Best CD Rates of March 2020

Kailey is an industry specialist covering bank accounts, credit cards, and all things personal finance. Her work has appeared on USA Today, CNN Money, Fox Business, and MSN Money.

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A certificate of deposit (CD) is a great option when you're hoping to earn more on your money than you're getting in a savings account but aren't ready to risk it in the stock market. If you're feeling overwhelmed by the sheer number of options, check out our list of the best CD rates below to get started, or keep reading to learn more about how CDs work and how to select the best one for your cash.

Ratings Methodology
Rates as of March 18, 2020
Best CD rates for 2020
CD Offer APY Term Min. Deposit Next Steps
Ally High Yield CD Member, FDIC APY-5 Year: 1.60% Term: 5 Year Min. Deposit: $0
Ally High Yield CD Member, FDIC APY-3 Year: 1.55% Term: 3 Year Min. Deposit: $0
Ally High Yield CD Member, FDIC APY-2 Year: 1.50% Term: 2 Year Min. Deposit: $0
Ally High Yield CD Member, FDIC APY-1 Year: 1.50% Term: 1 Year Min. Deposit: $0
Ally High Yield CD Member, FDIC APY-6 Month: 0.75% Term: 6 Month Min. Deposit: $0
American Express High Yield CD Member, FDIC APY-5 Year: 2.00% Term: 5 Year Min. Deposit: $0
Logo for American Express High Yield CD

American Express High Yield CD

Member, FDIC
APY-4 Year: 1.95% Term: 4 Year Min. Deposit: $0
Logo for American Express High Yield CD

American Express High Yield CD

Member, FDIC
APY-3 Year: 1.95% Term: 3 Year Min. Deposit: $0
Logo for American Express High Yield CD

American Express High Yield CD

Member, FDIC
APY-2 Year: 1.90% Term: 2 Year Min. Deposit: $0
Logo for American Express High Yield CD

American Express High Yield CD

Member, FDIC
APY-1.5 Year: 1.90% Term: 1.5 Year Min. Deposit: $0
Logo for American Express High Yield CD

American Express High Yield CD

Member, FDIC
APY-1 Year: 0.55% Term: 1 Year Min. Deposit: $0
Logo for American Express High Yield CD

American Express High Yield CD

Member, FDIC
APY-6 Month: 0.40% Term: 6 Month Min. Deposit: $0
Barclays Online CD Member, FDIC APY-5 Year: 1.85% Term: 5 Year Min. Deposit: $0
Logo for Barclays Online CD

Barclays Online CD

Member, FDIC
APY-4 Year: 1.85% Term: 4 Year Min. Deposit: $0
Logo for Barclays Online CD

Barclays Online CD

Member, FDIC
APY-3 Year: 1.85% Term: 3 Year Min. Deposit: $0
Logo for Barclays Online CD

Barclays Online CD

Member, FDIC
APY-2 Year: 1.85% Term: 2 Year Min. Deposit: $0
Logo for Barclays Online CD

Barclays Online CD

Member, FDIC
APY-1.5 Year: 1.85% Term: 1.5 Year Min. Deposit: $0
Logo for Barclays Online CD

Barclays Online CD

Member, FDIC
APY-1 Year: 1.85% Term: 1 Year Min. Deposit: $0
Logo for Barclays Online CD

Barclays Online CD

Member, FDIC
APY-6 Month: 0.65% Term: 6 Month Min. Deposit: $0
Logo for Capital One 360 CD

Capital One 360 CD

Member, FDIC
APY-5 Year: 0.85% Term: 5 Year Min. Deposit:
Logo for Capital One 360 CD

Capital One 360 CD

Member, FDIC
APY-2 Year: 0.95% Term: 2 Year Min. Deposit:
Logo for Capital One 360 CD

