The Federal Reserve is adopting a wait-and-see approach in the midst of ongoing economic turbulence. Currently, the top certificates of deposit (CDs) are offering rates of up to 4.70% APY, which is significantly higher than the national savings average. This presents an opportunity to secure competitive yields before anticipated rate drops later in the year. Unlike high-yield savings accounts, CDs feature fixed rates, providing clarity on your earnings at maturity and serving as a low-risk option for saving towards important life events such as holidays, home renovations, or supplementing retirement investments with predictable returns.
If you’re not keen on committing your funds for extended periods, consider shorter-term CDs with the best rates offered on terms of three to six months. By structuring a CD ladder that spreads your deposit across various maturity dates, you can balance short-term gains with long-term stability to ensure steady returns even as rates adjust downward.
For those interested in finding the current highest rates on FDIC-insured CDs with minimal or no deposit requirements and quick online enrollment, the following institutions offer competitive options:
– Bread Financial Savings CDs: 4.50% APY on 6-month terms with a $1,500 minimum
– Valley Bank Online CDs: Up to 4.30% APY on 3-month terms with a $25,000 minimum and 4.00% APY on 12-month terms with a $500 minimum
– Alliant Credit Union CDs: 4.10% APY on 6-month terms with a $1,000 minimum
– Discover Bank CDs: 4.00% APY on 12-month terms with no minimum
– American First Credit Union CDs: 4.00% APY on 12-month terms with a $1 minimum
– Barclays Bank Online CDs: 4.00% APY on 12-month terms with no minimums
– CIT Bank No-Penalty CD: 3.50% APY on an 11-month term with a $1,000 minimum
These digital banks and online accounts, while not as widely recognized as larger institutions, are FDIC-insured or work with FDIC-insured banks to safeguard deposits up to $250,000 per account. Understanding how CDs function can help you make informed decisions about your savings strategy. CDs entail locking in your funds for a specified period, during which you receive your initial deposit plus interest upon maturity. With fixed rates, CDs offer a secure way to earn higher returns compared to traditional savings accounts, though access to funds is restricted until maturity.
The Federal Deposit Insurance Corporation (FDIC) monitors average interest rates on various savings instruments, including CDs. Established by Congress, the FDIC plays a pivotal role in maintaining financial stability and protecting deposits at banks and credit unions nationwide.
The FDIC is a government agency that aims to maintain confidence in the U.S. financial system and provide insurance for consumer deposit accounts. Here is a comparison of national deposit rates on a $10,000 minimum deposit between March and February 2025 for traditional low-interest deposit accounts:
– Savings: 0.41% in March and February (No change)
– Interest checking: 0.07% in March and February (No change)
– Money market: 0.63% in March, 0.64% in February (Down 1 basis point)
– 1-month CD: 0.25% in March, 0.22% in February (Up 3 basis points)
– 3-month CD: 1.43% in March, 1.45% in February (Down 2 basis points)
– 6-month CD: 1.61% in March, 1.63% in February (Down 2 basis points)
– 12-month CD: 1.78% in March, 1.80% in February (Down 2 basis points)
– 24-month CD: 1.49% in March, 1.45% in February (Up 4 basis points)
– 36-month CD: 1.35% in March, 1.31% in February (Up 4 basis points)
– 48-month CD: 1.27% in March, 1.23% in February (Up 4 basis points)
– 60-month CD: 1.34% in March, 1.31% in February (Up 3 basis points)
The Federal Reserve, the central bank of the U.S., plays a significant role in influencing deposit account rates, loans, mortgages, credit cards, and other financial products through its key interest rate. The Fed’s decisions impact rates on various financial products, with CD rates closely tracking the changes in the Federal Reserve’s interest rate.
