Top CD rates today: July 26, 2024 | High APYs won't last forever

A certificate of deposit (CD) is a bank account that earns a fixed rate of return in exchange for locking in your funds for the entire term. CD terms often range from three months to five years, although it’s possible to find ones with terms shorter or longer than that. A CD can be a good place to stash money for savings goals, such as a down payment on a house or a new car. When choosing the best CD term, consider when you’ll need access to the money.

CD rates across the banks we monitor are showing slight declines. As the possibility of a Fed rate cut looms, banks are making preparations. Recent CD rate cuts include Popular Direct's three-month CD, which was lowered from 5.30 percent APY to 5.25 percent APY, and Bask Bank's one-year CD, which declined from 5.30 percent APY to 5.25 percent APY.

Today, the leading APY across CD terms among the banks we monitor is 5.50 percent, which is available on a three-month term from Quontic Bank. A minimum deposit of $500 is required. Many shorter terms are earning higher yields than longer ones in the current rate environment.

The table below shows top CD rates for the most common terms, as well as national averages and the amount you can earn in interest with a $5,000 deposit.

Today's best CD rates by term

Note: Annual percentage yields (APYs) shown are as of July 26, 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.

What to look for in a CD

In addition to a CD’s APY, pay attention to factors such as the minimum deposit requirement and the early withdrawal penalty. The required minimum deposit for a CD can range from $0 to $10,000 or more. While you should only commit funds to a CD that you can afford to lock in until the CD matures, it’s still helpful to be familiar with the terms of its early withdrawal penalty.

What the current rate environment means for CDs

Recent federal funds rate changes: To combat high inflation, the Federal Reserve raised its benchmark interest rate 11 times in 2022 and 2023, before leaving rates unchanged for seven straight meetings. Before the string of rate hikes began in March 2022, the target range was at 0-0.25 percent, and it currently stands at a 23-year high of 5.25-5.50 percent.

What this means for deposit accounts such as CDs: Yields on competitive savings accounts and CDs tend to move in lockstep with the Fed’s interest rate moves. As such, many banks increase their yields when the Fed raises rates, and they lower yields when the federal funds rate drops. While the Fed has held rates steady since July 2023, top CD APYs ended up peaking in late 2023 and have since been decreasing gradually, as illustrated below.

How inflation factors in

The Fed has held its key benchmark rate steady since July 2023, due to inflation not slowing as quickly as it has in the past. Fed officials are aiming to bring the annual inflation rate down to 2 percent. While the consumer price index (CPI), a measure of inflation, has decreased significantly from its decades-high annual rate of 9 percent in June 2022, it’s currently at 3 percent.

“We have stated that we do not expect it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2 percent,” Fed Chair Jerome Powell said in remarks following the Fed’s latest decision not to change rates on June 12.

The current rate of inflation is a significant factor that affects what the Fed decides to do with rates. An increase in the federal funds rate can be good for savers — translating to higher APYs on many CD and savings accounts — while it can be bad for borrowers as interest rates tend to increase on loans.

Is now still a good time to open a new CD?

“This a great environment for CDs as interest rates are at, or near, a peak for this cycle and the Federal Reserve is expected to begin cutting interest rates later this year,” says Greg McBride, CFA, Bankrate’s chief financial analyst. “The top-yielding CDs currently earn in excess of the inflation rate and savers have the ability to lock in that inflation-beating return for multiple years. If you have money you won’t need to touch for a period of time, now is a great time to consider a CD.”

CD FAQs

• What are the pros and cons of investing in a CD?

  Available in various terms and types, CDs often earn higher APYs than traditional savings accounts. Many provide a guaranteed APY, so you know how much you'll earn throughout the term. When CDs are issued by banks and credit unions that are federally insured, your money is protected should the financial institution ever fail.

  A drawback of CDs, however, is they often tie up your money for the duration of the term, charging an early withdrawal penalty if you need access to the funds sooner. While some CDs offer higher APYs than savings accounts, they generally earn lower returns than higher-risk investments. If a fixed-rate CD doesn't keep pace with inflation, it reduces the purchasing power of your investment over time.

• How does a CD work?

  A CD is a type of savings account that often earns a guaranteed APY while holding your funds for a set term. Often, CDs earn higher yields than ordinary savings accounts, although if you withdraw your funds before the term ends, you'll likely incur an early withdrawal penalty.

  When the CD matures, you can redeem it for your initial principal investment, plus the earned interest. If you don't take action before the grace period ends, the CD will typically renew automatically at the APY currently offered by the bank.

• Is a CD a safe investment?

  CDs opened at banks covered by the Federal Deposit Insurance Corp. (FDIC), and at credit unions covered by the National Credit Union Association (NCUA), are federally insured up to $250,000 per depositor, per insured financial institution, per ownership category. This insurance guarantees your money will be safe, even if the bank goes out of business.

  CDs typically offer guaranteed returns, which makes it easy to calculate your future earnings. However, while CDs are safe, they may yield lower returns compared with riskier investments such as stocks and bonds. Also, early withdrawal penalties can sometimes eat into your principal. Overall, CDs can be a solid option if your goal is to preserve your capital while earning a moderate return.

Research 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.