Capital One 360 CD

Member, FDIC
APY-1 Year: 1.00% Term: 1 Year Min. Deposit:
CIT Bank Member, FDIC APY-1 Year: 1.86% Term: 1 Year Min. Deposit:
Discover High Yield CD Member, FDIC APY-5 Year: 1.80% Term: 5 Year Min. Deposit: $2,500
Discover High Yield CD Member, FDIC APY-4 Year: 1.80% Term: 4 Year Min. Deposit: $2,500
Discover High Yield CD Member, FDIC APY-3 Year: 1.80% Term: 3 Year Min. Deposit: $2,500
Discover High Yield CD Member, FDIC APY-2 Year: 1.75% Term: 2 Year Min. Deposit: $2,500
Discover High Yield CD Member, FDIC APY-1.5 Year: 1.75% Term: 1.5 Year Min. Deposit: $2,500
Discover High Yield CD Member, FDIC APY-1 Year: 1.75% Term: 1 Year Min. Deposit: $2,500
Discover High Yield CD Member, FDIC APY-6 Month: 0.65% Term: 6 Month Min. Deposit: $2,500
Marcus by Goldman Sachs High Yield CD Goldman Sachs Bank USA Member, FDIC APY-5 Year: 1.90% Term: 5 Year Min. Deposit: $500
Logo for Marcus by Goldman Sachs High Yield CD

Marcus by Goldman Sachs High Yield CD

Goldman Sachs Bank USA Member, FDIC
APY-4 Year: 1.85% Term: 4 Year Min. Deposit: $500
Logo for Marcus by Goldman Sachs High Yield CD

Marcus by Goldman Sachs High Yield CD

Goldman Sachs Bank USA Member, FDIC
APY-3 Year: 1.85% Term: 3 Year Min. Deposit: $500
Logo for Marcus by Goldman Sachs High Yield CD

Marcus by Goldman Sachs High Yield CD

Goldman Sachs Bank USA Member, FDIC
APY-2 Year: 1.85% Term: 2 Year Min. Deposit: $500
Logo for Marcus by Goldman Sachs High Yield CD

Marcus by Goldman Sachs High Yield CD

Goldman Sachs Bank USA Member, FDIC
APY-1.5 Year: 1.85% Term: 1.5 Year Min. Deposit: $500
Logo for Marcus by Goldman Sachs High Yield CD

Marcus by Goldman Sachs High Yield CD

Goldman Sachs Bank USA Member, FDIC
APY-1 Year: 1.85% Term: 1 Year Min. Deposit: $500
Logo for Marcus by Goldman Sachs High Yield CD

Marcus by Goldman Sachs High Yield CD

Goldman Sachs Bank USA Member, FDIC
APY-6 Month: 0.60% Term: 6 Month Min. Deposit: $500
Sallie Mae Member, FDIC APY-5 Year: 1.70% Term: 5 Year Min. Deposit: $2,500
Logo for Sallie Mae

Sallie Mae

Member, FDIC
APY-2 Year: 1.70% Term: 2 Year Min. Deposit: $2,500
Logo for Sallie Mae

Sallie Mae

Member, FDIC
APY-1 Year: 1.70% Term: 1 Year Min. Deposit: $2,500
Synchrony Online CD Member, FDIC APY-5 Year: 1.85% Term: 5 Year Min. Deposit: $2,000
Logo for Synchrony Online CD

Synchrony Online CD

Member, FDIC
APY-2 Year: 1.80% Term: 2 Year Min. Deposit: $2,000
Logo for Synchrony Online CD

Synchrony Online CD

Member, FDIC
APY-1 Year: 1.80% Term: 1 Year Min. Deposit: $2,000
TIAA Bank Yield Pledge® CD Member, FDIC APY-5 Year: 1.90% Term: 5 Year Min. Deposit: $5,000
Logo for TIAA Bank Yield Pledge® CD

TIAA Bank Yield Pledge® CD

Member, FDIC
APY-3 Year: 1.80% Term: 3 Year Min. Deposit: $5,000
Logo for TIAA Bank Yield Pledge® CD

TIAA Bank Yield Pledge® CD

Member, FDIC
APY-1 Year: 1.75% Term: 1 Year Min. Deposit: $5,000
Discover High Yield CD

Discover has a higher minimum balance requirement than some of its competitors, but its rates are competitive and you don't have to worry about getting hit with any fees unless you withdraw funds via wire transfer. It also offers some unique term lengths, including CDs as short as three months and as long as 10 years for those who are interested in these options.

CD Rates - Minimum Deposit: $2,500
6 Month APY 1 Year APY 1.5 Year APY 2 Year APY 3 Year APY 4 Year APY 5 Year APY
0.65% 1.75% 1.75% 1.75% 1.80% 1.80% 1.80%
Marcus by Goldman Sachs High Yield CD

Marcus by Goldman Sachs® offers high-yield CDs with terms ranging from six months to six years. It stands out from the pack because of its low minimum deposit and its 10-day CD rate guarantee, which promises to bump up your rate automatically if the rate on your chosen CD increases within 10 days of account opening.

