than CDs, though with higher potential losses.
Dig deeper: High-yield savings account vs. CD: What to know when rates are high
Learn more about how certificates of deposit work when comparing the best for your budget and financial goals.
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.
Yes. Online-only banks and digital accounts are as safe as their traditional counterparts. They are either FDIC-insured chartered banks or partner with more recognizable banks to offer deposit accounts that are protected by the government for up to $250,000. The FDIC insures the safety of your money, even if the fintech were to fail or go out of business. Look for terms like "member FDIC," "FDIC insured" or "NCUA insured" when comparing your options. Learn more about how online banks compare to traditional banks when it comes to rates, fees and management of your money.
There's no best type of interest rate — rather, the difference is that fixed rates stay the same over time while variable rates can change based on market conditions. In many cases, the choice between fixed and variable rates will be a choice between products. Learn more about the difference between fixed and variable rates, and the ways they affect how you borrow and save money.
Compound interest is often described as earning interest on your interest. It’s a powerful way to boost your savings over time by earning interest on both your initial deposit and any interest you earn along the way. It means that every dollar you save is working harder and growing faster toward your financial goals.
An account's APY is the total amount of interest you'll earn on your deposit over one year, including compound interest, expressed as a percentage.
A jumbo CD is a certificate of deposit that requires a minimum of $100,000 to open the account. Like regular CDs, jumbo CDs come with a fixed interest rate and term. In the past, jumbo CDs offered a way for people and businesses to safely invest money at higher rates than available with a traditional CD.
However, with the Fed holding interest rates at 23-year highs, it’s not always true that jumbo CDs have a higher interest rate than traditional CDs. Learn more about jumbo CDs and why it's wise to shop around before locking your money into one.
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.
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 to build a CD ladder that helps 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, July 23, 2024, at 8:05 a.m. ET. APYs and promotional rates for some products can vary by region and are subject to change.
Sources
National Rates and Rate Caps, FDIC. Accessed July 16, 2024.
Consumer Price Index Summary, U.S. Bureau of Labor and Statistics. Accessed July 12, 2024.
Producer Price Index News Release summary, U.S. Bureau of Labor and Statistics. Accessed June 14, 2024.
Employment Situation Summary, U.S. Bureau of Labor and Statistics. Accessed July 9, 2024.
CME FedWatch Tool, CME Group. Accessed July 23, 2024.
