A certificate deposit, or CD, is a low-risk way to earn a return. CDs require you to lock in a deposit for a set amount of time at a fixed interest rate.
Today, CD rates are on a steady upward climb. And after the Federal Reserve’s latest rate hike, they will likely keep going up in the near future. Here’s everything to know about CD rates right now, the best time to invest, and how they stack up against other savings options today.
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.
The NextAdvisor editorial team updates this information regularly, though it is possible APYs have changed since they were last updated.
Here’s Where to Start
- The Best Banks for CDs
- Best CD Rates by Term
- Average Interest Rates for CDs
- This Week in CD Rates
- What to Know About CD Rates
- What Causes CD Rates to Change?
- What Is a CD?
- How Do CDs Work?
- What Term Should I Select?
- When Are CDs a Good Investment?
- How to Choose a CD
- CDs and Taxes
- What to Know About CD Ownership
- What to Know About CD Compounding
- CDs vs. Other Savings Accounts
- How to Build a CD Ladder
Best Banks for CDs of January 2023
Ally Bank: 3 months – 5 years; No Minimum Deposit to Open
Ally Bank is a popular online-only bank that offers products including home loans, high-yield savings accounts, CDs, and more. Without the overhead that comes with a national network of physical locations, Ally is able to offer better rates and fees. Ally Bank is ideal for people who value customer service (for which Ally has a good reputation) but don’t mind managing all their finances online. None of Ally’s bank accounts has minimum balance requirements.
American Express National Bank: 6 months – 5 years; No Minimum Deposit to Open
Did you know American Express does more than credit cards? American Express started an online consumer bank arm in 1989. American Express National Bank primarily offers competitive savings accounts and CD rates with no monthly fees. It lacks a checking account option.
Barclays Bank: 3 months – 5 years; No Minimum Deposit to Open
Barclays is a British multinational financial service company that’s organized into four core businesses: personal banking, corporate banking, wealth management, and investment management. Barclays Bank is the company’s personal banking business that offers high-yield savings accounts and CDs. It doesn’t offer any checking account options. Also, its U.S. banking operation doesn’t have a branch network, so you’ll only be able to manage your account online.
Capital One: 6 months – 5 years; No Minimum Deposit to Open
Capital One is one of the nation’s largest banks based on deposits. The Virginia-based bank was established in 1994 with all of its revenue coming from credit cards. However, it has expanded to offer other financial products and services such as auto loans and checking accounts. You can open a checking account, saving account, or even a money market account with Capital One. Its checking and savings accounts earn solid rates and don’t charge monthly fees. Capital One operates on a hybrid model, so it has physical branches and online banking features.
Bread Savings (Formerly Comenity Direct): 1 year – 5 years; $1,500 Minimum Deposit to Open
Bread Savings — formerly known as Comenity Direct — has been working behind the scenes for over 30 years on credit card programs with some of the biggest names in U.S. retail. Since 1986, it has managed many private label, co-brand, and business credit cards. Comenity Direct announced its rebrand to Bread Savings in April 2022 to reflect the rebranding of its parent company, Alliance Data, to Bread Financial in March 2022.
CIT Bank: 6 months – 5 years; $1,000 Minimum Deposit to Open
CIT Bank is the banking subsidiary of financial services company CIT Group and offers personal banking products to consumers, as well as business and commercial banking. The online-only bank offers three main financial products: savings accounts, CDs, and IRA CDs.
Discover: 3 months – 10 years; $2,500 Minimum Deposit to Open
Discover is one of the largest credit card issuers in the United States, but also offers online banking, home equity loans, student loans, and personal loans. Some of its retail products include CDs, checking accounts, money market accounts, and a high-yield savings account – all with no fees. It’s an ideal choice if you’re looking to manage your bank accounts and credit cards all in one place.
Live Oak Bank: 6 months – 5 years; $2,500 Minimum Deposit to Open
Founded in 2008, Live Oak Bank is headquartered in Wilmington, North Carolina. It has personal and business banking products including small business loans, online savings, and CD accounts. Live Oak was founded as a lender focused exclusively on financing veterinary practices, but now works with business owners in agriculture, insurance, and health care.
Marcus by Goldman Sachs: 6 months – 6 years; $500 Minimum Deposit to Open
Marcus by Goldman Sachs is a consumer bank that specializes in a few products including online high-yield savings accounts, CDs, and no-fee personal loans. It was founded in 2016, and has $50 billion in deposits since launch. The brand was named after Marcus Goldman, one of the founders of Goldman Sachs.
