- Some of the top CD rates have started dropping for several term lengths.
- It might be a good time to open a CD if you can keep money in your account for a full term.
- You could build a CD ladder if you want to have more flexibility.
Some of the best CD rates have started to drop for several CD terms, but you can still find many nationwide competitive options paying around 5% APY. Find out if now is a good time to open a CD.
Is now a good time to lock in CD rates?
It may be a good time to open a CD, if it aligns with your savings goals, says Alvin Carlos CFA, CFP, and managing partner of District Capital Management.
CDs work differently than other types of savings accounts because most have early withdrawal penalties — you have to maintain money in the account for a full term or pay a penalty if you take money out early.
"If you don't need money in one year, for example, I think it's advantageous to buy a 1-year CD now," adds Carlos.
Carlos also points out that if you lock in a CD, you'll be able to maintain a high rate for the remainder of the term. In comparison, high-yield savings accounts and money market accounts have variable interest rates. These rates wouldn't be locked in, so the rates could change at any time.
Carlos recommends building a CD ladder if you want more flexibility. You can create a CD ladder by distributing your money across several CDs with different term lengths. For example, you could open a 1-year, 2-year, and 3-year CD. Each year, you'll have access to a portion of your savings, and you can reevaluate your goals to determine whether you should renew the account or withdraw at maturity.
If you want to have more access to your money, a high-yield savings account or money market account may be a better place to keep your savings. You can take out money from these savings accounts at any time, although some banks do penalize consumers for withdrawing from savings more than six times per month.
The best no-penalty CDs are a good way to lock in higher rates on CDs without facing penalties if you need to withdraw funds before the maturity date. CIT Bank CD rates and Raisin are popular no-penalty CD options.
What will CD rates be in 2024?
Carlos says CD rates have likely peaked and will likely start dropping more in 2024 once the Federal Reserve starts cutting the federal funds rate.
CD rates are impacted by the federal funds rate, and may fluctuate over time. When the Federal Reserve raises the federal funds rate, CD rates rise. CD rates drop when the Federal Reserve cuts rates.
The Federal Reserve's Summary of Economic Projections for June indicated only one interest rate cut in 2024.
"For next year, I wouldn't be too worried about a huge drop in CDs," says Carlos. "I think that it's going to start incrementally dropping."
How to find the top CDs
If you're searching for CDs with high interest rates, here are a couple of things to keep in mind:
- Overall, online banks and credit unions pay higher CD rates than big brick-and-mortar banks. If you're searching for options that are available nationwide, several CDs pay 5% interest or more.
- A few local financial institutions have CD specials paying 6% interest or more. You'll have to meet geographic requirements, though.
- The best 6-month CDs have the highest rates overall, but you can also find other terms that pay good rates, too.
While CD rates can be a major factor in selecting an account, it's also important to think about what you want out of your banking experience. When you're choosing a CD, you can also compare opening requirements, early withdrawal penalties, and CD closing requirements.
This article was originally published in December 2023.
