Economists project that the latest Consumer Price Index (CPI) report will reveal inflation maintaining at 2.4%, which remains higher than the Federal Reserve’s 2% target. Inflation, in this context, signifies the general increase in prices throughout the economy and its impact on the purchasing power of your money. Despite this, you can shield yourself from inflation and earn a real return on your savings by opting for Certificates of Deposit (CDs) with attractive rates, such as the current best rate of 4.35% APY.
CDs offer a hassle-free way to accumulate earnings steadily in the background without any ongoing effort required on your part after the initial setup. This provides you with a passive income stream that remains insulated from market fluctuations or economic indicators once you’ve secured it. Opening a CD online takes less than 10 minutes, with most online banks and credit unions only needing your personal details and funding method. Approval typically occurs within one to five business days, and once opened, your CD is safeguarded by FDIC insurance for up to $250,000, ensuring the safety of your deposit throughout the chosen term.
If you are hesitant to lock up all your funds for an extended period, you may want to consider implementing a CD ladder strategy. This approach involves dividing your savings across multiple CDs with varying maturity dates, allowing you to access portions of your funds regularly while still benefiting from the competitive rates available across different timeframes.
The following are some of the best CD rates available today across different terms, with low or no minimum requirements and convenient online enrollment:
– Bread Financial Savings CDs: 4.35% APY on 6-month terms with a $1,500 minimum deposit
– Valley Bank Online CDs: Up to 4.30% APY on 3-month terms with a $25,000 minimum deposit, and 3.90% APY on 12-month terms with a $500 minimum deposit
– Alliant Credit Union CDs: 4.10% APY on 6-month terms with a $1,000 minimum deposit
– Discover Bank CDs: 4.00% APY on 12-month terms with no minimum deposit
– Raisin/American First Credit Union CDs: 4.00% APY on 12-month terms with a $1 minimum deposit
– Barclays Bank Online CDs: 4.00% APY on 12-month terms with no minimum deposit
– CIT Bank No-Penalty CD: 3.50% APY on an 11-month term with a $1,000 minimum deposit
While online-only banks and digital accounts may not be as recognizable as larger institutions, each is FDIC-insured or partners with an FDIC-insured bank to offer protected deposit accounts up to $250,000, ensuring the safety of your funds.
The Federal Deposit Insurance Corporation (FDIC) monitors monthly average interest rates for certificates of deposit and other savings accounts. Established by Congress, the FDIC is an independent government agency tasked with upholding stability and public trust in the U.S. financial system while insuring consumer deposit accounts.
Here are the FDIC national deposit rates for a $10,000 minimum deposit in April and March 2025 across various traditional deposit accounts:
– Savings: 0.41% (April) vs. 0.41% (March), no change
– Interest checking: 0.07% (April) vs. 0.07% (March), no change
– Money market: 0.62% (April) vs. 0.63% (March), down 1 basis point
– 1-month CD: 0.24% (April) vs. 0.25% (March), down 1 basis point
– 3-month CD: 1.42% (April) vs. 1.43% (March), down 1 basis point
– 6-month CD: 1.60% (April) vs. 1.61% (March), down 1 basis point
– 12-month CD: 1.77% (April) vs. 1.78% (March), down 1 basis point
– 24-month CD: 1.49% for both April and March, no change
– 36-month CD: 1.35% for both April and March, no change
– 48-month CD: 1.27% for both April and March, no change
– 60-month CD: 1.34% for both April and March, no change
Looking at the average rate updates over the past year, there has been minimal movement in traditional savings accounts compared to more significant changes in short- and long-term CDs.
The FDIC, as an independent government agency, plays a crucial role in maintaining the stability and confidence in the U.S. financial system by providing insurance for consumer deposit accounts.
For more information on low-risk investments for retirees with steady returns or updates on CD rates, it’s important to consider how these rates closely follow the Federal Reserve’s key interest rate decisions. The Federal Reserve’s rate adjustments impact rates on deposit accounts, loans, mortgages, credit cards, and other financial products. Typically, as the Fed rate increases, so do the annual percentage yields (APYs) on savings products like CDs, high-yield accounts, and money market accounts.
After multiple adjustments to the target interest rate between March 2022 and July 2023 to address rising inflation levels following the pandemic, the Federal Reserve implemented rate cuts in September 2024. The Fed paused these cuts on May 7, 2025, maintaining the federal funds target interest rate at 4.25% to 4.50% and
In 2025, there is speculation about potential rate cuts by the Fed, possibly another quarter-point cut in June following hints from the Fed. The CME FedWatch Tool indicates a high probability of rates remaining unchanged, with over a 70% chance according to market expectations.