CD Rates - Minimum Deposit: $500
6 Month APY 1 Year APY 1.5 Year APY 2 Year APY 3 Year APY 4 Year APY 5 Year APY
0.60% 1.85% 1.85% 1.85% 1.85% 1.85% 1.90%
Ally High Yield CD

Marcus by Goldman Sachs® offers high-yield CDs with terms ranging from six months to six years. It stands out from the pack because of its low minimum deposit and its 10-day CD rate guarantee, which promises to bump up your rate automatically if the rate on your chosen CD increases within 10 days of account opening.

CD Rates - Minimum Deposit: $0
6 Month APY 1 Year APY 1.5 Year APY 2 Year APY 3 Year APY 4 Year APY 5 Year APY
0.75% 1.50% -- 1.50% 1.55% -- 1.60%
American Express High Yield CD

American Express doesn't offer the most competitive rates on short-term CDs, but its long-term CD rates are among the best. There's no minimum deposit requirement, so it's a good fit for those who don't have thousands of dollars to spare, though obviously you'll earn more in interest if you can deposit more money at the same time. You don't have to bank or have a credit card with American Express to open an American Express High-Yield CD, but if you are already an American Express customer, it might be easier for you to manage everything in one place.

CD Rates - Minimum Deposit: $0
6 Month APY 1 Year APY 1.5 Year APY 2 Year APY 3 Year APY 4 Year APY 5 Year APY
0.40% 0.55% 1.90% 1.90% 1.95% 1.95% 2.00%
Synchrony Online CD

Synchrony is rare in that it doesn't penalize you for withdrawing interest before the maturity date, though you will owe a penalty if you try to withdraw your principal ahead of schedule. Its minimum deposit is higher than some of the other banks listed here, but it's worth considering if you're interested in CDs with less common term lengths, like three months or 15 months. At all levels, it offers competitive APYs that should interest those trying to earn the largest returns.

CD Rates - Minimum Deposit: $2,000
6 Month APY 1 Year APY 1.5 Year APY 2 Year APY 3 Year APY 4 Year APY 5 Year APY
-- 1.80% -- 1.80% -- -- 1.85%
Barclays Online CD

Barclays is a good starting point if you're interested in a high APY but don't have thousands of dollars to lock up in a CD. There's no minimum deposit requirement and you don't have to worry about any hidden fees. You also have the option to receive interest disbursements every month, which you can transfer to a Barclays Online Savings account, or you can add the money to your principal balance to help you earn even more interest.

CD Rates - Minimum Deposit: $0
6 Month APY 1 Year APY 1.5 Year APY 2 Year APY 3 Year APY 4 Year APY 5 Year APY
0.65% 1.85% 1.85% 1.85% 1.85% 1.85% 1.85%
TIAA Bank Yield Pledge® CD

TIAA Bank's CDs are backed by its Yield Pledge® guarantee, which promises that all of its CD rates will be among the top 5% of competitive accounts. It offers a number of term lengths ranging from three months to five years and they're IRA-eligible. You need at least $5,000 to open a CD with TIAA Bank, though, so this may place it out of reach for some people.

CD Rates - Minimum Deposit: $5,000
6 Month APY 1 Year APY 1.5 Year APY 2 Year APY 3 Year APY 4 Year APY 5 Year APY
-- 1.75% -- -- 1.80% -- 1.90%
Sallie Mae

Sallie Mae offers high APYs on all of its CDs and some unique term lengths. It's a great place for those interested in short-term CDs or setting up a short-term CD ladder to begin because you'll have options you can't find with most other banks, like 11-, 13- and 15-month CDs. It is missing a four-year CD option, so it might not be the best choice for those hoping to do a longer-term CD ladder.

CD Rates - Minimum Deposit: $2,500
6 Month APY 1 Year APY 1.5 Year APY 2 Year APY 3 Year APY 4 Year APY 5 Year APY
-- 1.70% -- 1.70% -- -- 1.70%
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What is a CD?