*Axos ONE Savings and Checking Bundle: The Annual Percentage Yield (APY) is accurate as of 04/01/2025. The base and promotional interest rate and corresponding APY for Axos ONE Checking is variable and is set at our discretion. The base and promotional interest rate and corresponding APY for Axos ONE Savings is variable and is set at our discretion. Axos ONE Savings is a tiered variable rate account. Axos ONE Checking is a non-tiered variable rate account. Interest rates may change as often as daily without prior notice. Fees may reduce earnings. Promotional terms and conditions are subject to change or removal without notice. Incentive may be taxable and reported on IRS Form 1099-MISC. Consult your tax advisor. After the accounts are opened, the amount of incentive earned will depend on meeting the additional requirements outlined below. The Axos ONE Checking account will earn a base rate of 0.00% APY. The Axos ONE Savings account will earn a base rate of 1.00% APY. Axos ONE accounts are eligible to receive a promotional APY for each statement cycle where the promotional criteria are met during the Qualification Period. To receive the promotional APY on both Axos ONE Checking and Axos ONE Savings, the Axos ONE Checking account must meet both of the requirements in either Option 1 or Option 2 below during the Qualification Period: Option 1 1. Your Axos ONE Checking account has received qualifying direct deposits of at least $1,500 in total. 2. The average daily balance of your Axos ONE Checking account is at least $1,500. Option 2 1. Your Axos ONE Checking account has received qualifying deposits of at least $5,000 in total. 2. The average daily balance of your Axos ONE Checking account is at least $5,000. If both of the requirements in either Option 1 or Option 2 above are met during the Qualification Period: The Axos ONE Checking account will earn a promotional rate of 0.51% APY for the statement cycle in which the requirements are met. The Axos ONE Savings account will earn a promotional rate of up to 4.66% APY for the statement cycle in which the requirements are met. The Qualification Period is from the 1st of the month through the 25th of the month. The Qualification Period for new accounts will begin on the day the account is approved. Any qualifying direct deposits received after the 25th of the month will count toward the next Qualification Period. A direct deposit is an electronic deposit of your paycheck or government benefits, such as Social Security, Disability, etc. Other deposits (i.e., online banking transfers, ATM and mobile check deposits, etc.) or person-to-person payments are not considered a direct deposit. Qualifying deposits only include deposits from the following eligible sources: (i) ACH transfers from external accounts, (ii) inbound wire transfers from external accounts, (iii) check deposits. Qualifying deposits do not include: (i) transfers internal to the bank (i.e., transfers between an account holder's Checking and/or Savings account), (ii) interest payments, (iii) promotional bonuses, (iv) credits, reversals, and refunds. Both accounts must be in an open and active status on the date the interest is paid to receive the promotional APY for that statement cycle. Account transactions may take one or more business days from the transaction date to post to the account.
**LendingClub LevelUp Savings Account: Earn 4.40% APY when you deposit at least $250 per month, earn 3.40% standard APY if minimum isn't met.
***CIT Bank Platinum Savings: Transfer a one-time deposit of $50,000+ for a Bonus of $300 or a one-time deposit of $25,000 -$49,999.99 for a Bonus of $225
****SoFi members who enroll in SoFi Plus with Direct Deposit or by paying the SoFi Plus Subscription Fee every 30 days or with $5,000 or more in Qualifying Deposits during the 30-Day Evaluation Period can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. Members without either SoFi Plus or Qualifying Deposits, during the 30-Day Evaluation Period will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Only SoFi Plus members are eligible for other SoFi Plus benefits. Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet. See the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.
*****Public High-Yield Bonds: All investing involves the risk of loss, including loss of principal. Past performance does not guarantee future results. This is not a recommendation or offer to buy/sell securities or engage in any investment strategy. Brokerage services for treasuries in a Treasury Account and US-listed securities, options, and bonds in a self-directed brokerage account are offered by Open to the Public Investing, member FINRA & SIPC. Public Advisors and Public Investing are affiliates. Self-directed Individual Retirement Accounts and Bond Accounts are offered by Public Investing. A Bond Account is a self-directed brokerage account with Public Investing, member FINRA/SIPC. Deposits into this account are used to purchase 10 investment-grade and high-yield bonds. The 6.9% yield is the average, annualized yield to worst (YTW) across all ten bonds in the Bond Account, before fees, as of 3/13/2025. A bond's yield is a function of its market price, which can fluctuate; therefore, a bond's YTW is not "locked in" until the bond is purchased, and your yield at time of purchase may be different from the yield shown here. The "locked in" YTW is not guaranteed; you may receive less than the YTW of the bonds in the Bond Account if you sell any of the bonds before maturity or if the issuer defaults on the bond. Public Investing charges a markup on each bond trade. See Public's fee schedule for more information. https://public.com/disclosures/fee-schedule. Bond Accounts are not recommendations of individual bonds or default allocations. The bonds in the Bond Account have not been selected based on your needs or risk profile. See Bond Account Disclosures to learn more. https://public.com/disclosures.
