Best Certificate of Deposit Accounts
The top CD options are typically those with the highest interest rates -- not surprising.
But other characteristics could matter to you, such as the early withdrawal penalty or the minimum deposit requirement.
- Marcus by Goldman Sachs: Best for 12-Month High-Yield CD
- Synchrony Bank: Best for Flexibility
- Capital One: Best for 5-Year CDs
- Discover® Bank: Best for 10-Year CDs
- Valley Direct: Best for Variable Rates
Marcus by Goldman Sachs: Best for 12-Month High-Yield CDs
To push the growth of your short-term savings, the 12-month CD option from Marcus by Goldman Sachs is a clear choice. The interest rate is among the highest available nationwide (and Marcus offers a 10-day CD rate guarantee, which is particularly useful as CD rates are changing frequently now).
This CD option has a $500 minimum balance and an early withdrawal penalty of 180 days of simple interest.
Read the full editor's Marcus by Goldman Sachs CDs review.
Synchrony Bank: Best for Flexibility
Amid an interest rate environment that is constantly changing, the Synchrony Bank 24-month Bump-Up CD can come in very handy. With a great starting interest rate, customers have a one-time option to increase the rate if interest rates rise during that 2-year maturity term.
The account has no minimum balance requirement and an early withdrawal penalty of 180 days of simple interest at the current rate.
Read the full editor's Synchrony Bank CDs review.
Capital One: Best for 5-Year CDs
The Capital One 5-Year CD offers a great opportunity to lock in amazing interest rates for long-term, low-risk savings growth–great for future financial goals such as a wedding or home down payment.
This CD option has no minimum opening deposit or minimum balance and the early withdrawal penalty is six months of interest, which is much less than competitor CDs of similar maturity terms.
Read the full editorial Capital One 360 CDs Review.
Discover Bank: Best for 10-Year CDs
Discover Bank is one of the few online banks that offers a super-long 10-year CD with an interest rate that is very competitive. This ultra long-term option offers a great way to combat inflation or decrease the risk of your financial portfolio.
The CD has a minimum opening deposit of $2,500 and the early withdrawal penalty is only 24 months of simple interest (very low relative to the length of the maturity term).
Read the editorial review of Discover Bank CDs.
Valley Direct: Best for Variable Rates
Valley Direct is the online banking of Valley National Bank and it provides a very interesting variable-rate CD with a 36-month maturity term. In addition to a market-leading rate, it also promises to stay 0.1% above the Federal Funds Target Rate Upper Limit. So, if interest rates rise, the CD rate change will apply on the 1st business day of the month after the rate change.
This 36-month Variable CD has a minimum deposit of just $500 and an early withdrawal penalty of 365 days of interest on the amount withdrawn.
How CDs Work
When a CD earns interest, it can be paid via check, transferred to a savings account, or capitalized. With interest payments via check or transfer, it is up to you how you reinvest or spend the interest.
On the other hand, when you choose to capitalize on your interest payments, this means that the CD yields will be reinvested into the account, making it part of the principal amount. The investment will grow more quickly in this manner.
The end of the term is what is known as CD maturity. Upon maturity, you can take either two courses of action: renew the CD or take out the money.
Keeping track of your maturity date is especially important because when banks do not receive any instructions from the customer regarding the matured CD, they will automatically renew this for the same term after a prescribed period of time, usually 10-15 days.
Should You Invest in CDs?
Before investing in a certificate of deposit, you should first determine what type of investor you are.
In the end, your decision to invest in CD should depend on whether or not you are comfortable with the yield it gives and the level of risk it presents.
For the conservative investor, safety is paramount. These investors typically aim to preserve their capital and maintain a steady income. This makes CDs a suitable investment option, as they offer guaranteed returns with extremely low risk.
Moderate investors strive for a balance between risk and return. They hold a mix of lower-risk investments like CDs, as well as higher-risk assets like stocks. While the yield from a CD might be lower, it adds stability to their portfolio.
On the other spectrum, aggressive investors prioritize high returns over potential risks. While a CD may not be their go-to investment option due to its lower yield, it can serve as a safety net during market downturns when high-risk assets are performing poorly.
How to Choose CDs
Determine when the CD matures
This is the first step you need to go through.
Though it may seem obvious, a surprising number of investors fail to confirm the maturity date of their investment.
They are shocked to find out that they tied their money for five or even ten years when they try to withdraw it from the bank.
Know the penalty for early withdrawal
Before investing in CDs, it is important to determine how many penalties will be charged in case of early withdrawal.
In some cases, investors risk losing a portion of their principal if they cash out early, especially if they bought brokered CDs.
Confirm the yield of the CD
The investor needs to receive a disclosed document that states how much the amount of interest rate on the CD will be.
