CD rates change weekly, and right now they range from under 1% to over 5% depending on the bank, the length of your deposit, and how much money you lock away

A certificate of deposit (CD) is a savings account where you agree to leave your money untouched for a set period — usually three months to five years — in exchange for a higher interest rate than a regular savings account. The rate you receive depends on three things: which bank you choose, how long you commit your money, and how much you deposit.

Rates shift constantly because they follow the Federal Reserve's interest rate decisions and competition between banks. A CD paying 4.5% at one bank might pay 3.8% at another, even on the same deposit length. The only way to know what's available right now is to check current offerings from multiple banks, because no single rate applies everywhere.

If you're comparing CDs to a regular savings account linked to direct deposit, the trade-off is simple: you get more interest, but you cannot touch the money without a penalty. Most banks charge a fee if you withdraw before the CD matures — often three to six months' worth of interest, sometimes more.

Key Takeaways

  • CD rates vary by bank, deposit term, and deposit amount, so comparing three to five banks takes 15 minutes and can mean hundreds of dollars in extra interest over the life of the CD.
  • Longer CDs (12 months or more) usually pay more than shorter ones, but rates can drop before your CD matures, so locking in for five years is a real bet on where rates are headed.
  • Early withdrawal penalties typically cost three to six months of interest, so only deposit money you know you will not need until the CD matures.
  • Online banks and credit unions often pay higher rates than brick-and-mortar banks because their overhead is lower, though all deposits are insured the same way up to $250,000 per account.
  • A CD ladder — splitting your money across CDs that mature at different times — lets you reinvest portions of your money as rates change without locking everything away for years.

How CD rates are set and why they move

Banks set CD rates based on what the Federal Reserve charges them to borrow money. When the Fed raises its rate, banks eventually raise CD rates to attract deposits. When the Fed cuts rates, CD rates fall. This lag can be weeks or months, so a bank might hold its CD rate steady even after the Fed moves.

Competition also drives rates. If one bank offers 4.8% on a one-year CD and its competitor offers 4.2%, customers move their money. Banks respond by raising rates to match or beat the competition. Online banks, which have lower costs than branches, often lead the market with higher rates.

The length of the CD also matters. Banks usually pay more for longer commitments because they want to keep your money longer. A three-month CD might pay 3.5%, while a five-year CD from the same bank might pay 4.8%. The difference is not always huge, but it compounds over time.

Where to find current rates and what to compare

The fastest way to see rates is to visit the websites of banks you already use, then check three to five online banks and your local credit union. Most banks display CD rates on their homepage or in a rates section. You do not need to open an account to see what they offer.

When you compare, look at the annual percentage yield (APY), not just the interest rate. APY includes the effect of compounding and shows you the true return. A CD with a 5.0% APY will earn more than one with a 4.95% APY, even if the difference looks small.

Write down the rate, the term length, the minimum deposit, and the early withdrawal penalty for each one. A bank offering 5.2% but charging six months' interest as a penalty might actually pay less than a bank offering 4.9% with a one-month penalty, depending on how long you keep the money there.

Deposit insurance and safety

All CDs held at banks insured by the Federal Deposit Insurance Corporation (FDIC) are protected up to $250,000 per depositor, per bank. If the bank fails, you get your money back. Credit union CDs are insured the same way through the National Credit Union Administration (NCUA).

This means a CD at a small online bank with a 5.1% rate is just as safe as one at a large national bank with a 3.8% rate, as long as both are FDIC or NCUA insured. You can check whether a bank is insured by searching the FDIC's Bank Find tool on their website or asking the bank directly.

If you have more than $250,000 to deposit, you can open CDs at multiple banks to keep each account under the insurance limit. Some people also use CDs at both a bank and a credit union to insure more money.

CD ladders and when to use them

A CD ladder is a strategy where you split your money across several CDs with different maturity dates. For example, you might buy five one-year CDs, each maturing in years one through five. As each one matures, you reinvest it in a new five-year CD at whatever rate is available then.

This approach solves two problems. First, you are not locked into one rate for five years — you get to reinvest portions of your money as rates change. Second, you have access to some of your money every year without paying an early withdrawal penalty. If an emergency comes up, you only lose access to the CDs that have not yet matured.

A ladder works best when rates are expected to rise or when you want a mix of safety and flexibility. If rates are falling, you might prefer to lock in a longer CD now at a higher rate. If you need all your money at once, a single CD is simpler.

How much extra interest you actually earn

The difference between a 3.5% CD and a 4.5% CD is one percentage point, but the dollar difference depends on how much you deposit and for how long. On $10,000 for one year, that one percentage point means about $100 in extra interest. On $50,000 for three years, it means roughly $1,500 more.

This is why comparing rates across even just three banks is worth the time. Fifteen minutes of research can save you hundreds of dollars. The higher the rate and the longer the term, the bigger the difference becomes.

Keep in mind that CD interest is taxable income. If you earn $500 in CD interest, you owe taxes on it at your ordinary income tax rate. Some people use CDs in retirement accounts (like IRAs) to avoid this, though those accounts have their own rules about withdrawals.

When a CD makes sense versus other options

A CD is the right choice if you have money you will not need for a specific period and you want a may provide return. Unlike stocks or bonds, a CD's rate is locked in from day one. You know exactly how much you will have when it matures.

A CD is not the right choice if you might need the money before it matures, because the early withdrawal penalty usually wipes out most or all of your interest gain. It is also not ideal if you think rates will rise significantly — you do not want to be locked into 4.0% if rates jump to 5.5% next month.

If you are saving for something specific — a down payment in two years, a car in 18 months, a vacation in six months — a CD with a matching maturity date can work well. If you are building an emergency fund, a high-yield savings account is better because you can withdraw without penalty.

Frequently Asked Questions

Do I have to use my bank's CD rate, or can I shop around?

You can shop anywhere. Banks compete for CD deposits, so comparing rates across five banks takes 20 minutes and often reveals a 0.5% to 1% difference. Online banks and credit unions frequently offer higher rates than the bank where you have your checking account.

What happens if I need my money before the CD matures?

You can withdraw it, but you will pay an early withdrawal penalty. Most banks charge three to six months of interest. On a $10,000 CD earning 4.5%, that penalty could be $112 to $225. Always read the penalty terms before you buy a CD.

Can I move a CD from one bank to another without losing interest?

Not without paying the penalty. If you move the CD before it matures, the original bank charges you. Once it matures, you can move the money to a new CD at a different bank with no penalty. Some banks offer "no-penalty CDs" that let you withdraw early without a fee, but they pay lower rates.

Is a CD safer than keeping money in a regular savings account?

Both are equally safe if the bank is FDIC insured — your money is protected up to $250,000 either way. The difference is that a CD pays more interest in exchange for locking your money away. Safety is the same; the trade-off is flexibility versus return.

Should I buy a long CD now or wait to see if rates drop?

That depends on your prediction about where rates are headed. If you think rates will fall, lock in a longer CD now. If you think rates will rise, buy a shorter CD and reinvest when it matures. Most people cannot predict rate movements reliably, so a CD ladder splits the difference.