Sallie Mae Bank: 6 months – 5 years; $2,500 Minimum Deposit to Open
For a long time, Sallie Mae has been known for creating, servicing, and collecting private education loans. But it also has a consumer bank business that offers savings accounts, money market accounts, and CDs. It’s headquartered in Salt Lake City and operates as a subsidiary of SLM Corp.
Synchrony Bank: 3 months – 5 years; No Minimum Deposit to Open
Synchrony Bank is a subsidiary of Synchrony Financial, a financial services company based in Stamford, Connecticut. With this online-only bank, you can open traditional and IRA CDs, as well as savings and money market accounts. The bank also partners with dozens of retailers, such as Amazon and Lenscrafters, to issue store-branded credit cards.
TIAA Bank: 3 months – 5 years; $1,000 Minimum Deposit to Open
TIAA Bank, formerly known as EverBank, is a full-service bank that offers certificates of deposits, as well as checking, savings, and money market accounts. It’s based in Jacksonville, Florida. There are several branches across Florida that offer in-person services, but it primarily operates as an online bank.
Best CD Rates By Term
1-year CD rates
|CFG Bank||4.86% APY||$1,500|
|Live Oak Bank||4.60% APY||$2,500|
|Bread Savings||4.50% APY||$1,500|
3-year CD rates
|CFG Bank||4.60% APY||$500|
|Bread Savings||4.50% APY||$1,500|
|Sallie Mae||4.40% APY||$4,500|
5-year CD rates
|CFG Bank||4.60% APY||$500|
|Bread Savings||4.50% APY||$1,500|
|Discover Bank||4.40% APY||$2,500|
Average Interest Rates for CDs
Like with savings accounts, though, you can often find CDs with much higher rates than these averages indicate. All of the accounts on our list of best CDs, for example, carry much more competitive rates than these averages. Before you open a new CD, make sure you compare accounts and find one that best fits your savings goals.
How We Chose These Banks
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.
This Week in CD Rates
CD rates remained the same this week. Based on banks we track at NextAdvisor, the average one-year CD rate is at 4.32%, the rate for a two-year CD rate is 4.08%, and the three-year CD average rate is at 3.83%. Five year CDs have an average 4.04% APY.
Rates are still rising across the board, but experts recommend sticking to shorter terms so you don’t miss out on potentially higher interest rates in the near future. Another solution may be building a CD ladder with short-term CDs to maintain flexibility in the rising rate environment.
As CD APYs continue to rise, you can expect high-yield savings accounts and money market accounts to see an increase, too. Be sure to compare all savings account options and rates to get the best rate for your goals.
What to Know About CD Rates
Normally, certificates of deposits — known as CDs — have higher interest rates than savings accounts or money market accounts. Since the pandemic, rates are rising again.
In response to the COVID-19 pandemic and the damage done to the economy, the Federal Reserve made an emergency cut to interest rates in March 2020, and many banks and credit unions followed suit. But since then, rates are rising across the board. Now, most CDs are up, along with high-yield savings accounts and money market accounts. Now, there’s a difference, though not major, between returns on a one-year CD versus a five-year CD, with some banks offering 4% for five-year CDs.
What Causes CD Rates to Change?
Several factors cause CD interest rates to fluctuate, but a primary reason it changes to the federal funds rate set by the Federal Reserve. In March 2020, the Fed cut rates to nearly zero, but interest rates saw sharp increases last year and will continue to rise with more rate hikes predicted this year, but at a slower pace.
When the Fed slashes interest rates, it lowers the cost of borrowing money, incentivizes businesses to invest and hire more, and encourages consumers to spend more. But cutting interest rates has a negative effect on savings and CD rates. Banks typically react to the Fed lowering interest rates by lowering their own annual percentage yields (APYs) on consumer products.
On the other hand, when the Fed raises rates, banks also follow suit by raising the yields on deposit products like CDs. As a result, CD rates at banks and credit unions are around 4% and above, which is in line with basic high-yield savings and money market accounts right now. CD rates are still higher than these more liquid accounts, but one downside to locking in a CD rate during a rising rate environment means you could miss out on potential higher interest in the future if you choose a long-term CD today.
What Is a CD?
A CD is a deposit account where you agree to leave your money in the account for a set period of time, with a set rate of return known as an APY.
How Do CDs Work?
The main benefit of a CD is your money grows over time with fixed interest, usually higher than a typical savings account. The trade-off is that you agree to leave the account untouched for a specific amount of time, known as the term. One thing to note is money in a CD account will commonly be assessed penalties or fees for early withdrawal before the CD term is up.
What Term Should I Select?
