The Federal Reserve is widely expected to lower its benchmark rate once again on Thursday, and many consumers are paying close attention. Whether you’re a saver, an investor or a borrower, your finances would likely experience a ripple effect from a lower federal funds rate.
For instance, savers have enjoyed high yields on savings accounts and certificates of deposit (CDs) in recent years, thanks to a federal funds rate that had gradually increased to a 23-year high. The Fed then chose to lower this benchmark rate in September, and many banks decreased their CD yields leading up to that cut, as well as after it took place.
While September’s Fed rate cut was by half a percentage point, officials are expected to lower rates by a quarter percentage point when the Fed meets this week. Such a move could spur further decreases in deposit account APYs.
During a falling-rate environment, one bright spot for savers can be fixed-rate CDs. By locking in a high rate now, you’ll continue to earn that annual percentage yield (APY) throughout the CD’s term, even if your bank starts to lower the yields on new CDs it issues. If you’re in the market for a high-yield CD, read on for options of various term lengths, all available from well-rated, federally insured banks and credit unions.
Bank5 Connect: 6-month CD
APY: 4.85%
Minimum deposit requirement: $500
Interest you’d earn with a $10,000 deposit: $240
Bankrate’s rating of Bank5 Connect’s CDs: 3.9 stars out of 5
Bankrate’s overall rating of Bank5 Connect: 4.5 stars out of 5
Additional details: Bank5 Connect currently offers the highest-earning six-month CD among banks monitored by Bankrate. It requires a relatively low minimum deposit of $500. In total, the bank offers eight terms of CDs, many of which earn competitive APYs. With the 24-Month Investment CD, you can add funds any time throughout the CD’s term.
See more top six-month CD rates.
CIBC Bank USA: 1-year CD
APY: 4.43%
Minimum deposit requirement: $1,000
Interest you’d earn with a $10,000 deposit: $443
Bankrate’s rating of CIBC Bank USA’s CDs: 4.6 stars out of 5
Bankrate’s overall rating of CIBC Bank USA: 4.3 stars out of 5
Additional details: CIBC Bank USA offers one of the highest yields among one-year CDs Bankrate monitors. Its minimum deposit requirement falls in line with what various other banks require. In total, the bank offers seven terms of CDs, all of which earn competitive yields.
See more top one-year CD rates.
Bask Bank: 2-year CD
APY: 3.75%
Minimum deposit requirement: $1,000
Interest you’d earn with a $10,000 deposit: $764
Bankrate’s rating of Bask Bank’s CDs: 4.0 stars out of 5
Bankrate’s overall rating of Bask Bank: 3.9 stars out of 5
Additional details: Bask Bank is an online-only bank that offers six terms of CDs, all of which earn competitive APYs. Term lengths range from three months to two years. Note that your CD may be closed if you don’t fund it within 10 business days.
See more top two-year CD rates.
Marcus by Goldman Sachs: 3-year CD
APY: 3.90%
Minimum deposit requirement: $500
Interest you’d earn with a $10,000 deposit: $1,216
Bankrate’s rating of Marcus by Goldman Sachs’ CDs: 4.9 stars out of 5
Bankrate’s overall rating of Marcus by Goldman Sachs: 4.1 stars out of 5
Additional details: Marcus by Goldman Sachs offers nine standard CD terms, all of which earn competitive APYs. It also offers three no-penalty CDs and a 20-month Rate Bump CD.
See more top three-year CD rates.
Synchrony Bank: 5-year CD
APY: 4.00%
Minimum deposit requirement: $0
Interest you’d earn with a $10,000 deposit: $2,167
Bankrate’s rating of Synchrony Bank’s CDs: 4.9 stars out of 5
Bankrate’s overall rating of Synchrony Bank: 4.3 stars out of 5
Additional details: Synchrony Bank offers a competitive rate on its five-year CD, as well as many of its other CD terms. Unlike many other banks, Synchrony doesn’t require any minimum deposit amount for its CDs (or for its savings or money market accounts). In addition to nine terms of standard CDs, it offers an 11-month no-penalty CD and a two-year bump-up CD.
See more top five-year CD rates.
Note: The above CD rates are accurate as of Nov. 5 and are subject to change at any time.
Things to consider when choosing a CD
Three important factors to keep in mind when shopping around for a CD include APY, term length and minimum deposit requirement.
APY
APY is a percentage that indicates how much interest your account will earn in a year, including compound interest — which is the interest you’ll earn on interest.
It pays to shop around for a CD that earns a high APY, considering competitive banks are offering rates several times greater than average CD rates. For instance, the average APY on a one-year CD is currently 1.75 percent, while you can find APYs of up to 4.50 percent from competitive online banks.
What does this translate to in dollars? For instance, putting $10,000 into such a top-earning one-year CD could earn you over $450 more in interest than depositing that amount into a one-year CD that pays a rock-bottom APY of 0.01 percent.
Term length
In addition to looking for a CD that earns a high yield, it’s important to choose a term length with which you’re comfortable. Only lock money into a CD that you’re sure you won’t need access to before the CD’s maturity date. Otherwise, you’ll likely be subjected to an early withdrawal penalty that could eat away at your interest and possibly even some principal.
When choosing a term length, consider when you’ll want to access the funds again. For instance, if you plan to purchase a home in two years, an 18-month CD could be a way to earn some interest on money for your down payment.
A no-penalty CD is an option that provides a fixed APY and doesn’t charge a penalty for early withdrawals. However, note you’ll likely be earning a lower yield than you would from a standard CD.
Minimum deposit requirement
Many CDs require a set minimum deposit amount, and this varies from bank to bank. Synchrony Bank, which we listed above, doesn’t require any set minimum deposit amount. Other banks require minimum amounts of $500, $1,000 or $2,500, and some even require you to deposit at least $10,000.
One perk of a fixed-rate CD is you can determine up front exactly how much money the CD will be worth when it matures. Bankrate’s CD calculator can come in handy in figuring out this amount.
Similar to considering a CD’s term length, determine up front how much you’re comfortable locking away in a CD. If you’ll need the money sooner for emergencies or to pay for living expenses, the money is better off in a liquid savings account.
Bottom line
CD rates have been decreasing slightly in 2024, both leading up to and after the September Fed rate cut. Rates could continue to lower should the Fed cut rates again. However, competitive CD APYs remain higher, overall, than they’ve been in years. In fact, some CD watchers refer to 2024 as the year of the CD.
Locking in a fixed-rate CD now that earns a high yield, on a term you’re comfortable with, allows you to benefit from that APY until the CD matures — even if banks continue to lower their rates on new CDs.
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