Elena Terrazas Chesney
Having an effortless option to store your money and a guaranteed rate of return can give you peace of mind in these whiplash times. And with the best 5-year CD rates, you can earn a healthy rate of return and outpace inflation.
They're perfect for savers looking for a risk-free way to meet midrange saving goals. Whether it's saving for a trip around the world, life during retirement or helping your child pay for college or save for a down payment on a home, a longer-term CD can help you get there.
Best of all, if you lock in one now, you won't have to worry about future rate cuts.
You can use our tool — powered by Bankrate — to compare CD rates below.
Why open a CD?
A CD is a type of investment account that holds a fixed amount of money for a fixed term. The APY associated with a CD account is usually higher than that of a traditional savings account, so you’ll be able to earn more thanks to compound interest.
Our savings calculator can help you determine just how much you’ll earn in interest once your CD term ends.
Unlike savings accounts, though, you won’t be able to access the cash in your CD before the end of the term, or you’ll be met with a fee.
Therefore, it’s a good place to put aside cash you don’t intend on using until a future date — maybe you have a kid in high school and want to save some money to help them out with college expenses.
If you're concerned about liquidity, you could do a no-penalty CD. These are shorter-term in nature but also give you quick access to your money in case you need it.
CDs are also good options for anyone looking for a fixed, predictable and safe return on their savings. This is because most CD accounts are FDIC or NCUA insured, meaning up to $250,000 per account is safe if the bank goes under.
The difference depends on whether you open an account with a bank (overseen by the FDIC) or a credit union (regulated by NCUA).
Short-term vs. long-term CDs
It can be easy to choose between a 1-year CD and a 5-year CD if your money is going toward a particular savings goal. For example, you may be getting married in one year, so it would make sense to open a CD with a similar term.
On the other hand, if you’re looking to open a CD with no particular savings goal in mind, you’ll need to consider how long you'll be able to reasonably go without accessing your cash. If you open a 5-year CD and then realize you need to withdraw that cash at the 3-year mark, you'll have to pay a fee, offsetting any interest earned.
The other thing to keep in mind is that future rate cuts are coming. The Fed cut rates in September based on low job reports and will likely issue one to two more rate cuts to end this year.
Therefore, if you're looking to maximize savings opportunities, now is the time to do so.
With this in mind, here are the best options to consider:
Top 5-year CD rates
Account | APY | Min. Deposit |
|---|---|---|
4.15% | $500 | |
4.00% | $500 | |
3.97% | $500 | |
3.91% | $500 | |
3.90% | $500 | |
3.60% | $1,000 | |
3.80% | $5,000 | |
3.75% | $500 |
Pros and cons of CDs
Pros:
- CDs offer guaranteed returns on deposits
- Fixed rates on CDs mean that even if rates fall, the APY on your account will remain the same since it's fixed
- 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:
- If you want to access your money before your term expires, your penalty fee might negate the interest earned.
- Upon maturity, the purchasing power of the money earned from your CD might be less due to inflation.
- You could earn more money with other investment opportunities, see options below:
Bottom line on the best 5-year CD rates
Since APYs on CD accounts are still fairly high, now is the best time to lock in rates. Just be sure you won't need to withdraw any funds from your CD before its maturity date, or you'll offset any interest you may have earned.
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