If you’re already saving for retirement, paying off your debt, and have at least a few months’ savings in a liquid account like a high-yield savings account, you can consider putting excess savings into a CD.
The most common CD terms are one year, three years, or five years. But some CD terms can be as short as three months or as long as 10 years. Just make sure you won’t need that money for the duration of the term you choose — and research the early withdrawal penalties that may apply just in case.
When Are CDs a Good Investment?
CDs offer a guaranteed way to earn interest on your money and can help you reach your savings goals faster. But the timing of your investment can play a big role in how much interest you’ll earn.
Today, interest rates are on the rise, which means you can find CDs with better interest rates than banks offered a few months ago, and often higher yields than what you’ll get with most conventional big-bank savings accounts. But if rates continue to increase, a CD with the same term may offer more interest later on.
If you have extra cash that you don’t need in the near future, a CD could be a smart investment in times of economic instability — especially since your rate of return is guaranteed for the duration of the term. Knowing the future value of the account, you can plan ahead. When the CD’s term is up, you can redirect those savings elsewhere or reinvest in another CD account.
How to Choose a CD
CDs come in all shapes and sizes: There are traditional CDs, bump-up CDs, no-penalty CDs, and more. But before choosing any CD, do some homework and figure out how much you’re willing to invest. If you’re saving for retirement, paying off your debt, and have at least a few months of savings in an account that you can easily access, consider putting excess savings into a CD. Just make sure you won’t need that money for the duration of the term — and research the early withdrawal penalties just in case.
Types of CDs
Take time to figure out which type of CD is best for your financial goals. Here are a few to consider:
This type of CD, also known as a standard CD, is as straightforward as it gets. You can open a traditional CD at just about any bank, credit union, or other financial institution. It has a fixed interest rate, a fixed term, a minimum deposit, an early withdrawal penalty, and federal deposit insurance. There are a variety of fixed interest rates and terms to pick from, typically from three months to five years. If you’re looking to add CDs to your savings strategy, a traditional CD is a good place to start. Other CD types resemble traditional CDs with only a few differences.
Imagine a CD where you can withdraw your money anytime at no cost. With a no-penalty CD, you can do just that. But there’s a trade-off when it comes to no-penalty CDs. In exchange for more liquidity, they often come with lower interest rates and may require higher minimum deposits. Also, there may be an initial waiting period before withdrawal, or you might not be able to partially withdraw from the CD.
Bump-Up and Step-Up CDs
Bump-up and step-up CDs both let you maximize interest in a rising rate environment, but there are some differences between the two. With a bump-up CD, you can request that the bank raise the interest rate on your CD. You can only request a rate boost for a bump-up CD if the bank offers new CDs at a higher rate for the same term. In a step-up CD, the bank gets to decide when to put in a rate raise.
Callable CDs are a little riskier than standard CDs, but they usually offer higher rates upfront. It’s called a callable CD because the bank has the option to “call,” i.e. close, your account at any time before it reaches maturity. So, you’ll receive your principal plus any interest already earned but miss out on potential interest for the rest of the CD term. A callable CD is usually called when interest rates dip.
You can buy a brokered CD through an investment firm, also known as a brokerage, although it’s still issued by a bank or credit union. They have a fixed interest rate, but brokerage fees could take a chunk out of your earnings. Most brokered CDs are insured by the FDIC, but you’ll want to double check with the firm. These CDs usually earn higher interest, but they’re harder to get out of if you decide you want your funds early. You can only access funds in a brokered CD before the term ends by selling the CD in a marketplace.
If you have a lot of cash on hand, you may consider putting it in a jumbo CD. A jumbo CD has a high minimum deposit requirement, typically over $100,000. In exchange for your higher deposit amount, jumbo CDs usually come with more competitive interest rates. For jumbo CDs, in particular, it’s important to remember deposit accounts at a single financial institution are only FDIC-insured for up to $250,000. For savings balances in excess of that, it makes sense to spread them around across multiple accounts at different FDIC-insured institutions.
Typically, you’re only allowed to make a single initial deposit when you open a CD account. But add-on CDs let you make contributions over time, similar to a savings account. It makes sense if you’re looking to increase your principal in addition to interest as the CD approaches maturity. Add-on CDs are rarer, however, so it may be difficult to find competitive rates. And the bank may limit how many deposits you can make over the CD’s term.
Best No Penalty CD Rates
A no-penalty CD offers more flexibility than traditional CDs. You might earn slightly less interest on your balance, but you’ll pay no penalty fee if you withdraw your money early, and you can still get a competitive rate. Taking money out of your no-penalty CD may have some restrictions — for example, you may still be required to wait a few days or weeks before you can make a no-penalty withdrawal. But oftentimes, you’ll waive many of the fees and penalties that traditional CDs have.
