Average CD Rates Are Rising, But Experts Don’t Recommend Long CD Terms Yet

Image to accompany a story about average CD rates for the week of August 8, 2022. Getty Images
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CDs rates are still rising, as this week’s average bumps slightly higher than last week. 

Since March, the Federal Reserve has steadily increased its target federal funds rate — and the latest hikes in June and July are some of the largest single increases seen in decades. With additional rate hikes expected through the end of the year, experts predict interest rates on savings accounts and CDs will keep increasing, too.

“It really shouldn’t take long at all [to see the effects of federal rate increases],” says Jeb Jarrell, certified financial planner and founder of Plentiful Wealth, LLC, a financial planning firm in Kentucky. 

Already, some banks are rolling out higher rates following last week’s Fed meeting, with the majority of movement focused on shorter CDs with 1-year or similar terms. 

Here’s a breakdown of where average CD rates stand today and how experts say a CD can fit into your savings plan:

What Is the Average CD Rate Right Now?

Average CD rates have been steadily rising over the past several months, and this week was no exception. 

“Historically, CD rates have moved along fairly quickly with the change in Fed rates,” says Hannah Szarszewski, founder of Blue Mountain Financial Planning, a virtual firm based in Texas. However, she does warn against expecting rate jumps as high as what the Fed is rolling out. “While they move in the same direction, CD rates likely won’t adjust by the same amount as the Fed rate.” 

Here are this week’s average CD rates for one-, three-, and five-year CDs:

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 TermFDIC National Deposit RateBankrate National IndexNextAdvisor 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:

1-year CD 

  • CFG Bank: 3.05%
  • Bread Savings (formerly Comenity Direct): 3.00%
  • Sallie Mae: 2.50%

3-year CD

  • CFG Bank: 3.55%
  • Sallie Mae: 3.05%
  • Synchrony Bank: 2.80%

5-year CD

Average CD rates compared to last week

Since last week, 1-year CDs saw the biggest increase, though it was still relatively small: one-year CD averages rose by 0.05% according to Bankrate’s index, and by 0.11% by our analysis of best rates. 

CDs with longer terms increased too, but even more marginally. Three-year CDs rose by 0.06% by our analysis, and by 0.03% according to Bankrate. Five-year CDs increased by 0.03% from our analysis, and a 0.02% increase based on Bankrate’s national index. 

Which Term Length Should I Choose for a CD Rate?

Your ideal CD term depends on your financial goals, but experts recommend sticking to shorter-term CDs amid ongoing rate hikes.

“Longer-term CDs are riskier because there is more uncertainty with interest rates in the future,” says Szarszewski. 

But even then, any CD term has some downside today. You’ll risk locking in a lower APY than what will likely be available a few months from now. For instance, the average three-year CD rate was 0.21% in January, but now the rate has doubled to 0.47% according to FDIC data — and those numbers include non-high-yield CDs, which are typically much slower to move. In another six months, the average could be even higher. 

And if you choose a CD term that’s too short, you may not get as good of a return or liquidity compared to a high-yield savings account or money market account. With variable interest rates, these can be better suited for keeping up with rising rates. Plus, you’ll have more flexibility in case you need to access your money on short notice.

By contrast, when rates drop, locking in a long-term rate early can be a good strategy. With the right timing, you can secure a good rate before interest rates fall, and maintain that fixed rate until maturity.

Whatever direction CD rates move, if your financial goal is at least three years away, investing the funds in a diversified portfolio may be optimal, says Szarszewski. Consider whether the potential returns of an investment account may be worth the added risk, especially if you won’t need to access the money for several years. 

CD Rates Compared by Term Length 

Even though rates are rising for all savings account types, CD rates still offer some of the best rates to earn a guaranteed return. Here are some of the best CD rates by term length: 

Best CD Rates for January 2023

Bank1 year apy3 year apy5 year apyMinimum Deposit
Live Oak Bank4.60%2.00%2.00%$2500
Bread Savings (formerly Comenity Direct)4.50%4.50%4.50%$1,500
TIAA Bank4.30%3.80%3.45%$1,000
Goldman Sachs Bank USA4.30%4.00%3.80%$500
Synchrony Bank4.30%4.30%4.30%$0
American Express National Bank4.25%1.15%4.25%$0
Sallie Mae4.25%4.40%4.25%$2500
Barclays Bank4.25%4.30%4.30%$0
Ally Bank4.15%4.25%4.25%$0
Discover Bank4.15%4.35%4.40%$2500
Capital One4.15%4.35%4.35%$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 

Before opening any new CD, remember to shop around for the best rate, term, and minimum deposit that works for you. 

First, choose the type of CD that aligns with your financial goals. Most banks offer traditional CD, but may also have additional types with different rules or benefits, such as IRA, no-penalty, and bump-up CDs. Next, make sure the CD you choose has the term you need. Oftentimes, no-penalty, IRA, and bump-up CDs offer fewer term options compared to traditional CDs. 

Next, look at the account requirements, such as the minimum deposit and time you’ll have to make your deposit, and any unique features to track your interest or financial goals. 

When you’re prepared to open your CD online or in-person, you’ll need general contact information, a form of ID, and any required funds to deposit. Before opening the account, check with your bank to see how your deposit can be made, such as a check, cash, or electronic transfer.

Average CD Rate FAQs

Is there a penalty for withdrawing from a CD early?

Yes, there is a penalty if you withdraw your money before maturity for traditional CDs. If you choose a no-penalty CD, you won’t pay a penalty for an early withdrawal.

What is the minimum deposit for a CD?

The minimum deposit for a CD depends on the bank you choose. Some banks don’t require a minimum while others may be $1,000 or more.

What is the best CD term?

Experts recommend shorter CD terms right now given that rates will continue to increase. But you should always consider your individual savings goals and compare options before deciding on a CD term.