Figuring out where to stash your cash to earn the most interest can be challenging. One potentially lucrative option is a certificate of deposit (CD) account. Depending on the bank or credit union you choose, CDs could offer a higher annual percentage yield (APY) than high-yield savings accounts or money market accounts.
Finding the best CD account can feel overwhelming, though. To help narrow down your options, we’ve pulled together a list of the best CD accounts. We’ll also discuss what to look for as you’re shopping around for a CD to make the process easier.
The best CD accounts of September 2021
- Best for flexible rates and withdrawals: Marcus by Goldman Sachs
- Best for large deposits: CIT Bank
- Best for military members: Navy Federal Credit Union
- Best for small deposits: Ally
- Best for varied term lengths: Discover
Best for flexible rates and withdrawals: Marcus by Goldman Sachs
Imagine opening a CD and then watching CD rates increase just a day or two later. You’re stuck with a long-term rate lock at a lower rate which means earning less interest.
Fortunately, online bank Marcus by Goldman Sachs offers a solution to this problem. As long as you make a $500 minimum deposit within 10 days of opening your account, you’ll receive the highest published interest rate and APY for the High-Yield CD you opened. APYs for Marcus CDs currently range from 0.15% to 0.70% (as of July 20, 2021), depending on the term you choose.
And if you’re not sure when you’ll need access to your funds, Marcus also offers a 7-month no-penalty CD with an APY of 0.45% (as of July 20, 2021). This CD allows you to withdraw your entire balance anytime, beginning seven days after you fund the account.
Learn more about CD accounts from Marcus.
Best for large deposits: CIT Bank
CIT Bank is the only bank on our list that offers jumbo CDs. These CDs require a $100,000 minimum deposit, and APYs range from 0.40%-0.50% (as of July 20, 2021), depending on the term you choose.
In general, jumbo CDs could offer higher interest rates than non-jumbo CDs due to the amount of money you’re letting the bank hold for a fixed period. However, it’s a good idea to shop around to find the best rate and terms for your personal finance situation.
In addition to its jumbo CDs, CIT Bank also offers other CD products, including term CDs and 11-month no-penalty CDs. If you’re looking for an online savings account and a checking account too, CIT Bank could be a good option.
Best for military members: Navy Federal Credit Union
Navy Federal Credit Union is a great option for military, Department of Defense civilians, and their family members. It offers CD accounts with competitive rates and terms as long as seven years. Minimum deposits for its CD products range from $50 to $1,000.
With its generous APY, Navy Federal’s Special EasyStart Certificate really stands out. It allows members to earn an eye-popping 3.00% APY for a 12-month term on up to a $3,000 maximum balance (as of July 20, 2021). Members must have a checking account and set up direct deposit to qualify and can only have one of these CDs per primary bank account holder.
Best for small deposits: Ally
Many banks have minimum deposit requirements for CD accounts. Thankfully, none of Ally Bank’s three CDs requires a minimum balance. So no matter how small your deposit amount, you can start saving for your future with an Ally Bank CD.
If you want added flexibility, Ally has an 11-month no-penalty CD, which allows you to withdraw your full balance after six days of account funding without incurring any fees. This could be a good option if you’re unsure when you’ll need access to your money.
In addition to its CDs, Ally also offers other banking products, including checking, savings, investing, retirement, mortgage, auto, and personal loan products.
Learn more about CD accounts from Ally.
Best for long-term deposits: Discover
While Discover might be well known for its credit cards, it also offers both short-term and longer-term CDs in addition to other financial products. It’s the only institution on our list with 10 year CDs, which have a 0.60% APY (as of July 20, 2021). A long-term CD could be a good option if you’re looking for stable growth and you’re concerned interest rates will decrease in the future.
Keep in mind, though, that longer-term CDs with Discover have higher interest penalties for early withdrawals. To open a CD with Discover, you’ll also need a minimum balance of $2,500.
Learn more about CD accounts from Discover.