Following multiple rate increases to combat high inflation post-pandemic, the Federal Reserve announced rate cuts in 2023. In March 2025, the Fed decided to maintain the federal funds target interest rate at 4.25% to 4.50%, aiming to stabilize employment and control inflation. The Fed’s future actions will depend on economic data and evolving conditions to manage risks and maintain stability. The next policy meeting is scheduled for May 6-7, 2025, with expectations of keeping rates unchanged.
Recent economic data and labor reports have sparked speculation about potential future cuts to the Fed rate, as inflation has remained relatively stable at rates between 2.5% and 4% since May 2023, down from a peak of 9.1% in June 2022. Notably, the Bureau of Labor Services released fresh job figures on April 4, showing a significant increase of 228,000 jobs added to payrolls in March, exceeding expectations and surpassing the 151,000 jobs added in February. Despite this positive job growth, the unemployment rate in March rose slightly to 4.2%, up from 4.1% in February but within the narrow range of fluctuation since May 2024. However, these positive job numbers were overshadowed by President Trump’s implementation of new tariffs, which caused a significant drop in the stock market and raised concerns about a potential recession.
In terms of inflation, the consumer price index released on April 10 revealed a decrease in the annual inflation rate to 2.4% in March, lower than the 2.8% reported in February, with overall prices dropping by 0.1% for the month. This decline was driven by lower energy costs and decreases in travel expenses. The producer price index released on April 11 also showed a decline in wholesale prices by 0.4% in March, the largest monthly drop since October 2023, with gasoline prices falling by 11.1%. Despite these signs of moderating inflation, concerns remain about potential price growth due to President Trump’s trade policies.
Federal Reserve Chair Jerome Powell addressed these economic challenges during remarks in Chicago on April 16, stating that the Fed would wait for more clarity before making any adjustments to its policy stance in light of the tariffs. The rate-setting panel led by Powell is scheduled to announce a rate decision on May 7, 2025, which will be closely watched for its impact on financial markets.
For individuals looking to compare certificate of deposit (CD) options, key factors to consider include the term length, rate of return, minimum deposit requirements, and the type of bank or financial institution offering the CD. It is essential to assess these factors against specific savings goals and financial circumstances to make an informed decision that aligns with individual financial objectives.
Life is unpredictable, and there may come a time when you need to access your funds before your Certificate of Deposit (CD) reaches maturity. Early withdrawal penalties are usually calculated in terms of the interest you would forfeit, such as 90 days of interest for CDs with terms of up to 24 months. In general, the longer the term of the CD, the higher the penalty fee.
Here are some key points to consider when deciding whether to break a CD and an expert’s insights on early withdrawals and breaking even:
Advantages of a Certificate of Deposit:
– Guaranteed returns: By depositing a set amount, you can earn a guaranteed interest rate throughout the term of your CD.
– Higher rates compared to traditional accounts: Many banks offer CDs with higher interest rates than standard savings or money market accounts, especially digital and online banks.
– Range of CD terms: CD terms can vary from three months to five years or longer, allowing you to align your investments with your financial objectives.
Disadvantages of a Certificate of Deposit:
– Penalty for early withdrawals: If you need to withdraw your funds before the CD matures, you may face penalties equivalent to several months’ worth of interest.
– Not the highest investment returns: While CDs provide a safe way to earn interest, other investment avenues like stocks, bonds, and mutual funds could potentially offer higher returns in the long term.
– Limitations on adding funds: Once your CD is locked in, you cannot deposit additional funds until it matures, restricting your flexibility.
Alternatives to a Certificate of Deposit:
If you’re seeking low-risk options for earning interest on your savings, consider the following alternatives:
– High-yield savings account: Offers competitive rates with the flexibility to add or withdraw funds without penalties.
– Money market account: Provides similar benefits to a high-yield savings account, with potentially higher interest rates.
– Higher-risk investments: Stocks, index funds, and mutual funds can yield higher returns than CDs, albeit with increased risk.
FAQs: CDs, Safety, and Growing Your Money:
Gain a deeper understanding of CDs, including how they work and how to choose the best option for your financial needs. Explore our collection of personal finance guides to help you manage your money effectively and build long-term wealth.
