Certificates of deposit are safe investments that let you set aside money at a fixed interest rate for an exact period of time, or term. If you’re looking for stability for your earnings or want to put aside money for a future purchase, CDs offer more interest than checking or savings accounts. While locking in a rate means low risk, keep in mind that you’ll pay a penalty if you withdraw your money prematurely.
The interest on a CD is usually compounded daily or monthly. Your CD will also list an annual percentage yield, or APY, that measures compounded interest over the course of the year, effectively giving you your annual interest rate.
When you open a traditional CD account, you’ll deposit one lump sum of money and then leave it untouched for the length of the CD’s term, which can run from a month to 10 years. There’s no guesswork or volatility like stocks: You’ll know exactly how much you’ll earn and when you’ll get your money.
APYs for CDs are directly tied to the federal funds rate benchmark, so as the Federal Reserve raises interest rates in 2022, CD APYs will likewise move higher. Annual yields for CDs peaked at over 10% back in the 1980s, hovered around 5% in 2000 and have been very low over the last decade. After years of decline, CD APYs are only now starting to climb, and while today’s highest rates (the best now surpass 3%) are less than the current record-high inflation, they’ll still give you more interest than a standard bank account.
There are many different types of CDs. Some may let you add money to your account during your term or withdraw money without penalty, but those features usually come by compromising a higher APY. The highest-yield CDs listed here are all traditional — they require one lump-sum deposit to open the account, the money cannot be withdrawn without penalty, and the APY is set for the term of the CD.
Note: The CD rates provided were collected from the issuing organizations’ websites and are valid as of June 24, 2022.
Pentagon Federal Credit Union provides certificates that are technically different from CDs but they still give fixed rates of interest on one-time deposits for certain term lengths. These money market certificates (MMCs) function exactly the same as CDs for investors.
The minimum deposit for all of PenFed’s MMCs is $1,000. PenFed also provides a lengthy seven-year certificate that gives a fixed 3% interest rate.
A five-year CD with the minimum deposit of $1,000 would give you $1,188 at the end of your term.
Minimum deposit: $1,000
Bread Financial arose from Alliance Data Systems, a marketing and private-label credit card company that still provides cards for brands like Victoria’s Secret, J. Crew and Pottery Barn. Bread Savings, formerly known as Comenity Direct, is an online-only banking subsidiary that focuses on credit cards, savings accounts, loans and CDs.
Bread Savings’ CDs run from one year to five years and require a minimum deposit of $1,500. Its rates for all terms are quite competitive, and its three-year CD in particular features the highest rate at that term on this list.
A five-year CD with the minimum deposit of $1,500 would give you $1,769 at the end of your term.
Minimum deposit: $1,500
Popular Direct is the direct banking arm of Popular Bank, a financial services organization that has operated in Puerto Rico for 128 years and in the mainland US for 55 years. Popular Direct only offers deposit-based accounts for savings and CDs.
Popular Direct’s CDs run from three months to five years and list high rates for three-, four- and five-year terms, but all require a heftier $10,000 minimum deposit. The penalties for early withdrawal at Popular Direct are also higher than its competitors on this list. The charge for early withdrawal on a five-year CD is a whopping 730 days of interest. However, its rates stack up near the top of our list right now.
A five-year CD with a minimum deposit of $10,000 would give you $11,734 at the end of your term.
Minimum deposit: $10,000
The First Internet Bank of Indiana claims to be the first ever state-chartered, FDIC-insured bank to serve its customers completely online. It offers a full array of banking products, including checking, savings and money market accounts, IRAs, credit cards, loans and CDs.
First Internet Bank provides a wide range of CD lengths, from three months to five years, and its longer-term rates rank among the best. Even better, First IB’s CDs only require a minimum deposit of $1,000, making for an affordable and secure investment.
A five-year CD with the minimum deposit of $1,000 would give you $1,164 at the end of your term.
Minimum deposit: $1,000
Based in Wausau, Wisconsin, Connexus Credit Union offers checking and savings accounts, consumer and business credit cards, and a variety of auto, home and personal loans to customers in all 50 states. Connexus provides share certificates that work exactly like CDs, giving fixed rates of return on lump-sum deposits for fixed terms.
Share certificates differ from CDs in that deposits are insured by the National Credit Union Administration and that, as a credit union, any profits Connexus earns go back to its members as dividends or other benefits. Connexus requires a minimum deposit of $5,000. The term lengths for Connexus’ share certificates run from one year to five years.
A five-year CD with the minimum deposit of $5,000 would give you $5,785 at the end of your term.
Minimum deposit: $5,000
Formerly Radius Bank before 2021, online-only LendingClub provides strong CD rates for a reasonable minimum deposit of $2,500. It lists five different CD terms on its website, ranging from one to five years, with a two-year rate of 2.50% that particularly stands out.
LendingClub’s early withdrawal penalties for CDs are a bit tougher than other banks. It charges 365 days of interest on your withdrawal, regardless of how early it’s made. What differentiates LendingClub from other CD issuers is its related high-yield savings account, which provides the best APY (1.26%) of any bank on this list.
