Are you looking to invest in a Certificate of Deposit (CD) but not sure where to start? CD rates can vary widely across financial institutions, so it’s crucial to find the best rate available. In the past, longer-term CDs typically offered higher interest rates to incentivize savers to keep their money deposited longer. However, the current economic climate has flipped the script on that trend.
Today, the highest CD rate stands at an impressive 4.40% APY, offered by NexBank on its 1-year CD with a minimum opening deposit of $25,000. To help you navigate the sea of CD rates, here are some of the best CD rate options available from our verified partners:
- Discover Bank: 2.05% APY on a 3-year CD
- Marcus by Goldman Sachs: 2.10% APY on a 5-year CD
- Ally Bank: 2.25% APY on a 5-year CD
Earnings from a CD depend on the Annual Percentage Yield (APY), which factors in the base interest rate and compound interest frequency. For example, investing $1,000 in a one-year CD at 1.81% APY with monthly compounding could yield $18.25 in interest. Opting for a 4% APY CD with the same initial investment would accumulate $40.74 in interest over the year. The more you deposit, the more you can earn, with a $10,000 deposit potentially earning $407.42 in interest with a 4% APY CD.
When choosing a CD, interest rates are crucial but not the only factor to consider. Different types of CDs provide various benefits and may offer greater flexibility at the cost of a slightly lower interest rate. Look beyond traditional CDs and explore options like:
- Bump-up CD: Allows for a rate increase if bank rates rise.
- No-penalty CD: Enables penalty-free withdrawals before maturity.
- Jumbo CD: Requires a higher minimum deposit for potentially higher interest rates.
- Brokered CD: Bought through a brokerage, these can offer competitive rates but carry more risk and might lack FDIC insurance.
As you weigh your options, remember that finding the best CD rate involves understanding your financial goals and balancing rate considerations with flexibility. Make an informed decision to ensure your investment works best for you.
