Which CD term earns the best interest rates?
For savers looking to maximize their balances with a certificate of deposit (CD) today, one of the first steps is picking the term length that's best for their goals.
Because CDs charge penalties for early withdrawal, your CD term should align with your timeline. If you want to use your balance for a down payment in a year, for example, you may not want to lock in a five-year CD using that deposit.
But another important thing to consider is the interest rate you'll get from different CD terms. If you have a flexible timeline but want to focus on getting the best possible rate, you might want to start your search with the highest-earning CD terms right now.
Find out how much you can earn with today's top CDs here.
CD terms with the best interest rates
Contrary to what the norm has been in the past, shorter CD terms tend to carry the highest interest rates right now. While both six-month and one-year terms can offer upwards of 5.00% APY, many one-year CD terms, in particular, have the highest rates today. Among CDs with this term length, you'll find interest rates around 5.25%, 5.30% or even 5.35% APY.
Here are a few of the highest-earning one-year CD rates today:
- First Internet Bank of Indiana: 5.48% APY
- Bread Savings: 5.35% APY
- Popular Direct: 5.35% APY
- Brio Direct: 5.35% APY
- Quontic Bank: 5.30% APY
As an example, say you deposit $10,000 in one of these 12-month CDs earning 5.35% APY. When the CD matures, your new balance will be $10,535 and you can withdraw it penalty-free to use as you'd like.
Explore more of the best CD rates available now!
What to know about CDs today
CDs can be a great way for current savers to earn the best possible yields on their balances, without any risk. These accounts are FDIC-insured up to balances of $250,000 per bank and per depositor, and the interest rates are fixed across the entire term, so you can rest assured that the rate you lock in at opening will be the amount you get upon reaching maturity.
However, today's rate environment can make the process of choosing your CD more complicated. Some experts recommend locking in long-term CD rates now, because the Fed could be ready to pause interest rate hikes for an extended period before eventually begin dropping them again. But shorter-term CDs can also be a great choice because they still offer the highest rates you'll find among low-risk savings options today.
"Because of the inverted yield curve (long-term rates are lower than short-term), it pays to lock in rates in the 1-year to 3-year range," says Cathy Curtis, CFP, founder of Curtis Financial Planning.
Compared to one-year CDs, some top three-year CDs earn between 4.50% and 4.75% APY today. You won't get the same interest rate as the shorter terms, but the longer term does give you the opportunity to lock in today's high rates for an extended time period. That could be beneficial if interest rates go down in the not-so-distant future.
"If the Fed succeeds in managing the economy and interest rates to a more stable environment, these shorter-term yields will come down, so it pays to lock in some higher rates now," Curtis says.
The bottom line
If you're able to part with your deposit for the required length of time, opening a CD could be a great financial choice today. And while locking in a long-term CD rate may help you preserve high interest rates for years into the future, they're not the term to look at for the absolute highest rates. Based on competitive offers in the market, you'll earn the best APYs today with one-year CDs. Before you decide, make sure you compare different CD terms, rates and account details that work for you. Get started by viewing today's top rates here.
