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The Federal Reserve lowered the federal funds rate three times this year. As a result, deposit account rates are on the decline.
The good news: You can lock in a competitive return on a certificate of deposit (CD) today and preserve your earning power. In fact, the best CDs still pay rates above 4%. Read on for a snapshot of CD rates today and where to find the best offers.
Where are the best CD rates today?
CDs today typically offer rates significantly higher than traditional savings accounts. As of December 2024, the best short-term CDs (six to 12 months) generally offer rates around 4.00% to 4.50% APY.
Today, the highest CD rate 4.27% APY, offered by NexBank on its 1-year CD. However, there is a large minimum opening deposit of $25,000 required.
The next-highest rate can be found at two banks: Synchrony (13-month term) and Marcus by Goldman Sachs (1-year). Both banks are offering 4.25% APY.
The following is a look at some of the best CD rates available today from our verified partners.
See our picks for the best CD accounts and rates>>
Historical CD rates
The 2000s were marked by the dot-com bubble and later, the global financial crisis of 2008. Though the early 2000s saw relatively higher CD rates, they began to fall as the economy slowed and the Federal Reserve cut its target rate to stimulate growth. By 2009, in the aftermath of the financial crisis, the average one-year CD paid around 1% APY, with five-year CDs at less than 2% APY.
The trend of falling CD rates continued into the 2010s, especially after the Great Recession of 2007-2009. The Fed's policies to stimulate the economy (in particular, its decision to keep its benchmark interest rate near zero) led banks to offer very low rates on CDs. By 2013, average rates on 6-month CDs fell to about 0.1% APY, while 5-year CDs returned an average of 0.8% APY.
However, things changed between 2015 and 2018, when the Fed started gradually increasing rates again. At this point, there was a slight improvement in CD rates as the economy expanded, marking the end of nearly a decade of ultra-low rates. However, the onset of the COVID-19 pandemic in early 2020 led to emergency rate cuts by the Fed, causing CD rates to fall to new record lows.
The situation reversed following the pandemic as inflation began to spiral out of control. This prompted the Fed to hike rates 11 times between March 2022 and July 2023. In turn, this led to higher rates on loans and higher APYs on savings products, including CDs.
Fast forward to September 2024 — the Fed finally decided to cut the federal funds rate after it determined that inflation was essentially under control. It cut its target rate again in November and December. Today, we're beginning to see CD rates come down from their peak. Even so, CD rates remain high by historical standards.
Take a look at how CD rates have changed since 2009:
Understanding today’s CD rates
Traditionally, longer-term CDs have offered higher interest rates compared to shorter-term CDs. This is because locking in money for a longer period typically carries more risk (namely, missing out on higher rates in the future), which banks compensate for with higher rates.
However, this pattern doesn’t necessarily hold today; the highest average CD rate is for a 12-month term. This indicates a flattening or inversion of the yield curve, which can happen in uncertain economic times or when investors expect future interest rates to decline.
Read more: Short- or long-term CD: Which is best for you?
How to choose the best CD rates
When opening a CD, choosing one with a high APY is just one piece of the puzzle. There are other factors that can impact whether a particular CD is best for your needs and your overall return. Consider the following when choosing a CD:
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Your goals: Decide how long you're willing to lock away your funds. CDs come with fixed terms, and withdrawing your money before the term ends can result in penalties. Common terms range from a few months up to several years. The right term for you depends on when you anticipate needing access to your money.
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Type of financial institution: Rates can vary significantly among financial institutions. Don't just check with your current bank; research CD rates from online banks, local banks, and credit unions. Online banks, in particular, often offer higher interest rates than traditional brick-and-mortar banks because they have lower overhead costs. However, make sure any online bank you consider is FDIC-insured (or NCUA-insured for credit unions).
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Account terms: Beyond the interest rate, understand the terms of the CD, including the maturity date and withdrawal penalties. Also, check if there's a minimum deposit requirement and if so, that fits your budget.
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Inflation: While CDs can offer safe, fixed returns, they might not always keep pace with inflation, especially for longer terms. Consider this when deciding on the term and amount to invest.
