Images by GettyImages; Illustration by Hunter Newton/Bankrate

Key takeaways

  • The top yield across CD terms decreased slightly today to 5.35% APY. It’s offered on a one-year term.
  • The highest APY on a three-month term dipped to 5.25%.
  • National averages are just a fraction of the top APYs, so be sure to shop around.

After the Federal Reserve’s decision Wednesday to leave rates untouched, savers looking to open a certificate of deposit (CD), especially one with a high fixed yield, would do well to seize on the moment now, as the Fed may lower rates yet in 2024. Annual percentage yields (APYs) on CDs tend to increase when the Fed raises rates, yet often go down when the Fed cuts rates. Rates on competitive CDs remain elevated, though, so a CD could be a good choice for savers looking to lock in a guaranteed yield.

“Interest rates took the elevator going up but will take the stairs coming down,” says Greg McBride, CFA, Bankrate’s chief financial analyst. “Savers can lock into longer-term certificates of deposit — provided it is consistent with their investment horizon — and earn returns that outpace inflation while being fully protected by federal deposit insurance.”

Leading rates have dipped today on three-month and one-year CD terms.  The table below lists the highest-yielding CDs across terms.

Today’s CD rates by term

CD term Institution offering top APY Highest APY National average APY Estimated earnings on $5,000 with top APY
Note: Annual percentage yields (APYs) shown are as of March 22, 2024. APYs for some products may vary by region.

N/A: Not available; Bankrate doesn’t track national averages for the 9-month CD term due to limited available data. Estimated earnings are based on the highest APYs and assume interest is compounded annually.

3-month America First Credit Union 5.25% 1.28% $65
6-month America First Credit Union 5.30% 1.66% $132
9-month America First Credit Union 5.30% N/A $197
1-year BrioDirect 5.35% 1.76% $268
18-month First Internet Bank of Indiana 5.04% 1.78% $390
2-year First Internet Bank of Indiana 4.82% 1.51% $513
3-year First Internet Bank of Indiana 4.66% 1.41% $749
4-year First Internet Bank of Indiana 4.50% 1.48% $974
5-year First Internet Bank of Indiana 4.55% 1.45% $1,264
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Keep in mind:

The Federal Reserve decided to leave rates unchanged this week. Fed rate moves often impact CD APYs.

What did the Federal Reserve do with rates this week?

The Fed chose to hold rates steady on March 20, which marked the fifth straight rate-setting meeting that it left rates untouched. Rates stand at a 23-year high, and the Fed is expected to start lowering them at some point in 2024. After this week’s meeting, the next Fed meeting is scheduled for April 30-May 1, 2024.

CD rates in 2022 through 2024

National average CD yields rose steadily in 2023, as the Federal Reserve continued to hike interest rates at the fastest pace since the 1980s. In all, Fed officials increased rates 11 times between 2022 and 2023, bringing the federal funds rate to its current target range of 5.25-5.50 percent. Along with these rate hikes, average CD APYs rose to the highest they’d been in many years, with APYs on some competitive CDs climbing as high as 7 percent.

This year is expected to be a banner one for CD savers. Bankrate’s McBride predicts two Fed rate cuts in 2024, yet he says CD yields will continue to top inflation. “Savers have another good year in which their returns will shine, with inflation expected to decline further,” he says.

McBride also stresses the importance of shopping around for the highest APY. “Top-yielding offers are still going to deliver a notable advantage [over lower-yielding ones],” he adds.

CD FAQs

  • Although Federal Reserve rate cuts are widely expected in 2024, and banks may lower deposit account rates as a result, CD yields are expected to remain strong and outpace inflation. Overall, average yields remain higher than they’ve been in years, while the top APYs on many terms are more than triple the national averages.

    Opening a competitive CD now means you won’t be missing out on a high APY should rates start to fall later this year. Because a CD typically earns a fixed rate, you’ll continue to earn the same yield throughout its entire term, even if rates on new CDs start to drop.

  • Before committing money to a CD, make sure you’re comfortable parting with the funds for the entire term; withdraw the funds early and you’ll likely be hit with an early withdrawal penalty. As such, a CD isn’t a good place for your emergency fund. Other factors to consider include:

    • Annual percentage yield, or APY: Not all banks are equal when it comes to APYs, so it pays to check out what various banks are offering. Online-only banks are known for paying high yields, so they’re a good place to start your search.
    • When you’ll need access to the money: CDs commonly come in terms between three months and five years, although you’ll sometimes be able to find terms as short as one month and as long as 10 years. Make sure you choose a term that corresponds with when you’ll want the money for a planned purchase or other investment.
    • Minimum deposit requirement: Some banks, such as Ally Bank and Synchrony Bank, don’t require any set minimum deposit, while others may require $1,000, $5,000 or even as much as $10,000. When shopping around, find a CD with a minimum deposit that aligns with your saving goals.
    • Federal deposit insurance: Before opening a CD, make sure the bank is insured by the Federal Deposit Insurance Corp. (FDIC). Likewise, if it’s a credit union, make sure it’s insured through the National Credit Union Administration (NCUA). This way, should the financial institution close its doors, your funds will be insured for up to $250,000 per depositor, per insured bank or credit union, for each account ownership category.
  • Your money is protected in a CD when it’s with a bank insured by the Federal Deposit Insurance Corp. (FDIC) or a credit union insured through the National Credit Union Administration (NCUA). When institutions are covered by this federal insurance, CDs and share certificates are each insured for up to $250,000 per depositor, per insured bank or credit union, for each account ownership category.

    CDs typically require that you lock in your money for a set term, and taking out the money before the term ends usually results in an early withdrawal penalty. This penalty causes you to lose some of your interest — and possibly also some of your principal, which is the money you originally deposited in the account.

Methodology

Bankrate calculates and reports the national average APYs for various CD terms. Factored into national average rates are the competitive APYs commonly offered by online banks, along with the very low rates often found at large brick-and-mortar banks.

In June 2023, Bankrate updated its methodology that determines the national average CD rates. For the process, more than 500 banks and credit unions are now surveyed each week to generate the national averages. Among these institutions are those that are broadly available and offer high yields, as well as some of the nation’s largest banks.

Read the full article here

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