Certificate of Deposit rates change daily and vary by bank, term length, and deposit amount

A Certificate of Deposit (CD) is a savings account where you agree to leave money untouched for a set period — typically three months to five years — in exchange for a fixed interest rate. The rate you receive depends on which bank or credit union you use, how long you lock the money away, and how much you deposit. Rates are not set by any government body; each financial institution decides its own rates based on market conditions and how much money it needs to attract.

Unlike a regular savings account, you cannot withdraw CD money before the term ends without paying a penalty. That penalty is usually a portion of the interest you would have earned. Because you are giving up access to your money, banks pay higher rates on CDs than on savings accounts. The longer the term, the higher the rate tends to be — a five-year CD usually pays more than a one-year CD at the same bank.

CD rates move with the Federal Reserve's interest rate decisions. When the Fed raises rates, new CDs issued by banks tend to offer higher rates. When the Fed cuts rates, new CD rates fall. This means the rate you see today will not be the rate offered next month. Rates also vary widely between banks — a large national bank might offer 4.5% on a one-year CD while a credit union offers 5.2% for the same term.

Key Takeaways

  • CD rates are set by individual banks and credit unions, not by government, and change based on Federal Reserve decisions and market demand.
  • You lock money into a CD for a fixed term (three months to five years) and receive a set interest rate; early withdrawal triggers a penalty.
  • Longer terms usually pay higher rates, and online banks typically offer higher rates than brick-and-mortar branches of the same company.
  • To compare rates, check your current bank, online banks, and credit unions — the difference between the highest and lowest rate for the same term can be 1% or more.
  • CD rates are highest immediately after the Federal Reserve raises interest rates, so timing your purchase can affect how much interest you earn.

Where to find current CD rates

Most banks and credit unions post their current CD rates on their websites. You can visit your own bank's site first to see what they offer, then compare with other institutions. Online banks — such as Marcus, Ally, and American Express Personal Savings — typically display rates prominently on their home pages and update them daily.

Financial websites like Bankrate, DepositAccounts, and NerdWallet aggregate CD rates from hundreds of banks and let you filter by term length and deposit amount. These sites do not sell CDs themselves; they show you what rates are available and link to the banks offering them. You can see the highest rates available for a one-year CD, a three-year CD, and so on, then decide whether to open an account at that bank.

Credit unions often offer competitive rates but may require membership. If you belong to a credit union, check their rates alongside national banks. Some credit unions participate in shared branching networks, which means you can deposit money at a different credit union's branch if you travel.

How term length affects the rate you receive

Banks typically offer a ladder of rates: a three-month CD might pay 4.0%, a one-year CD might pay 4.5%, and a five-year CD might pay 5.1%. The longer you commit your money, the more interest the bank pays you. This is because the bank wants certainty — it can lend out your money for longer and earn more from borrowers, so it shares some of that gain with you.

However, the relationship between term and rate is not always smooth. Sometimes a two-year CD pays nearly as much as a five-year CD, or a one-year CD pays almost as much as a three-year CD. This happens when the market expects interest rates to fall soon. In those cases, a shorter-term CD might be the better choice because when it matures, you can shop for a new CD at whatever rates are available then.

A CD ladder is a strategy where you buy multiple CDs with different maturity dates — for example, one CD maturing in one year, one in two years, and one in three years. This way, part of your money becomes available each year, letting you reinvest at whatever rates are current without locking everything away for the longest term.

Deposit amount and rate tiers

Some banks offer higher rates for larger deposits. A bank might pay 4.5% on a one-year CD for deposits under $25,000 and 4.7% for deposits of $25,000 or more. These thresholds vary by bank and change over time. If you have a large sum to deposit, ask your bank whether higher deposit amounts unlock better rates.

Most banks have no minimum deposit requirement, but some require $500 or $1,000 to open a CD. Online banks tend to have lower minimums than traditional banks. If you are starting with a small amount, online banks and credit unions are often your best option.

What happens when your CD matures

When the term ends, the bank notifies you that your CD has matured. You then have a window — usually 7 to 10 days — to decide what to do with the money. You can withdraw it, move it to a savings account, or buy a new CD at whatever rate the bank is offering at that time. If you do nothing, most banks automatically roll the money into a new CD at the current rate, which may be higher or lower than what you were earning.

Read the maturity notice carefully. Some banks renew automatically at a lower rate without telling you clearly. If rates have fallen and you want to keep your money in a CD, the automatic renewal might be fine. If rates have risen and you want the higher rate, you need to act before the renewal deadline.

How CD rates compare to other savings options

A high-yield savings account typically pays slightly less than a CD of the same term but gives you access to your money anytime without penalty. If you might need the money within the next year, a high-yield savings account is usually safer than a CD. If you are certain you will not touch the money, a CD's higher rate makes it the better choice.

Money market accounts often pay rates between regular savings and CDs, but they may have higher minimum balances and limit how many withdrawals you can make per month. Treasury bills and bonds, sold by the U.S. government, are another option for longer-term savings and carry no bank risk, though they are not insured by the FDIC the way bank CDs are.

All deposits in a CD at an FDIC-insured bank are protected up to $250,000 per depositor per bank. If you have more than $250,000 to save, you can open CDs at multiple banks to stay within the insurance limit at each one.

Frequently Asked Questions

Can I withdraw money from a CD early?

Yes, but you will pay an early withdrawal penalty. The penalty is usually a set number of months of interest — for example, three months of interest on a one-year CD. If you withdraw after six months, you lose three months of the interest you earned, and the bank keeps the rest. Some banks charge a flat dollar amount instead. Always ask what the penalty is before you buy a CD.

Do I have to pay taxes on CD interest?

Yes. Interest earned on a CD is taxable income in the year you earn it, even if you do not withdraw the money. The bank sends you a 1099-INT form at tax time showing how much interest you earned. If you are in a high tax bracket, the after-tax return on a CD might be lower than you expect.

What is the difference between a CD and a savings account?

A CD locks your money for a set term and pays a fixed rate; a savings account lets you withdraw anytime but usually pays a lower rate. CDs are better if you have money you will not need soon. Savings accounts are better if you might need the money or want flexibility.

Are CD rates the same at every bank?

No. Rates vary significantly between banks. For the same one-year CD, you might see 4.0% at one bank and 5.2% at another. Shopping around can earn you hundreds of dollars more in interest over the CD's life. Use comparison sites to see the full range of rates available.

What happens if interest rates fall after I buy a CD?

Your rate stays the same for the entire term. That is the point of a CD — your rate is locked in. If rates fall, you benefit because you are earning more than new CDs pay. If rates rise, you lose out because you are locked into a lower rate.