Here are a few of the best no-penalty CD rates available today. Keep in mind that most banks offer shorter terms for these CDs compared to traditional CDs and often require a minimum balance.
|Marcus by Goldman Sachs||3.50%||13 months||$500|
|Synchrony Bank||3.30%||11 months||$0|
These rates are accurate as of January 3, 2023.
CDs and Taxes
The money you stash away in a CD is not taxable – but any interest you earned on the CD is. The same rule applies to interest earned in other types of savings or deposit accounts.
There is no specific tax rate for interest earned on CDs. It’s recorded as income, so the amount you pay will depend on your tax bracket. You can use a CD calculator to estimate your potential interest earnings.
What to Know About CD Ownership
CDs are an investment tool that requires you to leave your money untouched for a set period of time. During the length of the CD, you will not be able to access your money or withdraw any funds without facing a penalty.
CDs have historically offered higher interest rates than other low-risk investment options like traditional savings accounts, but make sure you are prepared to part with your money for the period of the CD.
What to Know About CD Compounding
Similar to a traditional savings account, CDs earn compound interest. This means that every so often, the interest you earn — which is based on your CD rate — is added back to your principal investment (the original money you put into the CD). Then this new sum (principal + interest) will earn even more interest as time goes on. Check the terms of your CD for more information about how often your interest compounds.
CDs vs. Other Savings Accounts
A traditional savings account is secondary to your checking account, and is mainly used for saving money you may need immediate access to, such as an emergency fund. A traditional savings account will earn a little interest, and is generally found at an established bank.
There are also high-yield savings accounts that earn more interest than traditional savings accounts. These accounts are usually found at online banks.
Savings bonds are backed by the U.S. government, and therefore are one of the safest investments you can make. They’re essentially a loan to the government, and the government will pay you predefined interest in exchange for that loan.
Bonds are usually a much-longer term investment than CDs. A savings bond typically compounds semi-annually every year for 30 years, while CDs usually operate on 1- to 5- year time periods.
An IRA (individual retirement account) is a vehicle for saving for retirement. With an IRA, you make contributions with money that’s already been taxed, allowing your contributions to grow tax-free.
Money Market Accounts
You can use a money market account to securely save money while earning interest on your deposits. MMAs usually offer higher interest rates than traditional savings accounts, but are on par with high-yield savings accounts.
Investment accounts can be more risky than a savings account or CD, but you also have more potential for return. With an investment account, you can invest in stocks, bonds, mutual funds, ETFs, and index funds, but your return will be based on market performance.
How to Build a CD Ladder
If you’re looking for a tactical way to boost your savings, a CD ladder could be an effective strategy. By spreading your savings across multiple CDs with different maturity dates, you can maximize interest as rates increase over time.
The best part of a CD ladder is flexibility. As each CD matures, your savings will free up for you to either use or roll into more investments. A ladder lets you sidestep one of the biggest cons of investing in a CD: limited access to liquidity.
For instance, if you have $5,000, you may split that money across five CDs that mature every twelve months over the next five years. Here’s a breakdown using rates comparable to the ones from the banks on our list of best CD rates:
- $1,000 into a one-year CD at 2% APY
- $1,000 into a two-year CD at 2.2% APY
- $1,000 into a three-year CD at 2.4% APY
- $1,000 into a four-year CD at 2.6% APY
- $1,000 into a five-year CD at 2.8% APY
After your first CD expires, you’ll have $20 interest in addition to your starting $1,000. You can then roll that into a new five-year CD, and do the same as each annual CD matures. By doing so, you’ll get the benefit of higher-interest long-term CDs, but still have access to your money every year if you need it.
What is considered a good CD rate?
Normally, CDs offer higher interest rates than most savings accounts, but CD rates decreased a lot over the pandemic. Rates are on the rise this year, though, and CD rates are becoming more competitive..
What banks are the best choice for CDs?
To narrow down our list of CD lenders, we focused on banks that offer the most-common CD term lengths of 1, 3, and 5 years. We also eliminated institutions that require an opening deposit of more than $2,500.
What are the alternatives to a CD?
For similar low-risk investments, look at traditional and high-yield savings accounts, savings bonds, money market accounts, IRA and 401(k)s, or investment accounts.
How do I know if I’m maximizing my return on my CD?
To ensure that you’re getting the best CD return possible, shop around for CD rates from different financial institutions, consider a longer CD term, and don’t withdraw your money from your CD before the end of its time period.