What is a CD account?
CDs are deposit accounts with a fixed interest rate that typically require you to deposit funds for a set period of time. For instance, you could encounter an 18-month CD with a fixed rate of 0.40% or a 2-year CD with a 0.50% rate.
You might choose to put your money into a CD account for a few reasons. Often, CDs offer a higher interest rate than traditional checking or savings accounts, which can be useful if your goal is to grow your money over time. CDs are also a popular option for funding short-term goals, as they offer stable, predictable growth.
While some banks offer no-penalty CDs, once you deposit money in a CD account, it’s typically inaccessible for its full term unless you pay a penalty to withdraw the money early. The penalty is often equal to a certain number of days of interest you would have earned, such as 60 days. Penalties might vary by the term of the CD, with longer CD terms charging higher early withdrawal penalties, though this depends on the account and financial institution.
CD accounts often pay higher APYs than savings or money market accounts. Banks and credit unions often offer these higher rates to incentivize you to keep your money with them for an extended period. In general, the longer the CD term, the higher the interest rate you’re likely to receive. Unfortunately, some come with minimum deposit requirements, though this isn’t the case with every CD.
Types of CDs available
Institutions might offer a variety of CDs with different rates and terms to attract customers. Here are some general types of CDs commonly offered.
- Traditional CDs: These are basic CDs with a set term and interest rate. They may have early withdrawal penalties, depending on the account and bank.
- No-penalty CDs: These CDs might allow you to withdraw money before the term expires without paying a penalty.
- Jumbo CDs: These CDs generally have large minimum balance requirements and may offer higher interest rates due to these requirements.
- Potential rate increase CDs: These CDs might allow you to increase your interest rate if CD rates increase during a certain period.
- High-yield CDs: These CDs focus on offering the best interest rates available for a particular term.
How does compound interest work?
If you’re thinking about opening a CD, you may be wondering how compound interest works and how it relates to CD accounts. Compound interest is a concept that allows you to grow your money faster. Essentially, it allows the interest your money earns to earn more interest itself. A quick example best explains this.
Let’s say you have a balance of $10,000 in a 12-month CD that earns and is paid 0.01% interest per day. On day one, you’d make $1 in interest. This increases your balance to $10,001. The next day, you’ll actually earn slightly over $1 in interest because your balance is now $1 larger.
Over time, this compounding effect adds up. After a year, you’d have $10,371.72. If your interest didn’t get paid daily throughout the year and you were only paid interest on the initial $10,000 balance at the end of the year without compounding, you would only have a balance of $10,365. Compounding resulted in an extra $6.72.
Interest isn’t paid daily in practice, though. Instead, banks and credit unions specify how often they compound, or calculate, your interest. Many banks compound interest daily but pay it monthly. This generally results in the same benefit, but computers calculate the numbers behind the scenes and deposit your interest once per month.
The higher your interest rate and initial balance are, the more significant the effect of compound interest. Longer CDs and CDs with higher minimum balances may offer higher APYs, which could allow you to take advantage of compounding interest even more. Here are examples of CD rates by CD term, according to the FDIC’s national deposit rates as of July 20, 2021.
How to pick the right CD account for you
Choosing the correct CD for you comes down to many factors. Here are several things you may want to consider to find the best account for you.
- NCUA- or FDIC-insured: Since certificates of deposit generally qualify for NCUA or FDIC insurance, which protects your money against the risk of loss. It’s essential to pick a CD from a member FDIC or NCUA institution.
- Online vs. brick and mortar bank: People often have strong preferences about whether they want to bank online or in person. Take these feelings into account before choosing a CD. And keep in mind, online institutions could offer higher interest rates.
- Minimum deposit: Some banks and credit unions have minimum deposit requirements to open a CD account. These limits might be high in some cases, so double-check the minimums before choosing a CD.
- CD term: Choose a CD term you’re comfortable with, unless you’re opting for a no-penalty CD. Otherwise, you might have to pay penalties to access part or all of the funds in the CD before its maturity date.
