When it comes to Certificate of Deposit (CD) rates, they can vary significantly from one bank to another. This means it’s crucial to do your homework to ensure you’re securing the most advantageous rate available as you shop around. Let’s dive into what the current CD rates look like and how you can find the top offers on the market.
Traditionally, banks have offered higher interest rates for long-term CDs compared to their short-term counterparts, as an incentive to keep funds deposited for a longer period. However, the current economic scenario has turned this trend on its head.
Curious about the best CD accounts available today? We’ve got you covered.
Right now, NexBank takes the lead with an impressive 4.40% annual percentage yield (APY) on its one-year CD, though it does require a minimum deposit of $25,000 to get started.
Let’s take a closer look at some of the standout CD rates from our trusted partners:
The interest you earn from a CD hinges on its APY, which is a reflection of your total earnings over a year, factoring in the base interest rate and how frequently the interest compounds. Typically, CD interest compounds daily or monthly, enhancing your growth potential.
For instance, by placing $1,000 into a one-year CD with a 1.81% APY that compounds monthly, you would conclude the year with a total of $1,018.25. That’s your original $1,000 plus $18.25 in interest.
Now, envision shifting to a one-year CD with a 4% APY. In this scenario, after one year, your balance would rise to $1,040.74, with $40.74 coming in as interest.
The larger the amount you deposit into a CD, the bigger your returns. Taking our earlier example of a one-year CD with a 4% APY, but now with a $10,000 deposit, you would end the term with $10,407.42. This includes a healthy $407.42 profit from interest.
Check out more details: What qualifies as a good CD rate?
While interest rates often take center stage when choosing a CD, they’re not the only aspect to consider. Several CD types offer distinct advantages, albeit sometimes at the cost of slightly reduced interest rates. Let’s explore some common alternatives to the traditional CD:
Bump-up CD: This option allows you the flexibility to request an increase in your interest rate if the bank’s rates improve during your CD’s term. Note, however, that you typically only get to "bump up" once.
No-penalty CD: Also referred to as a liquid CD, this variety permits you to withdraw your funds before maturity without incurring any penalties.
Jumbo CD: These require a heftier minimum deposit—usually starting at $100,000—and tend to offer better rates in return. However, in today’s environment, the gap between jumbo and traditional CD rates might be narrower than you expect.
Brokered CD: True to its name, these CDs are purchased through a brokerage instead of directly from a bank. They can offer attractive rates or flexible terms, but also come with greater risk and may not be backed by FDIC insurance.
Understanding these options allows you to make a more informed decision when it comes to choosing the right CD for your financial needs.
