The Federal Reserve has decided to maintain current interest rates following the recent policy meeting but has hinted at the possibility of up to two rate cuts later in the year. This presents an opportune moment for savvy savers to secure the best yields on certificates of deposit (CDs) before they potentially decrease. Currently, there are CDs offering up to 4.75% Annual Percentage Yield (APY), providing a reliable option to safeguard your assets against inflation and economic uncertainty.
CDs function as a financial safety net, offering a fixed rate from the time of account opening until maturity, irrespective of future Federal Reserve actions. They serve as a means to diversify your investment portfolio and mitigate risks associated with more volatile investments, whether you are planning for retirement or aiming to achieve short-term financial goals, such as a down payment on a new home.
For those seeking greater flexibility, constructing a CD ladder that spreads funds across various terms can be a prudent approach. This method allows for periodic access to portions of your investment while securing the current competitive rates, which is especially advantageous in anticipation of lower rates in the future.
Opening a CD account is quick and hassle-free, requiring minimal initial deposits and devoid of hidden fees. Additionally, deposits are safeguarded by FDIC insurance, providing protection for amounts up to $250,000 per bank, equivalent to the security offered by traditional accounts.
To explore the most attractive CD rates available today, particularly for terms extending beyond a year, consider the following options:
– Bread Financial Savings CDs: 4.50% APY on a 6-month term with a $1,500 minimum deposit
– Valley Bank Online CDs: Up to 4.30% APY with a $25,000 minimum deposit
– Alliant Credit Union CDs: 4.25% APY on a 12-month term with a $1,000 minimum deposit
– Discover Bank CDs: 4.10% APY on 24-month terms and 4.00% APY for 12-month terms
– American First Credit Union CDs: 4.10% APY on a 12-month term with a $1 minimum deposit
– Barclays Bank Online CDs: 4.00% APY on 12-month terms with no minimum deposit
– CIT Bank CDs: 3.50% APY on an 11-month no-penalty CD
For a comprehensive overview of top CD rates, consider selecting APY to sort results by yields or sorting by term to align with your financial objectives. Although online-only banks and digital accounts may be less familiar than traditional institutions, rest assured that they are FDIC-insured or partnered with an insured bank, ensuring protection for your deposits.
Understanding how CDs operate:
A certificate of deposit (CD) functions as a deposit or savings account provided by financial institutions, including banks and credit unions. Unlike standard savings accounts, a CD requires funds to
Explore Further: Understanding Certificate of Deposits (CDs) to Maximize Your Savings
The Federal Deposit Insurance Corporation (FDIC) monitors the monthly average interest rates offered on certificates of deposit and various savings accounts. Established by Congress, the FDIC acts as an independent government entity responsible for upholding stability and public trust in the U.S. financial system while providing insurance for consumer deposit accounts.
Review the FDIC’s national deposit rates for a $10,000 minimum deposit across traditional low-interest deposit accounts in January and February 2025:
Depository Accounts and Rates
– National Deposit Rate on March 17, 2025
– National Deposit Rate on February 18, 2025
– Monthly Variation
Savings Account: 0.41% | 0.41% | No change
Interest Checking: 0.07% | 0.07% | No change
Money Market: 0.63% | 0.64% | Decrease of 1 basis point
1-Month CD: 0.25% | 0.22% | Increase of 3 basis points
3-Month CD: 1.43% | 1.45% | Decrease of 2 basis points
6-Month CD: 1.61% | 1.63% | Decrease of 2 basis points
12-Month (1-year) CD: 1.78% | 1.80% | Decrease of 2 basis points
24-Month (2-year) CD: 1.49% | 1.45% | Increase of 4 basis points
36-Month (3-year) CD: 1.35% | 1.31% | Increase of 4 basis points
48-Month (4-year) CD: 1.27% | 1.23% | Increase of 4 basis points
60-Month (5-year) CD: 1.34% | 1.31% | Increase of 3 basis points
Additionally, the FDIC, as an autonomous government body, focuses on preserving financial system integrity and enhancing consumer trust by insuring deposit accounts.