- CD type: Banks offer several different CD options, including no-penalty CDs, CDs with a potential rate adjustment, and traditional CDs. Consider your needs to find the one that fits best for your goals.
- Interest rate: The interest rate determines how much money you’ll earn from your CD. While shopping for the best interest rate is a good idea, you must make sure all other aspects of the CD fit your investing goals before looking at interest rates.
In determining our list of the best CD accounts, we looked at five popular financial institutions and evaluated them according to a set of criteria we consider critical to the consumer. We did not evaluate all banks or credit unions in the category. We used editorial judgment to determine what use or user each savings account would be best for.
FinanceBuzz evaluation criteria include:
- Interest rate: We considered interest rates as they determine how much interest you earn and are among the most critical factors of choosing a CD.
- CD term: In addition to the interest rate, the terms offered allow for flexibility in choosing the right CD. We looked for institutions with a variety of CD term lengths.
- FDIC- or NCUA-insured: All banks or credit unions on our list are FDIC or NCUA members, which means your deposits are insured.
- Minimum deposit: The minimum deposit required to open a CD account varies by institution, but all banks and credit unions on our list allow you to open a CD with $2,500 or less.
What’s better, a CD account, a high-yield savings account, or a money market account?
The right financial product between a CD account, a high-yield savings account, or a money market account will depend on your needs and goals. CDs could have better rates but require you to lock your money up for a set time period. If you need to access your money before the CD term ends, you might have to pay a penalty to withdraw money early.
High-yield savings accounts could provide a decent interest rate today, but your rate isn’t locked in for a set period. If interest rates decrease, you might not earn as much money in a high-yield savings account over the same period as you would with a CD. These accounts could be a good option for an emergency fund, as your money is more easily accessible and they may offer a higher yield than a traditional savings account.
Money market accounts are another option that could pay a decent interest rate, though some require a significant minimum deposit. Money market accounts might also offer limited check-writing abilities if you need to access the funds where savings accounts do not.
How does a CD ladder work?
CDs typically provide higher interest rates for longer-term CDs than shorter-term CDs. That said, people might not want to lock up their entire savings for five years or more. To address this issue and still take advantage of higher interest rates on longer-term CDs, some people use CD ladders.
CD laddering is a concept that allows you to have cash available regularly should you need it without having to withdraw money from a CD early. You accomplish this goal by initially opening CDs of varying terms over time. When the CDs expire, you renew them at a predetermined length to continue the CD ladder as long as you don’t need the funds for another purpose.
For instance, a person may decide they want to have the ability to access their CD funds once per year to eventually have 5 CDs. To start a CD ladder, the person would initially open a 1-year, 2-year, 3-year, 4-year, and 5-year CD. This means one CD will mature once each year. When each CD matures, the person has an opportunity to access the funds. If they don’t need the cash, they can open a new five-year CD to continue their CD ladder.
Are CDs a good investment?
Whether a CD is a good investment for you depends on your risk tolerance, goals, and timeline. A CD that pays a higher interest rate than a high yield savings account may be a better option than leaving your money in a checking or savings account.
From a risk of loss perspective, CDs are usually FDIC- or NCUA-insured. You may risk losing money if you have to withdraw the funds early, but that risk is limited. That said, people with a long investment time horizon may find better returns with other investment options.
Do CD accounts have monthly fees?
CD accounts generally do not have monthly fees. You may have to pay a penalty to withdraw funds before a CD’s maturity date, though. Check with your institution before opening a CD account if you have questions about fees or penalties.
The best CD accounts may be a good fit for your needs if you’re looking for stable account growth or you have a short-term time horizon for your financial goals.
Regardless of why you choose to open a CD account, it’s a good idea to make an educated decision on where to park your money. Compare the best banks and credit unions to find the ones that offer the best CD rates, terms, fees, and minimum deposits to suit your needs.