It should also contain how and how often the bank will pay the yield.
For example, some banks pay the interest monthly while some disburse it semi-annually. The payment can be made through electronic transfer by issuing a check.
Find out if the CD has call features
As was discussed above, the call feature allows the bank to terminate the CD after a specific period of time, but the investors do not have the same right.
If interest rates fall, the banks may “call” it, and you will be paid the principal plus any accrued interest.
However, if the interest rates rise, you can be stuck with a long-term CD that pays below-market rates. In addition, if the investor wants to cash out before the maturity date, they will lose some of their principal.
Federally Insured One-Year-Non-Callable
Understand what “Federally Insured One-Year-Non-Callable” means – the term doesn’t imply that the CD will mature in one year.
It simply states that the bank cannot terminate the CD during the first year, but the institution has the right to terminate it after one year has passed. Ask a bank representative if it isn’t clear when the CD will mature.
Determine if the brokered CD is insured
The Federal Deposit Insurance limits its coverage to $100,000 per depositor in each institution.
If an investor buys a brokered CD, it is essential for them to find out which institution is the issuer of the investment instrument.
The broker may put the money in a bank where the investor already has CDs and other deposits. In that case, they risk not being fully insured if their total deposit in the bank exceeds $100,000.
Ask whether the interest rate can change
Some forms of CDs have variable interest rates. These types of investment instruments have “multi-step” structures wherein the rate can increase or decrease based on a pre-set schedule.
The varying rate can also depend on a specified index's performance, such as the Dow Jones Industrial Average.
Consider a CD Laddering
Many people like CDs because of their security and higher interest rates. Some don't like them because they tie up their money for an extended period of time. If you are one of these people, the solution may be CD laddering.
CD laddering balances the benefits of higher interest you receive from a larger and longer-term CD, with more access to your money.
Building a CD ladder gives you the best of both worlds by buying multiple longer-term CDs with different maturity dates. Having staggered CD maturity dates enables you to have more regular access to your funds.
CD ladder strategies
A popular way to organize your CDs is by creating a flexible CD ladder that spreads your money across multiple CDs with the goal of having a regular source of income while earning the highest interest rate. For example, if you have $10,000 you wish to invest in CDs and you want to have a regular source of annual income, you would need to buy five $2,000 CDs.
Each of the five CDs would have a term of 1, 2, 3, 4, or 5 years. When the first CD matures at the end of the first year, you withdraw the interest and roll over the principal into a new five-year CD.
By following this process each year, at the end of five years, you will have five CDs, each earning the maximum interest rate for a 5-year CD. The same technique can be applied to any amount and any CD term.
Some banks provide pre-built CD ladders to customers.
What to Expect When Your CD Term is Coming to an End
Several weeks before your CD matures, your bank will notify you (usually by mail) that your CD is about to mature. The notice will include a description of your options and instructions about what to do once you select one.
When your CD reaches maturity, you have a number of choices:
- Withdraw your principal and interest and renew the CD.
- Withdraw your interest and renew the CD.
- Roll over your principal and interest in a new CD.
- Add funds and purchase a new CD.
- Withdraw the interest and a portion of the principal and buy a smaller CD.
If you choose to cash out some or all of your CD when it matures, you can receive a check in the mail or transfer it to another account.
Whichever option you choose, you will have to notify the bank in writing or in person, as required by your bank. If you don't follow your bank's rules for notifying them of the changes, they will be ignored.
What happens if you do nothing?
If you forget to respond to the notice or choose to do nothing, the bank will hold your money for a grace period of 7-10 days, and then it will automatically renew for the same terms as the original CD.
This will result in you being subject to early withdrawal penalties, even if you remember one day after the CD auto-renews.
On the surface, CDs seem simple, but there are a number of things you need to pay attention to when picking the right CD account.
Many investors traditionally purchased their CDs through banking institutions.
However, CDs are now also being offered by brokerage firms and independent sales personnel. These individuals or business entities are sometimes known as “deposit brokers” because they can negotiate a higher rate of interest by promising a specific amount of deposits to the banking institution.
In this regard, it is important to look at strategies that can maximize the yield of your CD.
CD Accounts We Analyzed
|Marcus by Goldman Sachs
|Bank of America
|First Internet Bank
|American Express National Bank
|Capital One 360
|Citizens Access Bank
|Live Oak Bank
|Alliant Credit Union
The interest rate is one of the most important aspects of a CD. It can be the difference between losing to inflation and keeping pace with it. It can also accelerate your progress toward long-term savings goals.
Interest rates on CDs tend to increase when you opt for a longer maturity term.
Early Withdrawal Fees
It really pays to research penalties and fees, not just the interest rates, so that if you take a loss with an early withdrawal, it doesn’t have to equal a wrong financial decision.
