Best CD Rates — A Risk-Free Way to Save
CDs won't keep up with inflation currently, but they're still a smart way to save for short-term goals. See our best options.
As inflation rises, where you store your cash matters more than ever. This is why, if you're looking to allocate some of your money outside the market, a CD could be a smart solution.
With a CD, you deposit money for a specified term. That term can range from three months to five years. If you need to end the term early, your bank will charge an early termination fee.
CDs are an appealing option because they force you to commit to saving money. While returns won't outpace inflation, using them wisely can help you save for future goals and earn a healthy return.
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What are the top-earning CD rates?
One of the benefits of CDs is that you can choose a term that aligns with your savings goal. Say you're saving for a down payment on a home in five years, then you could choose a five-year CD to help you meet it.
CDs also feature shorter terms. This is ideal if you're not looking to tie up your cash for long but want to earn a higher rate without fear of stock market slumps.
Moreover, for savers with larger deposits (think $50,000 or more), a jumbo CD can be a smart option. You'll earn APYs as high as 4.10%, with access to your money in six months to a year. That higher deposit can equate to you earning thousands effortlessly in a quick timeframe.
Here's a look at some of the top-earning CDs for each term:
Account | APY | Min Deposit | Term | Row 0 - Cell 4 |
4.00% | $1,000 | 3 months | Row 1 - Cell 4 | |
4.10% | $5 | 6 months | Row 2 - Cell 4 | |
4.10% | $1,000 | 1 year | Row 3 - Cell 4 | |
4.00% | $500 | 2 years | Row 4 - Cell 4 | |
4.05% | $500 | 3 years | Row 5 - Cell 4 | |
4.05% | $500 | 4 years | Row 6 - Cell 4 | |
4.15% | $2,500 | 5 years | Row 7 - Cell 4 | |
4.10% | $100,000 | 1-year Jumbo CD | Row 8 - Cell 4 | |
4.00% | $1,000 | 9 months no-penalty CD | Row 9 - Cell 4 |
Pros of using CDs
Here are a few of the many benefits gained when using them:
- You earn a guaranteed return
- They feature fixed rates, so if the Fed cuts rates, you won't have to worry about diminishing earnings
- Many accounts offer FDIC insurance
- They require discipline to reach your savings goals, since early termination penalties are high
CDs carry ample perks. If you would like to try one out, use this Bankrate tool to find the best CD terms and rates for your needs:
What are some cons to consider before opening one?
CDs are not the most flexible savings options. Keep these things in mind before committing to one:
- Returns are lower historically than what you could earn in investments, and inflation is higher than any current CD APY
- They feature steep early termination fees of up to a year of earned interest for longer-term CDs
- You won't have access to your cash until your term expires
If you want to try one out but are concerned about not having access to your cash, an alternative is a no-penalty CD. These CDs offer all the benefits of a regular CD, but with the flexibility to withdraw your money when you need it.
Usually, you'll need to keep your cash in the account for the first week or month after opening it. Then, each bank has its own rules for withdrawing. Some allow you to do it all at once, while others limit you to one withdrawal each statement.
The other thing to keep in mind is that inflation is currently higher than any APY CDs offer. It means you should use them sparingly in the interim until prices go back down.
When should I use a CD instead of a high-yield savings account?
Your financial goals and cash flow will help you decide which works best for your needs. To demonstrate, if you have an emergency fund in a savings account and want to save for a vacation in one year, a one-year CD is a smart option.
Why? Because you already have money stored away in case of an emergency. This makes it less likely you'll need to break open the 1-year CD, so you can stay on pace to reach your goals.
However, if you require regular cash access, then a CD isn't the best fit. Instead, consider the best high-yield savings accounts, as you'll have access to your cash when you need it, without worrying about early termination fees. Once you build an emergency fund, you can allocate future savings toward CDs.
How much can I earn with CDs?
It will depend on your initial deposit, term length and APY. If you have $100,000 you want to store in a jumbo CD with ECFU Financial for one year, you'll earn $4,100 effortlessly.
Meanwhile, if you deposit $5,000 into a one-year CD with Limelight Bank, you'll earn $205. While that number might not jump off the page, that's an extra $205 you'll earn for doing nothing aside from opening the account. And that momentum can carry you to achieve more goals.
The best part is that many CDs renew automatically. Make sure to set a reminder on your phone a week before its maturity date to explore other options. And if you find none you like, you can let it ride.
Bottom line on the best CD rates
With the inflation rate at 4.20%, if you're not storing your cash in an account earning at least this much, you're losing money.
This means CDs won't be a smart place to park your cash if you're looking to outpace inflation. However, inflation can change over time, and CDs can still help you earn a healthy rate and keep you committed to your savings goals. As such, they are smart solutions for savers looking to shelter some of their money from market volatility and earmark it for future goals.
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