Elena Terrazas Chesney
If you're looking for a safe place to store cash for short-term goals, certificates of deposit are worth considering. They offer guaranteed returns and FDIC insurance at most banks, making them a stable option for savings you won’t need right away.
Right now, one-year CD rates can reach up to 4.05% APY, which allows your money to grow at a pace that keeps up with inflation without taking on market risk. And because the rate is fixed, you know exactly what you’ll earn over the term.
But rates may not stay this high. The Federal Reserve cut rates again in October, and banks often follow suit. Opening a CD now lets you lock in today’s higher APY before yields start to slide.
Here are some of the top 1-year CD rates
Account | APY | Min Deposit | Early Withdrawal Penalty |
|---|---|---|---|
4.05% | $1,000 | 3 months of interest | |
4.00% | $500 | 3 months of interest | |
3.90% | $500 | 3 months of interest | |
3.90% | $5,000 | 3 months of interest | |
3.85% | $1,000 | 3 months of interest | |
3.80% | $25,000 | 3 months of interest |
Why open a one-year CD?
A CD, or certificate of deposit, is a type of investment account that holds a fixed amount of money for a fixed term, typically ranging from one to five years. The annual percentage yield (APY) on CD accounts is higher than rates for traditional savings accounts, helping you maximize savings with minimal effort.
However, unlike typical savings accounts, you won't be able to withdraw cash from your account before the CD matures. If you do, you'll have to pay an early withdrawal fee that can offset any interest you might have earned on the account (unless you open a no-penalty CD).
For this reason, CDs aren't a great place to park cash you plan to spend in the coming months, nor do they make good emergency funds. However, if you're saving for an upcoming trip of a lifetime or a large purchase, such as a car or wedding, a CD can be a great savings vehicle.
Because your cash is essentially locked away in a CD account, your savings will earn a fixed APY — an added benefit if the Federal Reserve decides to drop rates again in the future.
One of the best reasons to open a CD account is that it's one of the safest places you can save your cash, because most CD accounts are FDIC or NCUA-insured.
Use the tool below, powered by Bankrate, to help you find some of the best 1-year CD rates quickly:
The difference depends on whether you open an account with a bank (overseen by the FDIC) or credit union (regulated by NCUA). If your bank or credit union faces any financial trouble or closes, your deposits will be insured up to $250,000 per account (and up to $250,000 per person in a joint account).
You can even use the FDIC BankFind tool to check whether a bank is federally insured.
Opening a CD is also a great option if you're looking for a guaranteed rate of return on your savings. While CDs offer comparatively lower returns compared with higher-risk investment options, such as stocks or ETFs, they're a good choice if you value a fixed, predictable and safe return on your money.
Pros and cons of 1-year CDs
Before deciding whether a one-year CD is the right fit for your savings strategy, it’s helpful to weigh the advantages and drawbacks.
Pros:
- CDs offer a risk-free way to save with guaranteed returns on your deposit
- Fixed rates on CDs mean that even if interest rates fall, the APY on your account will remain the same
- Most CD accounts from banks and credit unions are federally insured for up to $250,000
- Since you can only withdraw funds when your CD account matures, you won't be tempted to spend your money elsewhere
Cons:
- Accessing funds from a CD account isn't as easy as with a savings account. If you need to withdraw funds from a CD account before the maturity date, you'll be charged a fee, which will likely offset any interest earned
- Money cannot be added to a CD once it has been opened
- Fixed rates on CDs mean that if rates increase, you'll miss out on potential earnings
- CDs have a lower earnings potential compared with stocks or mutual funds
When a 1-year CD makes sense
Short-term CDs give you the best of both worlds: You'll earn a healthy rate of return, and you have the flexibility to take advantage of better investment opportunities soon.
Keep in mind CDs work best when viewed as a park-your-money-and-forget-it type of vehicle. If you need quick access to your cash, a high-yield savings account might be the better option.
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