Top CD rates today: September 5, 2024 | What to know about CD rate trends now

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.

To date, all top rates have remained unchanged in September, with the highest rate at 5.25 percent annual percentage yield (APY). This is offered on a three-month term from America First Credit Union, which also offers the top rates for six- and nine-month CDs. Currently, shorter terms are earning higher yields than longer ones.

Bankrate’s table below shows the highest yields offered on widely available CDs, by term. It also lists how much you’d earn for each term with a $5,000 investment.

Today's CD rates by term

CD term	Institution offering top APY	Highest APY	Estimated earnings on $5,000 with top APY
3-month	America First Credit Union	5.25%	$64
6-month	America First Credit Union	5.15%	$127
9-month	America First Credit Union	5.15%	$192
1-year	CIBC Bank USA	5.06%	$253
18-month	Bask Bank	4.90%	$372
2-year	Bask Bank	4.75%	$486
3-year	TAB Bank	4.35%	$681
4-year	Schools First Federal Credit Union	4.20%	$894
5-year	Schools First Federal Credit Union	4.35%	$1,186

Note: Annual percentage yields (APYs) shown are as of September 5, 2024. APYs for some products may vary by region.

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.

How the current rate environment impacts 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 eight 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’ goal is 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 2.9 percent.

“The Committee does not expect it will be appropriate to reduce the target range until it has 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 July 31.

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?

As of late, top CD rates are declining due, in part, to strong signals from the Fed that it plans to cut interest rates this month. It's best to take advantage of still-high CD rates now while you still can.

"Now is the time to lock in attractive returns on CDs as the Federal Reserve is poised to begin cutting interest rates,” 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.

CD glossary

Here are some terms you’ll likely come across when choosing a CD.

• Add-on CD: A CD that enables you to make additional deposits after your initial investment. This feature affords more flexibility than traditional CDs, which only allow one deposit at the beginning of the term.
• Annual percentage yield (APY): A percentage that indicates how much interest a CD earns in one year, which takes into account the effect of compounding.
• Brokered CD: A type of CD issued by a bank but sold through a brokerage firm or other financial institution.
• CD ladder: An investment strategy that involves purchasing multiple CDs with varying maturity dates to provide liquidity and take advantage of higher rates.
• Early withdrawal penalty: A fee charged if funds are withdrawn from a CD before the maturity date. Penalties often range anywhere from 90 days to 365 days’ worth of interest.
• Grace period: A specific time after the maturity date during which an account holder can make changes to the CD without penalties. A grace period typically ranges from five to 14 days.
• IRA CD: A CD that’s held within an individual retirement account.
• Minimum opening deposit: The lowest amount of money required to open a CD account, which can vary by institution. Some institutions don’t have a minimum deposit requirement.
• No-penalty CD: A type of CD that allows you to withdraw your money without facing a penalty while providing a fixed APY.
• Promotional CD: Also known as a bonus or special CD, it’s a CD with an above average APY. These may be offered by banks and credit unions as a way to obtain new customers.
• Jumbo CD: A CD that has a high minimum balance requirement, typically $100,000, sometimes as low as $95,000. This type of CD tends to offer a higher interest rate than regular CDs with the same term.
• Bump-up CD: Also known as a “raise-your-rate CD,” a bump-up CD provides savers with the option to increase the CD’s APY without having to change its term. Generally, only one rate increase is allowed during its term.

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.