Best CD Rates of May 2024

The best CD rates can potentially outshine regular savings account rates … and can sometimes even beat high-yield savings account rates, depending on your financial goals.

Even better: With a CD account, you lock in a fixed APY (annual percentage yield)¹ for a set period of time that can weather interest rate drops over time and allow you to grow your wealth nearly on autopilot.

Discover some of the top CD accounts available today from our partners below. Open a new account in minutes and supercharge your money with some of the best CD rates we’ve found!

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.

Pros Higher interest rates than typical savings accounts Fixed rates for the length of the term Often compounded daily

Cons Charges fees for early-withdrawal Often requires minimum deposit

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.

CD’s vs. savings accounts

The main difference between savings accounts and cd’s is liquidity. You can withdraw your money from a savings account at any time with few (if any) restrictions, but CD’s require a commitment that lasts anywhere from a few months to several years.

Savings accounts used to have a legal limit of six withdrawals per month, but the Federal Reserve discontinued that rule in 2020. Since you now have unlimited withdrawals from your savings account (unless your banking institution says otherwise), your cash is as accessible to you there as it would be in a checking account.

CD’s are much more restrictive in comparison. If you take your money out of a CD before the end of your time commitment, you have to pay a penalty. There’s one exception to this: no-penalty CD’s. You might opt for a no-penalty CD if you want to lock-in your APY for a set period of time — even if you have to withdraw your money before that time is up.

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 deposit 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 August 23, 2023.

CD term	APY
6-month CD	1.34%
1-year CD	1.76%
2-year CD	1.50%
3-year CD	1.40%
4-year CD	1.34%
5-year CD	1.41%

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.

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How we chose these products

FinanceBuzz evaluated a selection of CD accounts offered by our partners, looking at various criteria including account fees, bonus offers, and more. We did not review all products in the category and compensation was considered when evaluating and ordering the products.