In today’s rising interest rate environment, a CD can be a mixed bag. Putting your money in a long-term CD could mean missing out on higher rates in the near future, but CDs with very short terms don’t offer great rates compared to more flexible high-yield savings accounts.
One-year CDs are a unique middle ground. One-year CDs often offer higher rates than high-yield savings or money market accounts today, without the major long-term commitment of other CD options. That’s increasingly important to keep in mind as interest rates rise.
Since March, the Federal Reserve has raised its federal funds rate six times and another potential rate hike in December. The latest increase pushed the Fed’s rate range to 3.75% – 4%. As the Fed keeps raising rates in its aim to balance inflation, CD and savings rates will climb, too.
“CD rates tend to be a reflection of the federal funds rate,” says Sweta Bhargav, a certified financial planner and principal financial advisor for Adviso Wealth, a financial planning and investment firm in Philadelphia. “So when the Federal Reserve increases interest rates, then [CD rates are] usually in effect quite soon after that.”
Compared to longer CDs, 1-year CDs can guarantee a good return and more liquidity amid rate hikes. Here are the best rates on one-year CDs today:
Best CD Rates for November 2022
|Bank||1 year apy||Minium Deposit|
|Bread Savings (formerly Comenity Direct)||4.50%||$1,500|
|Live Oak Bank||4.25%||$2500|
|Goldman Sachs Bank USA||4.00%||$500|
|American Express National Bank||4.00%||$0|
Note: The APYs (Annual Percentage Yield) shown are as of November 23, 2022. The APYs for some products may vary by region.
How we chose these banks
This list of best one-year CD rates follows what you’ll find on our primary list of best CD rates. As a result, this list does not represent the entire market. We began by analyzing more than 20 most commonly reviewed and searched banks with CDs, then used the following criteria to narrow down our top picks. These criteria are the same as those listed on our best CD rates page:
1. We eliminated credit unions and institutions with special membership requirements that make them inaccessible to a broad number of people. Many credit unions offer competitive terms for those who qualify; check your local area or use a credit union locator to compare rates.
2. We eliminated any institutions that don’t offer three of the most popular terms: one-year, three-year, and five-year. Many experts advise making use of various term lengths to maximize your CD investing.
3. We eliminated any institutions with minimum opening deposits of more than $2,500. While CDs are best for people with significant extra savings they can afford to hold in a long-term CD, there are many good options that don’t require high minimum deposits.
What Is the Average 1-Year CD Rate Right Now?
Currently, the average for national deposit rates for 1-year CDs is 0.71%, based on Federal Deposit Insurance Corporation (FDIC) data.
The Bankrate average 1-year CD rate is slightly higher at 1.10%. Bankrate conducts a weekly national deposit index survey of deposit accounts (like NextAdvisor, Bankrate is owned by Red Ventures).
Most online banks, like those among our picks for best CD rates, are offering rates higher than the average. Right now, the 1-year CD rates on our list average 3.81%.
Should I Choose a 1-Year CD?
A 1-year CD may be worthwhile right now if you’re looking to take advantage of rising interest rates, but you want access to your account within a year.
However, a certificate of deposit is not always the right choice for every savings goal — even a shorter-term, one-year CD. For example, it’s better to keep your emergency fund in a more accessible account like a high-yield savings account or money market account, even if they have slightly lower APYs. But if you already have an emergency fund, you may open a 1-year CD to boost your savings toward a wedding or down payment on a home you’re planning to buy in the not-too-distant future.
Just remember that because rates are still rising, locking your money into a CD for even just one year could mean losing out on potentially higher rates in a few weeks or months, says Ayesha Selden, a certified financial planner and franchise owner of Ameriprise Financial Services Inc. in Philadelphia.
To get more flexibility from your certificate of deposit, consider a no-penalty CD. These CD types sometimes offer slightly lower rates, but you can withdraw your deposit at any time without penalty, unlike the fee you’ll pay for early withdrawal from a traditional CD.
Comparing 1-Year, 3-Year, and 5-Year CDs
If you’re considering opening a certificate of deposit, some of the most popular term lengths you’ll find our one-year, three-year, and five-year CDs. Here are a few details about each, and how to choose the right term for your goals:
Because they’re the shortest term, one-year CDs tend to have the lowest APYs among these three CD options. The highest rates you can find from these CDs are around 3.63% today. That’s still higher than high-yield savings accounts, but the gap is closing as savings account rates increase. If you want to earn a solid return without locking away your money for long, a one-year CD is a safe option, though you may still risk missing out on higher interest rates in the near future.
In today’s rising rate environment, one way that some experts recommend using 1-year CDs for building a CD ladder. For example, if you spread your savings balance across four 1-year CDs, opening one every quarter for the next year, you can benefit from rising rates while still maintaining liquidity when you need your money. When your CDs mature, you can roll the funds into a new CD or choose another savings option suited for that future rate environment.
Three-year CDs are like a compromise between the differences in rates and flexibility of 1-year and 5-year terms. You’ll have a slightly better APY than 1-year CDs, with rates averaging at 3.45% right now, but can avoid the long-term commitment of waiting for a five-year CD to mature.
Still, with rates steadily increasing, some experts don’t recommend opening CDs with terms longer than a year or two. However, when rates do begin to fall, locking in a three-year CD can help you maintain a higher rate as APYs shrink.
Like any new account, think about your savings goal before you open a 3-year CD. You should decide whether not having access to your money is worth locking in a 1%-2% higher APY over variable APY high-yield savings accounts that may surpass current rates in a few months. And if you’re looking long-term, consider whether riskier but potentially more lucrative options like investing in an index fund could be better.
Five-year CDs have the biggest rate because they require you to lock your money into today’s rates for the longest period of time. Right now, the best five-year CD rates are upwards of 4% APY.
Many experts we’ve spoken to say they don’t recommend CDs with terms this long for today’s savers, since rates are likely to continue increasing over the next several months. It can be smart to choose a 5-year CD if rates are dropping, though, to ensure that you lock in a great rate before interest rates become less appealing. They’re also commonly used to guarantee a return with CD ladders.
If you’re looking for a very safe, long-term savings options, five-year CDs may be useful. Otherwise, a diverse investment portfolio made up of retirement accounts and other brokerage accounts can help you earn more in the long run, if you’re willing to take on more risk.
How to Open a 1-Year CD
Before you open a CD, compare rates and other account details, including minimum deposit requirements, penalties, and more to make sure you choose the bank that best fits your goals.
You can usually open the CD online or at a bank branch. Many of the best CD rates come from online-only banks, which means you may need to prepare to open your account online. You’ll need to provide personal information and contact info, and the account information for the bank account you’ll transfer your deposit from.
1-Year CD FAQs
Will 1-year CD rates go up?
As the Federal Reserve continues to increase the target federal funds rate (to bring down today’s very high inflation rates), experts predict that CD rates will follow.
What if rates go up while I have money deposited?
If the rate offered on your certificate of deposit increase after you open your CD, you won’t benefit from the rate incrase. When you agree to open a CD, you lock your moneyinto the rate you agreed to when setting up your account. There are CD types that are exceptions to this rule. For example, bump-up CDs may allow you to request one rate bump per CD term. And if you choose a no-penalty CD, you can withdraw your deposit at any time and put it into a different account with a higher rate.
What if I want to withdraw my money before 12 months?
If you withdraw your money before your CD matures, you’ll pay a penalty on your balance (unless you choose a no-penalty CD). Typically, the penalty requires three months’ worth of interest paid.