In the case of some banks with long-term CD accounts with a fixed penalty, the high-interest rate could outweigh the withdrawal penalty, even if you do end up taking your money out early.
Comparing CD Early Withdrawal Penalty Fees Across Major Banks
|60 days of interest
|150 days of interest
|Bank of America
|180 days of interest
|365 days of interest
|Capital One 360
|3 months of interest
|6 months of interest
|3 months of simple interest
|12 months of simple interest
|6 months of interest
|18 months of interest
|American Express National Bank
|270 days of interest
|540 days of interest
|1% of the withdrawal amount
|2% of the withdrawal amount
|6 months of interest
|12 months of interest
|90 days of interest
|180 days of interest
|$25 + either 1/2 of the interest you would have earned if the funds were withdrawn after maturity OR 1% of the withdrawal amount, whichever is greater
|$25 + either 1/2 of the interest you would have earned if the funds were withdrawn after maturity OR 3% of the withdrawal amount, whichever is greater
A Certificate of Deposit (CD) is a fixed-income investment product offered by banks and credit unions. It is a short to medium-term investment that is fully insured by the FDIC up to $250,000.
When investing in a CD, clients decide to put their money in the bank for a specific period of time, and in return, the bank pays them an agreed interest rate which is typically higher than the regular savings account. Banks usually impose a certain penalty for CD withdrawals made before the maturity or the end of the term.
Types of CD Accounts We Track
Most of us are familiar with the traditional certificate of deposit. It is a deposit product that earns a fixed interest rate higher than the savings account for a fixed period of time.
CDs are usually for people who have no immediate plans for their cash and want to enjoy a higher yield for their money in a safe and FDIC-backed investment vehicle.
However, do you know that there are other types of CDs besides the traditional CD?
These non-traditional CDs offer flexible options for depositors who may be looking to explore other CD alternatives.
Here are some of the most commonly offered and used non-traditional CDs:
A Callable CD is a CD a bank can "call" away after a designated call-protection period.
What happens is that the bank gives you a premium rate while the call-protection period is still in effect, but in exchange, as soon as this period ends, the bank can then take back the premium rate and replace it with a much lower one based on the prevailing market rates at that time.
As opposed to the Callable CD, a Bump-Up CD gives the depositor a chance to "bump up" or opt for a higher interest rate should there be an increase in CD rates within the lifetime of the CD. This can be done only once for the duration of the CD term.
Liquid CDs are CDs that allow the depositor to withdraw from his CD without being charged a penalty.
Pay close attention as there are several caveats to this type of CD:
- The minimum amount that you need to open and maintain this CD is much higher than the usual balance required
- The interest rate for liquid CDs are lower than traditional CD rates
- There is usually a limit to the number of times you can withdraw within the term of the CD
Step Up or Step Down
This type of CD is also commonly known as a flexible CD. Not to be confused with the Bump Up, the Step Up or Step Down CD usually enjoys a fixed rate for a period of time, say one year, after which the rate is automatically increased or lowered to a predetermined rate.
Brokerage CDs are those bought by the investor through a brokerage rather than from banks.
The advantage of buying brokered CDs is that these usually carry higher interest rates than those directly sold at banks because brokerages can pool investments before buying a certain bank's CD.
On the downside, brokered CDs are traded on the secondary market, and while you can have access to your cash without penalty, you could also stand to lose part of the principal for the same reason.
Also, some brokerages are not FDIC-insured so do your homework before buying CDs through one.
Zero-coupon CDs work in much the same way as zero-coupon bonds. The CDs are purchased at a deep discount to par value, or the amount of the CD by the time it matures.
The term zero-coupon means zero-interest payments.
So while this type of CD typically has higher yields, there will be no payments made for the duration of the CD term, which is usually for longer periods, as the interest will be reinvested together with the principal.
Even if you can afford to tie your investment for longer terms, you also need to cover the taxes that will be billed to you every year before even receiving the actual interest.
A jumbo CD is a CD in a very large denomination, usually at a minimum of $100,000.
Jumbo CDs are commonly bought by large institutional investors, such as banks and pension funds, who are interested in low-risk and stable investment options.
Jumbo CDs are also known as negotiable certificates of deposits and come in bearer form. It works like a conventional certificate of deposit that locks in the principal amount for a set time frame and is payable upon maturity.
To get more detailed information on each of these CDs and find out which are available now, visit your local bank or your online bank's website. To get the latest interest rates in the market today, check out our CD rates page.
For this guide, we researched roughly 155 CDs from the top 50 U.S. banks (based on total deposits according to the FDIC), credit unions, and non-bank financial services providers.
The Best CD Accounts were chosen based on the consistency of high-interest rates, early withdrawal penalties, minimum balance requirements, and account features.