Introduction to CD Rates
It’s still a good time to earn a great return on a certificate of deposit, just don’t wait to take action. After declining in 2024 as the Federal Reserve cut rates, average CD yields stabilized in early 2025 thanks to the central bank hitting pause on more rate changes for several months. However, the Fed finally took action with its first rate cut of 2025 after meeting Sept. 16-17, and additional rate cuts are within the realm of possibility at the meetings set for October and December.
Today’s Best CD Rates
The best CD rates yield up to 4.45% annual percentage yield. If you choose to open an account today, you could lock in high rates for years, depending on the term that best meets your financial goals. Experts expect the Fed may cut rates again this year, so don’t wait to invest. The highest CD rate of 4.45% is offered by Bread Savings for its 6-month CD. Colorado Federal Savings Bank and Ivy Bank fiercely compete with the current leader.
Pro Tip
Looking for the best CD to fit your investment needs? See rates from top institutions:
- Wells Fargo
- Capital One
- Chase
- Bank of America
- Discover Bank
- Northern Bank Direct
- Ally Bank
- Newtek Bank
- Popular Direct
- Citibank
- Sallie Mae Bank
Compare CD Rates at Top National Banks
If you’re unfamiliar with most of the names mentioned above, there’s a straightforward reason why: CDs typically don’t yield substantial income for major financial institutions by themselves. Established banks like Chase, PNC, and U.S. Bank prioritize attracting customers through more profitable products like loans and credit cards, rather than CDs. Consequently, the APYs offered on CDs at these banks are often much lower compared to those available at smaller regional banks or online institutions and to get a good rate, you may be required to open other deposit accounts or deposit much higher minimums.
CD Rates News 2025
Investors should understand that average CD rates closely track Fed monetary policy decisions, specifically changes to the fed funds rate. It’s essential for CD investors to follow the ebb and flow of the central bank’s policy decisions to plan for changes in rates. The federal funds rate currently stands at 4.00%-4.25%. Last year, the Fed cut interest rates three times, leaving fed funds at 4.25%-4.50% as of December 2024. High inflation left over from the post-pandemic period was cooling off, and the FOMC reduced rates to help the economy stay on track. CD APYs fell from two-decade highs as the Fed cut rates.
Historical Context
Those 20-year highs in CD yields were the result of the central bank’s rate hike campaign of 2022 and 2023. Inflation was rising at its highest rate since the early 1980s, thanks to the economic disruptions of the pandemic. Between March 2022 and July 2023, the FOMC raised interest rates 11 times, from zero to 5.25%-5.50%, to help tame inflation.
How to Get a Good CD Rate
Determining what a good CD rate looks like is subjective. It depends on how much money you have to invest, how long you can leave it locked up in a certificate, and what prevailing market rates are when you intend to open an account. For instance, a 5.00% APY CD over five years might not be the right choice if you need liquidity sooner or if rates rise, leaving you with a lower return. Generally, rates above the national average are advantageous. Compare rates across banks for your desired term to find the best option.
Key Factors to Evaluate
- Term length: Ensure they match your savings goals.
- APY: Higher rates are available for longer CD terms.
- Minimum deposit: Ensure you can meet minimum deposit requirements.
- Penalties: Understand early withdrawal costs, in case you need to withdraw money before a CD matures.
- Deposit insurance: Always verify that your bank or credit union of choice has Federal Deposit Insurance Corp. (FDIC) or National Credit Union Administration (NCUA) coverage.
Types of Certificates of Deposit
Various CD types cater to different needs, such as:
- Brokered CDs are bought and sold via brokerage accounts rather than banks or credit unions.
- Callable CDs include a call feature allowing the issuing financial institution to end the CD before its maturity.
- Bump-up CDs allow you to request a higher APY if interest rates increase after you’ve opened your account.
- No-penalty CDs do not impose penalties for withdrawing funds before maturity.
- Jumbo CDs usually require a minimum initial deposit of at least $100,000 but generally provide higher APYs than standard CDs.
- Variable-rate CDs offer changing APYs that are indexed to prevailing interest rates.
Conclusion
CD rates today aren’t far from their recent highs. You still have the opportunity to secure advantageous rates on both short-term and long-term CDs. By depositing a larger lump sum into your CD, you can earn substantial interest. Remember, the key to maximizing your return is to stay informed about market trends and Fed decisions, and to choose the CD type that best aligns with your financial goals and risk tolerance.
