CD rates change weekly, and the highest ones are rarely at the bank where you keep your checking account
A certificate of deposit (CD) is a savings account where you agree to leave money untouched for a set period — usually three months to five years — in exchange for a fixed interest rate. The rate you receive depends on three things: how long you lock the money away, which bank or credit union you use, and what week you open the account. Banks with no physical branches typically offer rates two to three times higher than brick-and-mortar banks, because they have lower overhead costs.
The highest CD rates available right now are posted on comparison sites like Bankrate, DepositAccounts, and the FDIC's own rate tracker, which update daily. You can also call credit unions directly — they often match or beat online bank rates and may offer better terms for members. The catch is that CD rates are not negotiable. You either take the rate the bank is offering that day, or you wait and hope rates go up (which means the bank's rate goes up, not down).
Shopping for CDs takes an hour if you use a comparison site, or several hours if you call banks one by one. Most people find the best rate, open the account online, and transfer money from their checking account. The account opens within one to three business days.
Key Takeaways
- Online banks and credit unions post CD rates that are typically two to three times higher than rates at traditional banks with branches.
- CD rates change every week, so the highest rate available today may not be the highest rate available next week.
- Bankrate, DepositAccounts, and the FDIC's National Information Center all publish updated CD rates daily and let you filter by term length.
- Your money is insured up to $250,000 per account at FDIC-insured banks and up to $250,000 per account at NCUA-insured credit unions, even if the bank fails.
- You cannot withdraw money before the CD matures without paying an early withdrawal penalty, which usually costs three to twelve months of interest.
How to compare CD rates across banks
Start with a rate comparison site rather than visiting individual bank websites. Bankrate, DepositAccounts, and Investopedia's CD rate tracker all pull rates from hundreds of banks and update them daily. You can filter by term length (three months, one year, three years, five years, and so on) and see the rate, the minimum deposit required, and whether the bank is FDIC-insured.
Once you find a rate that interests you, visit that bank's website directly to confirm the rate is still current — rates can change between when the comparison site updates and when you apply. Read the early withdrawal penalty before you open the account. A CD with a 0.50% penalty means if you withdraw early, the bank takes six months of interest. A CD with a 1.00% penalty means the bank takes a full year of interest. The penalty is deducted from your principal, not added on top.
If you are a member of a credit union, call and ask what CD rates they offer. Credit unions often match online bank rates and sometimes offer slightly better terms — for example, a lower minimum deposit or a shorter penalty period — because they are member-owned rather than shareholder-owned.
The difference between online banks, traditional banks, and credit unions
Online banks (like Marcus, Ally, and American Express Bank) have no physical locations, so they spend less money on buildings and staff. They pass that savings to customers through higher CD rates. A typical online bank might offer 4.50% on a one-year CD, while a traditional bank with branches offers 0.75% on the same term.
Traditional banks with physical locations offer lower rates because they have higher costs. You can walk in and talk to a person, which some people value, but you pay for that convenience through lower interest. Some traditional banks do offer competitive rates on CDs if you also maintain a checking account with them, though the rate is still usually lower than an online bank's rate.
Credit unions are member-owned financial institutions. They often offer CD rates that match or beat online banks, and they may have lower minimum deposits or shorter early withdrawal penalties. To open a account at a credit union, you usually have to meet a membership requirement — for example, living in a certain county, working for a certain employer, or belonging to a certain organization. Some credit unions have opened membership to anyone, so it is worth asking.
What FDIC insurance means and why it matters
The Federal Deposit Insurance Corporation (FDIC) insures deposits at banks up to $250,000 per depositor, per bank, per account type. This means if the bank fails, the FDIC will pay you back up to $250,000. A CD is a separate account type from a checking account, so if you have $100,000 in a CD and $100,000 in a checking account at the same FDIC-insured bank, both are fully insured.
If you have more than $250,000 to deposit, you can spread it across multiple banks to keep everything insured. For example, you could open a $250,000 CD at Bank A and a $250,000 CD at Bank B, and both would be fully insured. The FDIC's website has a tool called the Electronic Deposit Insurance Estimator (EDIE) that lets you calculate your coverage at any bank.