Remember, your bank will notify you when your CD is nearing maturity, usually through mail, email, or online alerts. Keep your contact information up to date and set reminders to stay informed about your options post-maturity. Additionally, banks profit from CDs by charging higher interest rates.
Banks make more money on the interest they charge on loans than what they pay out in interest on customer deposits. This difference, known as a spread, is crucial for banks to generate profits. While a traditional savings account offers flexibility in moving your money without penalties, a Certificate of Deposit (CD) requires you to lock in your deposit for a specific period. At the end of this period, the bank returns your principal along with the accrued interest. The lock-in feature of a CD, along with penalties for early withdrawal, enables banks to predict how long they can use your deposit to earn profits. Therefore, banks are usually willing to offer slightly higher interest rates for the reliability of CD deposits.
When it comes to online-only banks like Lending Club or SoFi, your money is safe just like with traditional banks. These online institutions are either FDIC-insured chartered banks or work in partnership with well-known banks to provide deposit accounts backed by government protection of up to $250,000. The FDIC ensures the safety of your funds, even in cases where the fintech institution faces financial difficulties. Look for terms like “member FDIC,” “FDIC insured,” or “NCUA insured” to ensure the safety of your deposits when comparing different banking options.
Compound interest refers to earning interest on both your initial deposit and the interest accumulated over time, thus enhancing your savings growth. It is a powerful way to increase your savings over time by allowing each dollar saved to work harder towards your financial objectives. The Annual Percentage Yield (APY) of an account represents the total interest earned on your deposit over one year, inclusive of compound interest, and is expressed as a percentage.
A jumbo CD is a type of certificate of deposit that necessitates a minimum deposit of $100,000 to open the account. Similar to regular CDs, jumbo CDs come with a fixed interest rate and maturity term. In the past, jumbo CDs offered an opportunity for individuals and businesses to invest funds securely at higher rates than conventional CDs. However, with the Federal Reserve maintaining interest rates at multi-year highs, jumbo CDs do not always have higher rates compared to traditional CDs. It is advisable to compare different options before committing your funds to a jumbo CD.
A no-penalty CD, also known as a liquid CD, is similar to a traditional CD where you lock in a deposit for a predetermined period at a guaranteed return rate, but with the added benefit of being able to withdraw your funds without penalties before the CD matures. However, this flexibility typically results in lower returns compared to a standard CD. Given the current high-interest rate environment, a high-yield savings account might offer similar or even higher rates than a no-penalty CD with comparable flexibility.
A CD ladder is a savings strategy that involves spreading your funds across multiple CDs to take advantage of higher interest rates without tying up your entire investment in one long-term CD. The concept behind CD laddering is to have access
When you purchase a CD through a brokerage firm, you are buying it from an investment account rather than a bank or credit union. Similar to traditional CDs, you select a term length that offers a fixed interest rate. However, unlike regular CDs, brokered CDs can be purchased either new or from other investors. Before investing in brokered CDs, it is important to understand the differences between saving and investing.
Saving involves keeping your money in secure accounts with minimal risk of losing your principal, while investing entails purchasing assets such as stocks, bonds, or mutual funds that have the potential for higher returns. To determine the best approach for your financial goals, explore our comprehensive guide on saving and investing.
Please note that the annual percentage yields (APYs) mentioned were accurate as of Thursday, April 17, 2025, at 7 a.m. ET. It is essential to be aware that APYs and promotional rates may vary by region and are subject to change. For more information, refer to the following sources:
– National Rates and Rate Caps, FDIC
– Consumer Price Index Summary, U.S. Bureau of Labor and Statistics
– Producer Price Index News Release Summary, U.S. Bureau of Labor and Statistics
– Employment Situation Summary, U.S. Bureau of Labor and Statistics
– CME FedWatch Tool, CME Group