Economists are closely monitoring inflation and labor reports to gauge the timing of future Fed rate cuts. Data shows inflation stabilizing between 2.5% and 4% since May 2023, after peaking at 9.1% in June 2022. Recent job reports indicate a positive trend, with employers adding 177,000 jobs in April, surpassing projections but slightly lower than the previous month. The unemployment rate remains steady at 4.2%.
Recent consumer price index data shows a cooling trend in inflation, with rates easing to 2.4% in March, lower than expected and a decline from the previous month. Lower energy costs and reduced travel expenses contributed to the decline in overall prices. The producer price index also recorded a decrease in wholesale prices, with gasoline prices dropping significantly.
Federal Reserve Chair Jerome Powell emphasized a cautious approach to rate cuts at a press conference in May, citing the need to wait for more data before making decisions. The upcoming rate decision will be announced on Wednesday, June 18, 2025.
For those considering investing in certificates of deposit (CDs), it’s important to compare key factors such as term length, rate of return, minimum deposit requirements, and the type of financial institution. Shorter terms are suitable for specific goals like a holiday, while longer terms can help secure higher APYs before rates decrease. Look for the highest APY available for your desired term and consider the initial deposit amount based on your budget.
Digital banks typically offer higher rates compared to traditional brick-and-mortar banks or credit unions, with few exceptions. If you prefer not to use an online-only bank, consider opting for a high-yield savings account or money market account that provides a competitive rate without withdrawal penalties.
Early withdrawal penalties for Certificates of Deposit (CDs) are usually expressed in terms of the interest you would forfeit, such as 90 days of interest for CDs with terms up to 24 months. Generally, the longer the CD term, the higher the penalty fee.
It’s essential to consider when it makes sense to break a CD. Expert advice on early withdrawals and reaching a break-even point can be helpful.
Benefits of a CD include guaranteed returns and higher interest rates compared to traditional accounts. CD terms range from three months to five years or more, catering to various financial goals. Shorter-term CDs may offer better rates than standard bank accounts, while longer terms can rival high-yield savings accounts.
However, there are drawbacks to CDs, such as penalties for early withdrawals, potentially lower returns compared to other investments like stocks or bonds, and the inability to add more funds once the CD is locked.
Apart from CDs, consider alternatives like high-yield savings accounts and money market accounts, which offer safe and steady returns with more flexibility in accessing your funds. Higher-risk investments like stocks and mutual funds can provide higher returns but come with greater potential losses.
To learn more about CDs, safety, and growing your money, explore our personal finance guides. Your bank will typically inform you via mail, email, or online alerts when your CD is approaching maturity.
Before your CD matures, ensure your contact information is current to avoid missing important notifications. Additionally, set a reminder for yourself a few weeks prior to the maturity date. For more information on your options post-maturity, refer to our guide.
How do banks profit from CDs? Banks earn by charging higher interest rates on loans than what they pay out on customer deposits. This difference, known as a spread, is the primary source of bank revenue. Unlike a regular savings account that allows flexible withdrawals without penalties, a CD requires you to keep your funds locked in for a specific period, returning your initial deposit plus interest upon maturity. This lock-in period enables banks to plan their revenue stream better, as early withdrawals are discouraged through penalties.
Are online-only banks like Lending Club or SoFi secure? Yes, online-only banks and digital accounts are just as safe as traditional banks. They are either FDIC-insured or partner with established banks to offer protected deposit accounts. Look for terms such as “member FDIC,” “FDIC insured,” or “NCUA insured” when considering your options.
What is compound interest? Compound interest is the concept of earning interest on both your initial deposit and the interest accumulated over time. This method accelerates your savings growth significantly.
What is a jumbo CD? A jumbo CD is a certificate of deposit that requires a minimum opening balance of $100,000. Similar to regular CDs, jumbo CDs offer fixed interest rates and terms. While traditionally jumbo CDs provided higher interest rates, current market conditions may not always support this claim.
What is a no-penalty CD? A no-penalty CD, also known as a liquid CD, allows you to withdraw funds without penalty before the maturity date. However, these CDs may offer lower interest rates compared to traditional CDs. High-yield savings accounts might provide comparable or even higher rates with similar flexibility.
What is a CD ladder? A CD ladder is a strategic approach to diversify your investments across multiple CDs, maximizing high rates while maintaining flexibility and liquidity.
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