CD rates today, October 1, 2024

Remark: Image can only be used together with the text and should not be downloaded and used independently.

If you’re looking for a low-risk way to invest and are comfortable locking your money away to earn a higher interest rate than a typical savings account, a certificate of deposit (CD) could be a good choice. CD rates have been at historic highs in recent years, with many offering over 5% annual percentage yield (APY), promising substantial returns. CD rates are influenced by different factors, such as the length of the term (longer terms usually offer higher rates), the amount deposited (some CDs have tiered rates), and most significantly, the Federal Reserve interest rates. Understanding these dynamics can help you make an informed investment decision. CD rates today: earn up to 4.95% CD rates news 2024 Interest rates on CDs have surged since 2022, closely following the lead of Fed interest rate hikes. The national average rate for 5-year CDs stands at 1.42%, a significant increase from less than 0.50% in June 2022. Many banks are offering even higher rates, with the top 5-year CDs boasting APYs exceeding 4%, and some 1-year CDs offering APYs close to 5%, though they're starting to fall. Initially, CD rates climbed in response to the Fed's measures to combat inflation. However, with inflation easing from over 9% in mid-2022 to 2.5% currently, the Fed lowered the rate by half a point from 5.25-5.5% to 4.75-5.0% at its most recent meeting on September 18. Is it still a good time to open a CD? With recent increases in interest rates, investing in a CD now could potentially yield higher returns. However, CD APYs are influenced by the federal funds rate, and rates could decrease if the Fed decides to lower them as indicated. Currently, CD rates are at their highest point in recent years, reflecting favorable market conditions. Therefore, this could be an advantageous time to consider investing in a CD for short-term or long-term goals. Depositing a larger lump sum can help you earn substantial interest over the CD's term. Historical CD rates In the early 1980s, CD rates surged into double digits, sharply contrasting with today's lower rates. By 2019, however, the APY for a 5-year CD had slightly exceeded 3%. Throughout the early 2020s, top rates typically remained below 1% APY. Recently, however, rates have increased, with the best offerings close to 5% APY for 1-year CDs. How to get a good CD rate Determining what constitutes a good CD rate involves finding a balance between the highest rate available and your ability to leave funds locked away for the specified term. For instance, a 5% APY CD over five years may not be suitable if you anticipate needing liquidity sooner or if interest rates increase, potentially resulting in lower overall returns. Generally, rates that exceed the national average are considered worthwhile. It's important to compare rates across different banks to find the best option for your specific needs. Key factors to consider when comparing CDs include: Term length: Ensure it aligns with your savings goals and timeline. APY: Higher rates typically are offered for longer terms. Minimum deposit: Make sure you can meet the required initial balance. Penalties: Understand the costs associated with withdrawing funds before maturity. Deposit insurance: Verify that the bank is Federal Deposit Insurance Corp. (FDIC)- or National Credit Union Administration (NCUA)-insured for deposit protection. Additionally, note that online banks often offer higher interest rates but be mindful of any minimum balance requirements and associated fees. Choosing a bank over a broker can sometimes help avoid unnecessary fees. Look into offerings from online banks Online banks and financial technology companies (fintech) generally offer more competitive rates than national banks. Large financial institutions primarily earn revenue from interest on loans, fees, and investments in securities. In contrast, smaller banks and online fintech companies attract customers with competitive APYs on deposit accounts. Moreover, online banks typically operate with lower overhead costs, allowing them to pass better rates on to their clients. Set up a CD ladder CD ladders are perfect for savers who are hesitant to commit funds for extended periods of time. By diversifying savings across CDs with different maturity dates, you can benefit from both short-term accessibility and higher long-term interest rates. For instance, say you invest $3,000 in three staggered CDs (1-year, 2-year, and 3-year). As each CD matures, you can reinvest the funds into a new 3-year CD. This approach allows annual access to your money along with the accrued interest. Compare CD rates by term length At present, CD rates are elevated across both short-term and long-term options. While APYs are not the sole factor to weigh when selecting a financial institution for your CD, staying informed about the highest available rates can guide you toward making a well-informed decision. Today's top 3-month CD rates Learn more about the best 3-month CD rates available today. Today's top 6-month CD rates Learn more about the best 6-month CD rates on the market today. Today's top 9-month CD rates Read more about the best 9-month CD rates available today. Today's top 1-year CD rates Learn more about the best 1-year CD rates available today. Today's top 18-month CD rates Learn more about the best 18-month CD rates on the market today. Today's top 2-year CD rates Read more about the best 2-year CD rates available today. Today's top 3-year CD rates Learn more about the best 3-year CD rates available today. Today's top 5-year CD rates Learn more about the best 5-year CD rates on the market today. Today's top 10-year CD rates