A five-year CD with the minimum deposit of $2,500 would give you $2,891 at the end of your term.
Minimum deposit: $2,500
Founded in 2016 and named after the investment bank’s founder, Marcus from Goldman Sachs provides savings accounts, investments and loans to customers from its online-only platform.
Options abound for CD term lengths at Marcus, with 12 different options to choose that range from six months to six years. Marcus CDs are also unique in offering three “no penalty” CDs that let you make withdrawals at any time at no cost, at the expense of a lower APY.
A five-year CD with the minimum deposit of $500 would give you $577 at the end of your term.
Minimum deposit: $500
Quontic Bank has only a few physical branches in New York, Miami and Indianapolis, Indiana, but it’s become well-known for its competitive online banking products, including checking and savings accounts, home loans and reverse mortgages.
Quontic also offers a set of robust CDs, with terms ranging from six months to five years, and a top APY of 2.86%. CDs also include a low barrier to entry, with a minimum deposit of $500.
A five-year CD with a minimum deposit of $500 would give you $576 at the end of your term.
Minimum deposit: $500
* 1.90% is the APY for PenFed’s 15-month CD. PenFed does not currently offer a 1-year CD.
Certificates of deposit are products offered by banks, credit unions and other companies that have deposit accounts. Traditional CDs provide a fixed interest rate on a deposit if you agree to leave the money untouched for a specific period of time, known as a term.
Most banks offer CDs for two, three, four or five years, although terms can run as short as one month or as long as 10 years.
CDs are good for investors who want no risk at all. Unlike investments in stocks and bonds, which will vary in their rate of return, CDs provide an exact interest rate that won’t change in exchange for agreeing to invest your money for a certain amount of time. Because they’re low hassle, they could be a good option for parents who want to put aside money for their children, for households saving for a future expense or individuals who want a “rainy day” fund.
If you know that you’ll need a certain amount of money at a specific time in the future, a CD interest calculator can quickly let you know how much you need to invest, and you won’t need to think about it again until the CD matures and you withdraw your money.
However, the interest rate on CDs is currently less than the rate of inflation, especially now. Combined with the yearly taxes you’ll pay on your interest, you may end up losing money in total value. For other low-risk investments, consider I bonds — Treasury bonds pegged to inflation — or Treasury Inflation Protected Securities, also known as TIPS.
Most retail banks and credit unions sell CDs, as do online “neobanks” that don’t have banking charters but offer financial services. Because neobanks lack traditional overhead expenses like physical branches and in-person customer service, they can often provide higher APYs on CDs, passing on savings to customers in the form of higher interest rates.
Most neobanks partner with banks to ensure that the FDIC. backs customers’ deposits up to $250,000, but be sure to confirm that there’s FDIC insurance with every bank you use.
Most banks will not require a hard credit check to open a CD. Ask your bank or read your application completely to make sure any credit inquiries are “soft” to avoid temporarily damaging your credit with a “hard pull.” According to the credit-reporting company Experian, hard credit checks should be mentioned or included in your application.
Penalties for early withdrawal vary between institutions. Most are calculated by a loss of interest or dividends for a certain period of time. A longer CD term will generally have a greater penalty for early withdrawal.
However, banks do not share a standard calculation for early withdrawal penalties. Some may require you to withdraw the entire amount of the CD account, while others will charge a penalty only on the amount of a partial withdrawal. In some cases, if the early withdrawal penalty is greater than the interest you’ve earned, you’ll lose money on your principal investment.
CNET Reviews CD rates based on the latest APY information from issuer websites. We evaluated CD rates from more than 50 banks, credit unions and financial companies. We selected the CDs with the highest APY for 5-year terms from among the organizations we surveyed, and considered rates for shorter terms if 5-year terms were identical or unavailable.
Banks surveyed include: Alliant Credit Union, Ally Bank, America First Credit Union, American Express National Bank, Axos Bank, Bank of America, Bank of the West, Bank5 Connect, Barclays, BMO Harris, Bread Savings, BrioDirect, Capital One, CFG Community Bank, Citizens Access, Colorado Federal Savings Bank, Connexus Credit Union, Consumers Credit Union, Discover Bank, First Internet Bank of Indiana, First Tech Federal Credit Union, FNBO Direct, GO2bank, Golden 1 Credit Union,, HSBC Bank, Huntington Bank, Lake Michigan Credit Union, LendingClub Bank, Live Oak Bank, M&T Bank, Marcus by Goldman Sachs, Merrick Bank, Nationwide (by Axos), Navy Federal Credit Union, NBKC,, OneUnited Bank, Pentagon Federal Credit Union, PNC, Popular Direct , PurePoint Financial, Quontic Bank, Rising Bank, Salem Five Direct, Sallie Mae Bank, Santander Bank, Synchrony Bank, TAB Bank, TD Bank, TIAA Bank, Truist Bank, U.S. Bank, UFB Direct, Union Bank, USAA Bank, Vio Bank, and Wells Fargo.
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