A certificate of deposit (CD) is a savings vehicle most banks offer that pay you a high rate of interest in exchange for leaving your initial deposit untouched for a set number of months or years. Some credit unions offer them as well, though they usually refer to them as share certificates. In some respects, CDs are similar to savings accounts. Both are insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA) up to $250,000 per customer per bank and both offer interest on the money in the account.

CDs tend to offer much higher interest rates. The best CDs have APYs in excess of 2% whereas a typical savings account APY is 0.09%. But the tradeoff for these high interest rates is less accessibility, so it's not a good fit for those who believe they may need to access the funds in their CDs prematurely.

How does a CD work?

When you place your money in a CD, you're agreeing not to touch it for a certain number of months or years in exchange for a higher interest rate. The length of time you must leave the money alone varies by CD and is referred to as the CD term. CD terms can be as low as three months on the short end to 10 years on the long end. Most terms range from six months to five years. Longer-term CDs usually offer higher interest rates.

You invest an initial sum, known as the principal, and that principal earns the APY your bank offers for that particular CD. Some banks impose a minimum amount you must deposit, just like a minimum opening deposit requirement on a checking or savings account. Others employ a tiered structure where those who deposit larger balances get better interest rates than those depositing small balances.

Interest is usually paid monthly or quarterly, and you can choose whether you want the interest added to your principal balance or distributed to you. CD interest rates are known to fluctuate quite often, but once you've opened one, your interest rate is locked in for the full term. This can be a good thing, particularly if interest rates drop after you open your CD, but it can also be a bad thing if you invest in a long-term CD and rates later increase. To combat this risk, many people choose to employ a CD-laddering strategy. More on that below.

The government taxes your CD earnings every year, even though you may not actually be able to access those earnings without penalty until the CD term is up. Your bank or credit union should send you a 1099-INT form by Jan. 31 of the following year if your CD earned $10 or more dollars in interest throughout the year. If you earned less than $10 in interest, you're still responsible for reporting this to the government, though you may not get a form.

Once your term is up, your CD is considered matured and you may withdraw your funds plus the interest you earned, assuming you didn't have those distributed to you as you went along. You can spend the money if you'd like, put it back in a savings account where you can access them at will, or place it in a new CD so they can grow even more. Some banks automatically reinvest your CD funds unless you specify that you don't want it to do this.

Withdrawing money from your CD before it is matured will result in a penalty, though the exact penalty depends on your bank and how close you were to the maturity date. Typically, your penalty gets smaller the closer you are to that date. The penalty is usually listed as "X months of interest," meaning that if you withdraw your funds five months ahead of schedule and the penalty is three months' interest, you would lose three months' worth of interest. Some banks may impose a minimum penalty too, which could cost you more than a month or two of interest.

Types of CDs

There are several types of CDs and they each work a little differently. It helps to understand the different types so you can decide which one is right for you.

Traditional CD

A traditional CD is the type of CD described above. You put some money in, lock in your interest rate, and leave your money where it is until the maturity term. Early withdrawals result in penalties.

Jumbo CD

"Jumbo" is a sophisticated term in the financial world that refers to "larger than average," so a Jumbo CD is a CD with a larger-than-average minimum balance requirement. Every bank sets their own threshold for what's considered a Jumbo CD, but most of them require at least $50,000. This type of CD rewards customers for their large deposits with some of the best CD interest rates around, but many people won't be able to afford the high entrance cost.

No-penalty CD

No-penalty CDs, also known as liquid CDs, are essentially traditional CDs, except they don't penalize you if you decide to withdraw your money before the maturity date. This might sound appealing if you're concerned about needing to access your funds sooner than you expected, but the tradeoff is a lower interest rate. In some cases, the interest rate you'd get from a no-penalty CD might not be significantly different from what you could get from a high-yield savings account. If this is the case, you may as well just leave your money in savings.

Bump-up CD

Bump-up CDs, also known as raise-your-rate CDs, lock you into an initial APY when you open the account, but if CD interest rates improve over the course of your term, you can request a one-time rate increase. Your bank will switch you over to the new, higher interest rate and you'll continue receiving that rate for the rest of your loan term. Some long-term CDs may allow two rate increases, though this is rare. You must choose your time wisely because you only get one opportunity to increase your rates and you must also remember to request the increase because your bank will not give it to you automatically.