Read more about the best 10-year CD rates available today. Today's top jumbo CD rates Read more about the best jumbo CDs on the market today. Compare rates to top national banks If you're unfamiliar with many of the institutions mentioned, it's because certificates of deposit typically do not generate substantial income for major financial institutions. Established banks like Chase, PNC, and U.S. Bank prioritize attracting customers through more lucrative products such as loans and credit cards rather than CDs. Consequently, CD interest rates offered by these banks are often lower than those at smaller regional banks or online institutions. Moreover, to obtain a competitive rate at these larger banks, you may need to open additional deposit accounts or meet higher minimum deposit requirements. Chase Bank CD rates Read more about Chase Bank CD rates Citibank CD rates Discover CD rates Learn more about Discover’s CD rates. Marcus CD rates Read more about Marcus CD rates. PNC CD rates Truist CD rates How do CDs work? A certificate of deposit is a specialized savings account where you earn interest by depositing money for a set period of time. Unlike traditional savings accounts, which have interest rates that fluctuate with market conditions, a CD offers a fixed interest rate throughout its term. This stability allows savers to benefit from predictable returns, particularly during periods of higher interest rates set by the Fed. At maturity, you can access both your initial deposit and the accumulated interest. One notable difference between a CD and a standard savings account is that funds in a CD cannot be withdrawn before the term ends without incurring an early withdrawal penalty. Pros Higher APY than other savings vehicles Fixed rates Flexible term lengths Cons Lower returns than stocks APY locked, no inflation adjustment Illiquid; penalties for early withdrawals Types of CDs There are various types of CDs designed to meet different financial needs: Brokered CDs are bought and sold through brokerage accounts rather than directly from banks or credit unions. These CDs often offer higher APYs since they are issued by banks and sold to brokerages. Callable CDs include a feature that allows the issuing institution to terminate the CD before its maturity date. Investors receive their principal and any accrued interest up to the call date if this option is exercised. Bump-up CDs allow you to request a higher APY if interest rates increase after opening the account. You can typically adjust the rate once or twice during the CD's term. No-penalty CDs do not charge penalties for early withdrawals before maturity. This type is less common and may offer lower APYs compared to traditional CDs. Jumbo CDs require a substantial minimum deposit, often starting at $100,000 or more. They generally offer higher APYs than standard CDs. Variable-rate CDs have an APY that changes in response to prevailing interest rates. These CDs carry more risk than traditional CDs because a decrease in interest rates before maturity can result in a lower yield. The takeaway Presently, CD rates are elevated for both short and long terms. While APYs are crucial, they aren't the sole consideration when choosing where to open your CD. Nonetheless, knowing the highest available rates can assist you in making a knowledgeable choice. Frequently asked questions Is investing in a CD right for me? While certificates of deposit may not be appropriate for all investors, they hold particular appeal for risk-averse individuals seeking stable investments. For those with short-term financial goals or nearing retirement, CDs offer a dependable method to steadily accumulate funds until they are needed, whether for retirement planning or significant purchases. How is CD interest taxed? Interest earned from CDs is classified as taxable income and must be reported on Form 1099-INT if it exceeds $10 annually. Moreover, early withdrawals from CDs result in penalties, which are also reported on your tax return. How does a CD differ from a savings account? CDs offer a fixed interest rate for a specific duration and limit access to funds while savings accounts offer greater flexibility despite potential interest rate fluctuations. Nonetheless, maintaining both a savings account and a CD can be advantageous. Surplus funds can be allocated to a CD to gain higher interest over a designated period or earmarked for specific future purchases. How much does a $10,000 CD make in a year? If you invest $10,000 in a 2-year CD with a 2.50% APY, you will earn $250 in interest in the first year alone, leading to a total of $10,506 at maturity after the second year. However, withdrawing funds before maturity incurs an early withdrawal penalty, potentially resulting in forfeiting part or all of the earned interest and even a portion of the principal. Are CDs FDIC-insured? Yes, CDs are covered by the FDIC. This federal agency insures savings accounts held by its members, including money market accounts (MMAs) and CDs, up to $250,000 per customer per bank. This coverage ensures the safety of your funds in the rare event of a bank failure. If you choose to invest in a CD through a credit union, ensure it is covered by the NCUA, which operates similarly to the FDIC but specifically insures credit unions. Read more To earn the max on your deposit, check our ranking of the best CD rates. Our ranking of the best jumbo CD rates can help you maximize your earnings on big deposits. Short-term deposit investors can find a great rate on our list of the best 3-month CDs. The best 1-year CD rates ranking can help you earn a tidy return on a 12-month deposit. Choose one of the best high-yield savings accounts to boost your APY.

Reporting By Abigail Rueger

Fortune via Reuters Connect