CD rates change weekly, and the highest available today depends on the term length and your bank
Certificate of Deposit (CD) rates are not fixed across the banking industry. Banks set their own rates based on what the Federal Reserve has done, what they need to attract deposits, and how long you agree to lock your money away. A CD paying 4.50% at one bank might pay 3.75% at another for the same term. The highest rates are almost always at online banks and credit unions, not at the brick-and-mortar branches where most people have checking accounts.
The rate you see today will not be the rate next week. The Federal Reserve controls the benchmark rate that banks use as a reference, and that rate can change. Even when the Fed holds steady, individual banks raise and lower their CD rates constantly to compete for deposits. If you see a rate you like, locking it in matters — waiting even a few days can mean the offer is gone.
The term length you choose (three months, one year, five years) affects the rate you get. Longer terms usually pay more because the bank keeps your money longer. But the relationship is not always straightforward — sometimes a two-year CD pays more than a five-year CD, depending on what banks think will happen to rates in the future.
Key Takeaways
- Online banks and credit unions consistently offer higher CD rates than traditional banks, often by 1% or more for the same term.
- CD rates change weekly or even daily, so the highest rate available today may not be available tomorrow.
- Longer CD terms usually pay higher rates, but comparing rates across different term lengths requires looking at each one separately.
- The Federal Reserve's benchmark rate influences all CD rates, but individual banks set their own rates independently.
- You can compare current rates across multiple banks without opening an account, and you should check at least three to five options before committing.
Why online banks offer higher rates than traditional banks
Online banks have lower overhead costs than branches with physical locations, staff, and real estate. They pass some of that savings to depositors by offering higher CD rates. They also compete more aggressively for deposits because they cannot rely on customers walking in the door — they have to attract money through rates.
A traditional bank with hundreds of branches may offer a one-year CD at 3.50%, while an online bank with no branches offers the same term at 4.75%. Both are real rates from real banks. The online bank is not taking more risk; it is simply operating with a different cost structure. If you have money sitting in a savings account at your local bank earning 0.01%, moving it to a CD at an online bank can mean hundreds of dollars more per year in interest.
How to find and compare rates across banks
Start by checking rates at three to five banks you have not heard of. Bankrate, DepositAccounts, and the FDIC's BankFind tool all show current rates from multiple institutions. You can see the rate, the term, and any minimum deposit required without opening an account. Write down the rates you find, including the bank name and the date you checked — rates change fast enough that a screenshot from yesterday is not reliable.
Compare rates for the specific term length you want, not across different terms. A five-year CD at 4.80% is not comparable to a one-year CD at 4.50% — they are different products. If you are torn between two term lengths, look at the rates for each separately and decide which term makes sense for your situation first, then find the highest rate for that term.
Check whether the bank is FDIC-insured (for banks) or NCUA-insured (for credit unions). This matters because it determines whether your deposit is protected if the institution fails. Most online banks and credit unions are insured, but verify before you move money. The FDIC website and NCUA website both have searchable databases of insured institutions.
Credit unions often have rates as high as online banks
Credit unions are member-owned cooperatives, not for-profit institutions. Many offer CD rates that match or beat online banks because they return profits to members rather than shareholders. You have to be a member to open a CD at a credit union, but membership is often free or costs a small one-time fee.
Some credit unions have open membership (anyone can join), while others require you to work for a specific employer, live in a specific area, or belong to a specific organization. Check whether you are already may be able to access for membership at a credit union through your job, your school, or your neighborhood. If you are, comparing their CD rates to online banks is worth a few minutes — you may find a rate that is 0.25% to 0.50% higher.
What happens to your rate if the Federal Reserve changes its benchmark
When you open a CD, your rate is locked in for the entire term. If the Federal Reserve raises rates after you open your CD, your rate does not go up — you keep the rate you agreed to. If the Fed cuts rates, you keep your higher rate. This is the trade-off of a CD: you sacrifice flexibility for a may provide return.
Banks set their CD rates based partly on what they expect the Federal Reserve to do. If the Fed is expected to cut rates, banks may offer lower CD rates now because they know they will not have to pay as much in the future. If the Fed is expected to raise rates, banks may lock in higher rates now to attract deposits before they have to pay even more. This is why the same term length can pay different rates at different times of year.
The difference between promotional rates and standard rates
Some banks offer a higher rate for a limited time to attract new customers. These promotional rates are real — you will actually earn that rate — but they may drop after a few months or after a certain amount of time has passed. Read the fine print to see whether the rate is promotional and when it changes.
A standard rate is what the bank offers to all customers, all the time. It is usually lower than a promotional rate, but it is stable. If you are comparing a promotional rate at one bank to a standard rate at another, do the math for the full term of the CD. A promotional rate of 5.00% for six months followed by a standard rate of 3.50% for the remaining six months of a one-year CD will earn you less total interest than a standard rate of 4.50% for the full year.
Minimum deposits and early withdrawal penalties
Most CDs require a minimum deposit to open — often $500, $1,000, or $2,500. Some online banks have minimums as low as $100 or no minimum at all. If you have a small amount to deposit, checking the minimum requirement before you apply saves time.
If you need to withdraw money before the CD matures, you will pay an early withdrawal penalty. The penalty is usually a certain number of months of interest — for example, three months of interest on a one-year CD. Calculate what that penalty would be in dollars before you open the CD. If a CD pays 4.50% on $10,000 and the penalty is three months of interest, the penalty is roughly $112. If you think there is a chance you will need the money, that cost matters.
Laddering CDs to balance rate and access
CD laddering means opening multiple CDs with different maturity dates so that money becomes available at regular intervals. For example, you could open a one-year CD, a two-year CD, and a three-year CD with the same amount in each. After one year, the first CD matures and you can withdraw the money or open a new three-year CD at whatever rate is available then. This gives you some access to your money while still locking in longer-term rates.
Laddering works best when you have a larger amount to divide — at least $3,000 to $5,000. If you have less, the benefit of spreading it across multiple terms is smaller than the hassle of managing multiple CDs. But if you have $15,000 and you are not sure whether you will need it in two years or five years, laddering lets you earn a higher rate than a short-term CD while keeping some money accessible sooner.
Frequently Asked Questions
Should I open a CD if rates might go higher?
If you think rates will rise, a shorter-term CD lets you reinvest at a higher rate sooner. A one-year CD at 4.50% today gives you the option to move to a 5.00% CD next year if rates go up. A five-year CD locks you in at 4.50% for five years. There is no way to know which choice is right, so decide based on when you actually need the money, not on predictions about rates.
Can I move a CD to a different bank if I find a better rate?
Yes, but you will pay an early withdrawal penalty at your current bank. Calculate whether the higher rate at the new bank will earn you enough extra interest to cover the penalty over the remaining term. Often it will not, so moving is not worth it unless the rate difference is large and you have a long time left on the CD.
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 and the rate can change. CDs usually pay more, but savings accounts give you flexibility. If you might need the money within a year, a savings account is safer.
Do I have to pay taxes on CD interest?
Yes. CD interest is taxable income in the year you earn it, even if you do not withdraw the money. The bank will send you a 1099-INT form at tax time showing how much interest you earned. This is one reason to compare rates — a higher rate means more interest, which means more taxes, but also more money in your pocket after taxes.
What happens to my CD if the bank fails?
If the bank is FDIC-insured, your CD is protected up to $250,000. The FDIC will pay you the full amount you deposited plus any interest earned up to the date of failure. Check the FDIC's BankFind tool to confirm your bank is insured before you open a CD.