Step-up CD

Step-up CDs are similar to bump-up CDs but instead of you deciding when to increase your rates, your bank automatically raises them according to a set schedule. These types of CDs are rare and they won't necessarily give you a better return than a traditional CD. If a step-up CD starts out with a lower initial APY, the total amount you earn in interest could turn out to be roughly the same as what you would've earned with a traditional CD that had a higher APY all the way through.

Callable CD

Callable CDs typically offer above-average interest rates, but there's a big catch. On a certain date, known as your call date, which could be a few months or a year after you open the CD, your bank has the opportunity to "call" it away from you. That means that it will take away your high interest rate and reissue you a new CD with a new, lower interest rate. These types of CDs have a call schedule which determines when the bank can lower your rate. It will usually do this if CD interest rates have dropped since you opened yours, but if rates have risen, you may not have to worry about your CD being called.

Zero-coupon CD

A zero-coupon CD is a CD that you purchase at a discounted rate. For example, you might purchase a five-year $50,000 CD for $25,000. You'd put the $25,000 in your CD and you wouldn't see any interest show up in your account during the 10-year term, but once the CD has matured, you get the full $50,000. Just because the interest isn't showing up in your account monthly or quarterly doesn't mean you don't owe taxes on it, though. The IRS is still going to expect you to pay money on the interest you're accruing even if the bank hasn't deposited it in your account yet. Zero-coupon CDs also tend to have longer loan terms and they can be callable.

IRA CD

IRA CDs can be any other type of CD. The only difference is they're kept inside your IRA. They usually have longer loan terms and that can mean higher interest rates, though they almost certainly won't be as high as what you could earn investing in stocks or mutual funds. The good news is, you won't have to pay interest on any earnings until you withdraw the funds in retirement if you're using a traditional IRA. But you may also face penalties if you try withdrawing the money before you're 59 1/2, even if the CD term is up.

Add-on CD

Traditional CDs only enable you to make a single initial deposit, but add-on CDs let you deposit more money at a later date if you choose. Some banks limit how many more deposits you can make in a month or quarter or over your CD term, so read the fine print if you plan to deposit more money down the road.

Brokered CD

Brokered CDs are issued by banks or credit unions, but you purchase them through a brokerage firm. This is one way to take advantage of potentially higher CD rates without opening accounts at a bunch of different banks, but you should note that not all brokered CDs are FDIC-insured. You should always check this before purchasing one. If you decide to get out of a brokered CD before it matures, you have to sell it, just like you'd sell a bond. It's possible to lose money this way if CD interest rates have increased since you opened yours. You might have to take a loss to interest someone in your CD with a lower interest rate.

Foreign currency CD

Foreign currency CDs are CDs that are invested in one or more currencies besides the U.S. dollar. Your money is converted to these foreign currencies and then they get changed back into dollars when the CD matures. Your interest rates are based on the prevailing interest rates in the countries whose currencies you're investing in, so it's possible to earn much more than you could with a traditional CD, but it's risky because currencies are volatile so you could just as easily lose money. Foreign currency CDs are also rare, so many banks won't offer them.

What to consider when choosing a CD

There are several factors you want to pay attention to when choosing a CD. Here are the most important:

  • FDIC or NCUA insurance: Most CDs will have FDIC or NCUA insurance, but it pays to be sure. You'll probably never need to use it, but you don't want to risk losing your money if your bank or credit union goes under.
  • CD term: Think about how long you're willing to tie your cash up for. If you think you'll need the money in the next year or two, you're better off going with short-term CDs. If you don't think you'll need it for the foreseeable future, a long-term CD may give you a larger return.
  • APY: The annual percentage yield (APY) determines how much you'll earn in interest. Shop around to see which CDs offer the highest APY for your chosen loan term.
  • How often rates are raised: If you're considering a bump-up or step-up CD, you should pay attention to how often you or the bank may raise the APY.
  • Whether it's callable: If a CD is callable, your rates might go down over time and this could hurt your profits.
  • What rates are doing: When CD rates are rising, a short-term CD is best because then you're not tying your money up for long periods of time and potentially missing out on a higher rate in the future. When rates are falling, longer-term CDs are best because you'll lock in your higher rate. Rates can also influence the type of CD you choose. For example, when rates are falling, you probably don't want to choose a callable CD because your rates will likely drop once the call date comes around.
  • Minimum deposit: Every CD has its own rules about deposits. Some may not have a minimum deposit requirement at all while others require a few hundred to a few thousand dollars. Jumbo CDs will usually require at least $50,000. Make sure you're able to meet the minimum deposit and rule out any CDs that require more money than you can spare.
  • Fees: Few CDs charge fees, apart from the penalties if you withdraw money before the maturity date. But some of them do. Check to see whether yours charges any fees and if it does, make sure that your expected return is still worth it after subtracting these fees. If not, move onto another one.
  • Penalties: Every bank and credit union maintains its own schedule for CD penalties. Hopefully, you won't have to deal with them at all, but it's worth looking them over just so you're aware of what might happen if you need to withdraw the funds early in an emergency.
  • When interest compounds: Most CDs compound daily, but some may compound monthly. The more frequently the interest compounds, the more money that means for you.
  • How interest is paid to you: Some banks may give you the choice between adding the interest you earn to your principal balance or having it distributed to you. When it's distributed to you, you can reap the rewards of your CD right away, but adding it to your principal balance is the best way to go if you're trying to maximize your profits. If you do this, your next month or quarter's interest payment will be based on your new, larger balance, resulting in an even larger payment, and the next interest payment will be based on an even larger balance, and so on.
  • What happens at the end of the CD term: Some banks automatically reinvest your money into a new CD of similar length once the CD term ends, unless you specifically give other instructions. This is usually a bad idea because the new CD's APY might not be that competitive. Rather than just letting your bank reinvest it automatically, you should seek out and choose a new CD with a high APY or cash out the funds if you aren't planning on reinvesting them again. Your bank should send you a notice when your maturity date is approaching so you can make plans for what you'd like to do with the money. Make sure you notify your bank about what you'd like to do so it doesn't automatically reinvest it in an undesirable CD.

How to invest with a CD

One of the biggest potential perks or drawbacks of a CD is that once you open one, you're usually locked in at that rate for the CD term, unless you choose a type of CD where the rate can fluctuate. This is great news if rates fall after you've opened your CD, but it can be devastating if rates rise and you're stuck earning a lower interest rate. CD laddering is one way to reduce this risk.

This is where you take the total amount you'd like to invest in CDs and divide them up among CDs of different term lengths. For example, if you'd like to invest $5,000, you might divide this sum up into five chunks and invest $1,000 in a one-year CD, $1,000 in a two-year CD, $1,000 in a three-year CD, $1,000 in a four-year CD, and $1,000 in a five-year CD. When your one-year CD matures, you can invest it in a new five-year CD. The next year, you do the same with your two-year CD, and so on. This is just one example. You could also do a ladder with CDs of shorter lengths if you don't want your money locked up for as long at a time.

CD laddering ensures that a portion of your money is available every year for you to withdraw or reinvest as you see fit. It also enables you to reap the benefits of the higher APYs long-term CDs offer. But most importantly, every year you'll have an opportunity to take advantage of new, potentially higher interest rates so you're not stuck investing a huge chunk of your money at a low rate.

CDs vs. high-yield savings accounts

CDs and high-yield savings accounts both enable you to earn better returns than you would with most traditional savings accounts or a checking account. The two main differences come down to APYs and accessibility. The best high-yield savings accounts may have APYs that are comparable to some CDs, but many CDs, particularly those with longer terms, will offer an even higher APY than most high-yield savings accounts. This can make them a better choice for those who don't anticipate using their money within the next few years and want to earn a high yield without the risks involved with investing their money.

But when you choose a CD, you're locking up your money for an extended period of time. Savings accounts enable you to withdraw your money at any time. Usually, there are no penalties for this, but you could face penalties if you make more than six "convenient" transactions in a month. This includes online transfers, automatic bill pay, transfers initiated over the phone, and transfers made via debit card or check. Transfers made at a bank or an ATM don't count toward your six withdrawals, nor do withdrawals initiated by phone if your bank mails you a check.

If you're unsure how soon you'll need to withdraw your money, you're better off placing it in a high-yield savings account. This way, you'll still earn a high rate and you can take your money out or add more in at any time. Some savings accounts charge monthly maintenance fees, so watch out for this as it could affect your profits. You should also check to see whether your bank requires a certain minimum balance in order to get the high APY. If you cannot meet this requirement, you might not earn much interest at all.