Credit unions are insured by the National Credit Union Administration (NCUA), not the FDIC, but the coverage is the same: $250,000 per member, per credit union, per account type. If you are a member of multiple credit unions, each one's insurance is separate.
CD terms and early withdrawal penalties explained
When you open a CD, you choose how long to lock your money away. Common terms are three months, six months, one year, two years, three years, and five years. The longer the term, the higher the rate — a five-year CD usually pays more than a one-year CD. However, rates change constantly, so sometimes a shorter-term CD pays nearly as much as a longer-term one.
If you withdraw money before the term ends, the bank charges an early withdrawal penalty. This penalty is stated as a number of months of interest. A CD with a 0.50% penalty and a 4.50% annual rate means the bank will deduct about $11.25 per $10,000 deposited (six months of interest at 4.50%). A CD with a 1.00% penalty means the bank will deduct about $22.50 per $10,000 deposited (twelve months of interest).
Some banks offer "no-penalty CDs" that let you withdraw money early without a penalty, but these CDs pay lower rates than traditional CDs. A no-penalty CD might pay 3.75% while a traditional one-year CD pays 4.50%. Whether a no-penalty CD makes sense depends on whether you might need the money before the term ends.
When to open a CD and how rates move
CD rates are set by each bank based on what the Federal Reserve is doing with interest rates. When the Federal Reserve raises its benchmark rate, banks typically raise CD rates within a few weeks. When the Federal Reserve lowers its benchmark rate, banks typically lower CD rates within a few weeks. This means if you think the Federal Reserve might raise rates soon, you might wait. If you think rates might fall, you might lock in a rate now.
In practice, most people cannot predict what the Federal Reserve will do, and trying to time the market usually backfires. A better approach is to open a CD when you have money you do not need for a specific period. If you know you will not need $10,000 for two years, open a two-year CD today. If rates go up next month, you will wish you had waited, but you will still earn interest. If rates go down, you will be glad you locked in the rate when you did.
Some people use a "CD ladder" strategy: they open multiple CDs with different term lengths (one year, two years, three years, four years, five years) so that one CD matures each year. When a CD matures, they can open a new one at whatever rate is current. This strategy lets you take advantage of rising rates without locking all your money away for five years.
How to open a CD and move money into it
Once you have chosen a bank and a CD term, you can open the account online in about ten minutes. You will need your Social Security number, date of birth, address, and employment information. The bank will verify your identity and run a background check (this is required by law). The account usually opens within one to three business days.
To fund the CD, you can transfer money from a checking account at another bank using the bank's online transfer tool, or you can mail a check. Online transfers usually take three to five business days. Once the money arrives, it is locked in the CD and earns interest at the rate you were quoted.
When the CD matures, the bank will send you an email or letter telling you what happens next. You can usually choose to withdraw the money, roll it into a new CD at the current rate, or move it to a savings account. If you do nothing, many banks automatically roll the money into a new CD at the current rate, so read the maturity notice carefully.
Frequently Asked Questions
Can I move money out of a CD before it matures?
Yes, but you will pay an early withdrawal penalty. The penalty is usually three to twelve months of interest. Some banks offer no-penalty CDs that let you withdraw without a penalty, but these pay lower rates. Before you open a CD, make sure you will not need the money before it matures.
What is the difference between a CD and a high-yield savings account?
A CD locks your money away for a set term and pays a fixed rate. A high-yield savings account lets you withdraw money anytime without a penalty, but the rate can change. CDs usually pay more than savings accounts, but you lose flexibility. Choose a CD if you know you will not need the money for a specific period.
Are CDs taxed?
Yes. The interest you earn on a CD is taxed as ordinary income in the year you earn it. If you earn $500 in CD interest, you will owe federal income tax on that $500. Some states also tax CD interest. The bank will send you a 1099-INT form at tax time showing how much interest you earned.
What happens if the bank fails while my money is in a CD?
The FDIC will pay you back up to $250,000. Your CD is insured just like a checking account. This has never happened to a CD holder at an FDIC-insured bank, because the FDIC steps in before a bank actually fails and pays depositors.
Can I open multiple CDs at the same bank?
Yes. Each CD is a separate account, so each one is insured up to $250,000. You can open a one-year CD and a five-year CD at the same bank, and both are fully insured. This is a common strategy for building a CD ladder.