Delve Deeper: Optimal Low-Risk Investment Strategies for Retirees with Consistent Returns on their Nest Egg
Recent Developments in CD Rates
The rates on certificates of deposit (CDs) closely follow the primary interest rate established by the Federal Reserve, the central bank of the United States. This Fed rate serves as the benchmark affecting interest rates on deposit accounts, loans, mortgages, credit cards, and other financial services. Typically, as the Fed rate increases, so do the Annual Percentage Yields (APYs) on savings instruments like CDs, high-yield accounts, and money market accounts.
Following 11 consecutive rate hikes from March 2022 to July 2023 to address the highest inflation in forty years triggered by the
The Federal Reserve will hold its next policy meeting on May 6 and May 7, 2025. It is currently too early to predict the decisions that will be made during this meeting. Economists are closely monitoring inflation and labor reports to speculate on the timing of potential future cuts to the Fed rate. Inflation has decreased from a peak of 9.1% in June 2022 to a range of 2.5% to 4% since May 2023.
Recent jobs data from the Bureau of Labor Statistics shows that unemployment rose to 4.1% in February, with employers adding 151,000 jobs to payrolls. While this fell slightly below expectations, it exceeded the revised numbers from January. The data does not yet reflect the impacts of ongoing events such as trade tensions, immigration policies, and federal job cuts, which have led to concerns about declining consumer confidence and economic uncertainty.
On the inflation front, the consumer price index for February eased to 2.8%, below the previous month’s level, calming worries about the economy’s health. The producer price index also reported a slowdown in wholesale inflation for the 12-month period ending in February.
Federal Reserve Chair Jerome Powell highlighted slower growth and higher inflation in the economy during a post-meeting press conference on March 19. The Fed’s rate-setting panel, led by Powell, will announce its decision on rates at the conclusion of the May 7 meeting.
For financial planning, it is important to consider factors such as term length, rate of return, minimum deposit requirements, and the type of financial institution when choosing a certificate of deposit (CD) that aligns with your savings goals and budget. Digital banks typically offer higher interest rates compared to traditional brick-and-mortar banks or credit unions.
Consider looking into a high-yield savings account or money market account that offers a competitive rate without withdrawal penalties or fees. Life is unpredictable, and there may be instances where you need to access your funds before a Certificate of Deposit (CD) matures. Early withdrawal penalties for CDs are usually calculated in terms of months of interest forgone – for instance, you might lose 90 days’ worth of interest on CDs with terms up to 24 months. Typically, the longer the CD term, the higher the penalty fee.
Further exploration: When is it advisable to break a CD? Insights from experts on early withdrawals and breaking even.
Advantages of a Certificate of Deposit:
1. Guaranteed returns: With a CD, you deposit a sum and earn a fixed interest rate over the term, which becomes yours once the CD reaches maturity.
2. Higher rates compared to traditional accounts: Many banks offer CDs at rates higher than those of standard savings or money market accounts, with digital and online banks often providing the top rates.
3. Variety of CD terms: CD terms range from three months to five years or more, catering to different financial objectives. Shorter-term CDs may offer better rates than regular bank accounts, while longer terms can rival high-yield savings accounts.
Disadvantages of a Certificate of Deposit:
1. Penalties for early withdrawals: Accessing your funds before the CD matures can result in penalties equivalent to several months of interest, ranging from three to six months’ worth depending on the account and term.
2. Not the most lucrative investment option: While CDs provide a secure way to earn interest, other investment avenues like stocks, bonds, mutual funds, and annuities can offer higher returns over the long run.
3. Inability to add more funds: Once your CD is locked in, you cannot deposit additional funds until it matures. Following maturity, you can transfer your funds to another account or renew the CD.
Further exploration: High-yield savings account vs. CD: Key considerations when interest rates are high.
Alternatives to CDs:
Apart from CDs, there are other low-risk options to grow your savings with steady returns, allowing for flexible deposits and withdrawals without penalties:
1. High-yield savings account: Offers variable rates of 5% APY or more, enabling rapid growth of your savings without withdrawal penalties.
2. Money market account: Provides competitive rates compared to regular savings accounts, granting easy access to your funds.