CD vs. money market accounts

Money market accounts are another type of savings vehicle that shares some features of CDs, savings accounts, and checking accounts. They typically offer higher APYs than a checking or savings account, though rates aren't usually as high as what CDs offer. Money market accounts have the same withdrawal restrictions as savings accounts, but they give you the freedom to access your money whenever you want. In addition, some offer debit cards and check-writing capabilities like checking accounts.

A CD is still your best bet if you want to earn the highest APYs, but a money market account could make sense if you value easy access to your funds. In addition to making online and phone withdrawals and transfers whenever you'd like, you can withdraw money directly from your account with a check or debit card. But again, you should check to see what kinds of fees your money market account might charge and how its minimum deposit requirements stack up against the CD requirements.

Is a certificate of deposit right for me?

You're never going to get rich investing in CDs. Even at their best, their APYs aren't close to the returns you could get by investing your money in the stock market and they might not even keep up with inflation. But they can be a great tool for those who are wary of investing their savings.

If you expect to use your funds in a few years and you don't want to risk losing money by investing them in potentially volatile stocks, a CD is a great option because it provides a high APY compared to most other types of bank accounts and a guaranteed return, assuming you don't withdraw the money before the CD's maturity date.

A CD is not a great choice if you anticipate needing the money before the maturity date and it's also not the right choice for your emergency fund. You never know when you'll need to use this money so you want to keep it liquid at all times.

CDs have their place in an investor's toolkit, but it's important to understand what that place is and choose your CDs carefully so that you can get the largest possible return. Use the guide above to choose the right CD for you and consider building a CD ladder if you intend to leave your money in your CD for a long time.

FAQs

  • A certificate of deposit (CD) is a type of savings vehicle offered by banks and credit unions. It typically offers higher interest rates than even high-yield savings accounts, though the trade-off is limited access to your money.

  • When you place money in a CD, you're agreeing you won't touch it for a certain length of time, known as the CD term. This could be a few months to several years. Your balance accrues interest and that interest is regularly deposited to your account. You must pay taxes on that interest annually, even though you may not be able to use that money yet. If you decide to withdraw money from your CD before the maturity date, you will pay a penalty. Once your term is up, you can withdraw the money, move it to savings, or invest it in a new CD.

  • The most important thing is to make sure the bank or credit union has FDIC or NCUA insurance so you're protected in case your bank goes under. You must also think about when you'll need your money as this dictates the appropriate CD term. Look at the APY as this tells you how much you'll earn in interest. A higher APY is better. Fees are rare on CDs, but you should check if yours imposes any and also look into its penalty schedule if you withdraw your money early. Some CDs have minimum balance requirements that might prohibit those with small sums from investing. You should also know how often interest compounds, when it's paid to you, and what happens at the end of the CD term. Finally, you should be mindful of what CD rates are doing because this can help you decide which term length is best.

  • CDs and high-yield savings accounts both enable you to earn higher interest rates on your money than traditional savings accounts without risking your money in the stock market. But savings accounts enable you to access your money at any time while CDs require you to tie it up for months or years at a time. CDs tend to offer even higher APYs than high-yield savings accounts.

  • Money market accounts also offer above-average APYs, but they give you free access to your money at any time and they may include check-writing capabilities and debit cards for directly withdrawing money from your account. CDs don't let you withdraw the money at all without paying a penalty, but in exchange for tying up your funds, you get a higher APY.

  • A CD is a good fit for you if you don't anticipate needing to use your money in the next few years but don't want to tie it up in the stock market. It's a safe way to earn a guaranteed return, assuming you don't withdraw your money early. It's not a good fit for those who think they might need access to their funds before the CD term ends, and you also shouldn't keep your emergency fund in a CD because you never know when you'll need to access this.

Offer APY Min. Deposit
Discover High Yield CD 1.80% - 5 Year $2,500
Marcus by Goldman Sachs High Yield CD 1.90% - 5 Year $500
Ally High Yield CD 1.60% - 5 Year $0
American Express High Yield CD 2.00% - 5 Year $0
Synchrony Online CD 1.85% - 5 Year $2,000
Barclays Online CD 1.85% - 5 Year $0
TIAA Bank Yield Pledge® CD 1.90% - 5 Year $5,000
Sallie Mae 1.70% - 5 Year $2,500

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