It’s been two weeks since the Federal Reserve hiked interest rates for the fourth time this year. Though experts predict rates will continue rising in coming months in response, they only increased slightly this week.
“We’re already starting to see signs that inflation is coming down,” says Cady North, a certified financial planner and founder of North Financial Advisors in San Diego, CA. Just this week, the latest consumer price index showed that inflation started to slow in July. “That’s going to give the Fed a bit more leeway to consider not raising rates as much as they have been.”
But even with cooling inflation, CD rates are likely to continue increasing over the next few weeks, experts say.
Here’s where rates stand for now and what else to know before opening a certificate of deposit in today’s rising rate environment.
What is the Average CD Rate Right Now?
After a few weeks of fairly steady increases, this week’s average CD rates remained about the same. The largest jump among our top picks came from 1-year CDs, which increased by 0.07% since last week. But it’s normal for interest rates to lag a bit behind big federal rate hikes.
“CD rates are always going to be lagging. They’re never going to move in lockstep with the Fed,” says North. “So, I don’t expect major hiccups or sharp hiccups in the rates.”
Here are this week’s average CD rates for one-, three-, and five-year terms:
How NextAdvisor Determines These Average Rates
We compare three different averages in our average CD rate analysis. First, we consider the national deposit rates from the Federal Deposit Insurance Corporation (FDIC). Second, we use Bankrate’s national index of deposit accounts, based on a weekly survey (like NextAdvisor, Bankrate is owned by Red Ventures). Finally, we calculate the current average rate of each bank on our list of best CD rates. Despite low national averages, you’ll find more rates aligned with the NextAdvisor average when comparing CD rates among different banks.
|CD Deposit Term||FDIC National Deposit Rate||Bankrate National Index||NextAdvisor Average APY|
Some of the banks on our list of best CD rates offer much higher APYs than these averages. Here’s a few of the top rates for each term this week:
- CFG Bank: 3.05%
- Bread Savings (formerly Comenity Direct Bank): 3.00%
- Live Oak Bank: 2.75%
- Bread Savings (formerly Comenity Direct Bank): 3.55%
- CFG Bank: 3.55%
- Sallie Mae: 3.05%
- Bread Savings (formerly Comenity Direct Bank): 3.65%
- CFG Bank: 3.65%
- Synchrony Bank: 3.25%
Average CD rates compared to last week
Each of the three rate surveys we use to determine weekly averages performed differently this week.
The FDIC’s rate calculations are done monthly, so there was no change week-over-week.
Bankrate’s survey of national banks showed only a very slight uptick in CD rates for one-, three-, and five-year terms this week. Since last week, each term average rose by 0.01%, according to Bankrate’s index.
Based on our analysis of banks on our best CD rates page, there was a wider gap. Average interest rates rose by 0.07% for one-year CDs, but only 0.01% for three-year CDs. For five-year CD terms, average rates actually dropped 0.03%.
Which CD Term Should You Choose?
Interest rates are rising for all savings options across the board right now, including high-yield savings accounts and money market accounts. CD rates are no exception, and while some CD terms offer comparable rates to these more liquid account, longer-term CDs can earn more.
Nonetheless, based on how quickly rates are rising, it may be best to stick to shorter term CDs right now to avoid getting a lower rate while CDs fluctuate. Many of the best one-year CDs come with solid APYs that are higher than other savings options right now. But remember, you won’t be able to withdraw without paying a penalty until after the CD reaches maturity.
But there are a few downsides to opening any CD right now. If you lock in a five-year CD rate today and rates continue to go up, you could lose out on higher rate options to come and may have lost significant purchasing power by the time the CD reaches maturity if inflation remains high.
“That’s the risk you take by locking in a rate for a longer period of time. Chasing yield isn’t always the best choice.” says North.
CD Rates Compared by Term Length
Here’s how CD rates vary by term right now:
Best CD Rates for January 2023
|Bank||1 year apy||3 year apy||5 year apy||Minimum Deposit|
|Live Oak Bank||4.60%||2.00%||2.00%||$2500|
|Bread Savings (formerly Comenity Direct)||4.50%||4.50%||4.50%||$1,500|
|Goldman Sachs Bank USA||4.30%||4.00%||3.80%||$500|
|American Express National Bank||4.25%||1.15%||4.25%||$0|
Note: The APYs (Annual Percentage Yield) shown are as of January 03, 2023. The APYs for some products may vary by region.
How to Open a CD
Most banks let you open a CD online, though you may have in-person options if you’re near a bank branch. You’ll typically get a better interest rate from an online bank or online division of a brick-and-mortar bank.
Before you open a new account, start by comparing rates and requirements, such as the minimum deposit to open a CD and penalty fees you may incur. You may also look for perks such as a rate guarantee within a given period — if the bank offers a higher rate on your CD term within that period, you may be able to automatically increase your rate. If you’re worried about accessing your money before maturity or losing out on rising rates, you may also consider different CD types, like a no-penalty CD or bump-up CD.
“Focus on the amount of money that you’re locking up, but also the amount of time you want to spend chasing yield,” says North. “The difference between a few basis points of interest and your time is definitely worth something.”
When you’ve narrowed down your bank, CD type, and CD term, double check any requirements to open an account. You’ll need your account and routing number from another bank to transfer money to open and kickstart your CD. Most banks don’t allow cash deposits, but accept ACH transfers, wire transfers, direct deposits, and online transfers. You’ll also need personal information, such as your Social Security number and email address.
Make sure the CD term you choose aligns with your goals for the money you’re setting aside, and make sure that you’re not putting money into a CD that you could potentially need in case of an emergency, North adds.
Average CD Rate FAQs
Are CDs FDIC-insured?
Yes, CDs are FDIC insured as long as you open your account via an FDIC insured bank.
What’s the minimum deposit for a CD?
The minimum deposit required for your CD will depend on the bank you choose. Some banks don’t require a minimum amount for a CD, while others may range from $500 to $1,000.
Is there a penalty for withdrawing from a CD before it matures?
There’s a penalty if you withdraw money from a traditional CD before it matures. Penalties vary, but are often around three months worth of interest earned. You can avoid paying a penalty if you choose a no-penalty CD, though you may forfeit some added interest earnings.