3. Higher-risk investments: Stocks, index funds, and mutual funds through brokerage accounts offer potential for higher returns than CDs, albeit with increased risk.
Further exploration: Optimal low-risk investments for retirees seeking secure and consistent returns.
FAQs: CDs, safety, and wealth accumulation:
Expand your understanding of CDs to make informed decisions aligning with your financial objectives. Keep abreast of the latest personal finance resources to save, earn, and grow your wealth effectively.
How to track your CD maturity date:
Banks typically notify you via mail
Explore more in our comprehensive guide on what to do when your CD matures. How do banks generate revenue from a CD? Banks profit by charging higher interest rates on loans than the rates they pay out on customer deposit accounts. This profit margin, known as a spread, is essential for banks to make money. Unlike a standard savings account that allows for easy access to your funds without penalties, a CD requires you to commit your deposit for a specific period, with the principal and interest returned upon maturity. This fixed term, along with penalties for early withdrawal, enables banks to strategize better on how to profit from your deposit over time, and they are usually willing to offer slightly higher interest rates in exchange for this predictability. Are online-only banks like Lending Club or SoFi secure for my money? Yes, online-only banks and digital accounts are just as safe as traditional banks. They are either FDIC-insured chartered banks or collaborate with well-known banks to provide deposit accounts that are government-protected up to $250,000. The FDIC ensures the safety of your funds, even in the event of a fintech company failing or going out of business. Be sure to look for terms like “member FDIC,” “FDIC insured,” or “NCUA insured” when comparing banking options. Find out more about the differences between online banks and traditional banks in terms of rates, fees, and money management. What exactly is compound interest? Compound interest refers to the concept of earning interest on both your initial deposit and any interest accrued over time. This method enhances your savings by allowing you to earn interest on your interest, making every dollar you save work harder and grow faster toward your financial objectives. An account’s APY (Annual Percentage Yield) represents the total interest earned on your deposit over a year, inclusive of compound interest, expressed as a percentage. Delve deeper into how compound interest functions in our guide on turning time into money. Can you explain what a jumbo CD is? A jumbo CD is a certificate of deposit that requires a minimum deposit of $100,000 to open the account. Similar to regular CDs, jumbo CDs come with a fixed interest rate and term. While in the past, jumbo CDs offered higher rates than traditional CDs, the current high-interest rates set by the Fed may not always guarantee this. Learn more about jumbo CDs and why it’s important to compare rates before committing to one. What does a no-penalty CD entail? Also known as a liquid CD, a no-penalty CD operates like a traditional CD where you lock in a deposit for a predetermined rate of return over a specific period, but with the added benefit of withdrawing your funds without penalty before maturity. This flexibility, however, may come with lower returns compared to a standard CD. Given the current high interest rates, a high-yield savings account might offer similar or even better rates than a no-penalty CD with comparable flexibility. Discover what to
Discover the latest rates and maximize your returns before missing out on today’s top offers. Curious about brokered CDs? These certificates of deposit are purchased through a brokerage firm, offering a unique alternative to traditional bank or credit union options. Tailor your investment with a term length and fixed interest rate, all accessible through your investment account. Explore the world of brokered CDs and key considerations before diving in.
Distinguish between saving and investing by understanding the accessibility of your funds and the associated risks. Saving involves secure accounts with minimal risk, safeguarding your principal. In contrast, investing entails acquiring assets such as stocks, bonds, or mutual funds, potentially yielding higher returns. Delve deeper into the saving versus investing debate to determine the optimal strategy for your financial portfolio.
Please note: The presented Annual Percentage Yields (APYs) were accurate as of Thursday, March 20, 2025, at 8:10 a.m. ET. Regional variations and changing promotional rates may apply. For more information, refer to our sources:
– FDIC National Rates and Rate Caps (Accessed March 18, 2025)
– U.S. Bureau of Labor and Statistics Consumer Price Index Summary (Accessed March 13, 2025)
– U.S. Bureau of Labor and Statistics Producer Price Index News Release Summary (Accessed March 14, 2025)
– U.S. Bureau of Labor and Statistics Employment Situation Summary (Accessed March 10, 2025)
