CD rates today, August 7, 2024 (2024)

CD rates are influenced by various factors, including the term length (longer terms often provide higher rates), deposit amount (some CDs offer tiered rates), Federal Reserve interest rates, and promotional offers from financial institutions.

CD rates today: earn up to 5.30%

CD rates news 2024

Interest rates on certificates of deposit have surged since 2022, mirroring the Fed's rate hikes. The national average rate for 5-year CDs is now 1.86%, up from less than 0.50% in June 2022. Many banks offer even higher rates, with top 5-year CDs boasting APYs over 4% and some 1-year CDs offering APYs well above 5%.

CD rates rose initially as the Fed took measures to combat inflation. With inflation decreasing from over 9% in mid-2022 to 3% today, the Fed has kept interest rates steady at 5.25% to 5.5% since July 2023. However, a rate cut later this year is still possible.

Is it still a good time to open a CD?

Given the recent interest rate increases, investing in a CD could yield higher returns. However, CD APYs are influenced by the federal funds rate, which could decrease if the Fed lowers rates later in the year as hinted.

CD rates are currently at their peak compared to recent years, reflecting favorable market conditions. Therefore, now could be an opportune time to invest in a CD, allowing you to secure advantageous rates on both short-term and long-term CDs. You could earn substantial interest by depositing a larger lump sum now while rates are high.

Historical CD rates

In the early 1980s, CD rates soared into double digits, starkly contrasting today's rates. By 2019, however, the APY for a five-year CD was just above 3%.

Throughout the early 2020s, top rates generally stayed below 1% APY. Recently, we have seen a period of rising rates, with the best offerings now exceeding 5% APY for 1-year CDs.

How to get a good CD rate

Determining a good CD rate depends on balancing the highest rate with your ability to keep funds locked for the term. For example, a 5% APY CD over five years might not be ideal if you need liquidity sooner or if rates rise, leaving you with a lower return.

Generally, rates above the national average are worthwhile. Compare rates across banks for your desired term to find the best option. Key factors to evaluate when comparing CDs include:

• Term length: Ensure it matches your savings goals and timeline.
• APY: Higher rates are usually offered for longer terms.
• Minimum deposit: Ensure you meet the required minimum balance.
• Penalties: Understand the costs associated with early withdrawals.
• Deposit insurance: Verify Federal Deposit Insurance Corp. (FDIC) or National Credit Union Administration (NCUA) coverage.

Additionally, online banks typically offer higher interest rates—but check for any minimum balance requirements and associated fees. Opting for a bank rather than a broker might help avoid unnecessary fees.

Look into offerings from online banks

Online banks and financial technology companies (fintechs) typically offer better rates than national banks. Large financial institutions generate revenue primarily through interest on loans, fees, and investments in securities.

Alternatively, smaller banks and online fintech companies attract new customers by offering competitive APYs on deposit accounts. Additionally, online banks usually have lower overhead costs, enabling them to provide better rates to their clients.

Set up a CD ladder

CD ladders are ideal for savers reluctant to lock in their money for long periods of time. By splitting savings across CDs with varying maturities, you can enjoy both short-term access and higher long-term rates.

For example, you could invest $3,000 in three staggered CDs (1-year, 2-year, and 3-year). As each CD matures, reinvest the money into a new 3-year CD. This strategy provides annual access to your money plus the interest earned.

Compare CD rates by term length

Currently, CD rates are high for both short-term and long-term options. While APYs aren't the only factor to consider when choosing an institution for your CD, being aware of the highest rates available today can help you make an informed decision.

Compare rates to top national banks

If you're unfamiliar with many of the bank names mentioned above, there's a straightforward reason. CDs typically don't generate substantial income for major financial institutions on their own.

Large, national banks like Chase, PNC, and U.S. Bank focus on attracting customers through more profitable products, such as loans and credit cards, rather than CDs. As a result, the interest rates offered on CDs at these banks are often much lower than those available at smaller regional banks or online institutions. Additionally, to secure a good rate at these larger banks, you may be required to open other deposit accounts or deposit much higher minimums.

How do CDs work?

A certificate of deposit is a specialized savings account where you earn interest by depositing money for a predetermined length of time. Unlike traditional savings accounts, which have interest rates that fluctuate with market conditions, a CD offers a fixed interest rate for the entire term. This stability allows savers to benefit from higher returns, especially during periods of elevated interest rates set by the Federal Reserve.

When your CD reaches maturity, you gain access to both your initial deposit and the accrued interest. A key distinction between a CD and standard savings account is that funds deposited in a CD are inaccessible for withdrawal until the term concludes. You will incur an early withdrawal fee if you need to access the money early.

Types of CDs

Different types of CDs serve various needs:

• Brokered CDs are purchased and sold through brokerage accounts rather than directly from banks or credit unions. Brokered CDs typically offer higher APYs than traditional CDs because they are issued by banks and then sold to brokerages.
• Callable CDs include a call feature that allows the issuing institution to terminate the CD before its maturity date. If this feature is exercised, investors receive their principal and any accrued interest up to the call date.
• Bump-up CDs allow you to request a higher APY if interest rates rise after you've opened the account. You can usually adjust the rate once or twice during the CD's term.
• No-penalty CDs do not impose penalties for early withdrawals before maturity. This type is less common and may offer lower APYs than traditional CDs.
• Jumbo CDs require a minimum initial deposit, often starting at $100,000 or more. They generally offer higher APYs than standard CDs.
• Variable-rate CDs have an APY that changes in response to prevailing interest rates. These CDs carry more risk than traditional CDs because decreasing interest rates before maturity can lead to a lower yield.

The takeaway

Currently, CD rates are high for both short and long terms. While APYs are important, they're not the only factor to consider when deciding where to open your CD. However, being aware of the highest available rates can help you make a well-informed decision.

Frequently asked questions