CD RatesCD Rates

If you have money earmarked for a specific goal, such as a vacation or a wedding, a certificate of deposit (CD) can be an excellent option for both saving and earning interest. CDs are low-risk investment vehicles that offer a fixed rate of return in exchange for keeping your funds deposited for a set period, known as the term.

“According to Dana Menard, CFP, founder, and lead financial planner at Twin Cities Wealth Strategies, ‘CDs are always worth opening depending upon your goals, timeframe, and expectation for the term you’re locking up your money for.’

“With today’s top CDs offering annual percentage yields (APYs) of up to 5.5%, there’s never been a better time to open an account. While CD rates have been gradually declining in recent months, experts anticipate this trend will persist throughout the year. By opening a CD now, you can secure a still-high rate and safeguard your earnings against potential future drops.

Today’s Best CD Rates

Here are some of the top CD rates available right now and how much you could earn by depositing $5,000:

TermHighest APYBankEstimated Earnings
6 months5.50%BMO Alto; CommunityWide Federal Credit Union$135.66
1 year5.50%Bread Savings; CommunityWide Federal Credit Union$275.00
3 years4.75%First Internet Bank of Indiana$746.88
5 years4.60%BMO Alto$1,260.78

How the Fed Impacts CD Rates

CD rates are influenced by the federal funds rate, which determines the cost of borrowing and lending money among banks. When the Federal Reserve raises this rate, banks typically follow suit by increasing interest rates on consumer products like credit cards, savings accounts, and CDs to attract new customers and remain competitive.

Starting in March 2022, the Fed regularly increased the federal funds rate to combat inflation, leading to a surge in CD rates. However, with inflation showing signs of cooling, the Fed paused rate hikes at its last three meetings. Consequently, CD rates stabilized toward the end of 2023, and many banks began reducing rates across CD terms in recent months.

Here’s how APYs compare to the previous week:

TermCNET Average APYWeekly ChangeAverage FDIC Rate
6 months4.93%+0.61%1.51%
1 year5.09%-0.78%1.86%
3 years4.20%-0.47%1.40%
5 years4.00%-0.25%1.41%

APYs as of Jan. 31, 2024. Based on the banks we track. *Weekly percentage increase/decrease from Jan. 22, 2024, to Jan. 29, 2024.

The Fed is expected to announce another pause in rate hikes at its meeting this week.

“The Fed is expected to maintain its current interest rate stance at the Jan. 30-31 meeting,” said William Bevins, CFP, CFTA. “Any subtle shifts in the Fed’s communication could impact CD rates in the short term. The consensus remains that rates are on hold for a few more months.”

However, the Fed is likely to begin cutting rates later this year, leading to further declines in CD rates. Therefore, locking in an APY now can protect your earnings from future rate decreases.

Why You Shouldn’t Wait to Open a CD

In addition to a fixed APY, opening a CD offers other benefits:

  • Federal deposit insurance: CDs held at FDIC-insured banks or NCUA-insured credit unions are protected up to $250,000 per person, per institution, in the event of a bank failure.
  • Early withdrawal penalties: Most banks impose penalties if you withdraw funds before the CD matures, discouraging premature withdrawals and helping you maintain your savings.
  • Comparing CD Accounts: When comparing CD accounts, consider factors such as the term length, minimum deposit requirement, fees, federal deposit insurance, and customer ratings and reviews.


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