10 Best CD Rates of 2023 – Market News Data

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*Rates and APYs are subject to change. All information provided here is accurate as of December 7, 2023.

Certificates of Deposit (also known as CDs) can be a great way to save and grow your money with very little risk.

Before choosing a CD, it’s important to consider how soon you’ll need the deposited money, as well as the terms and rates offered by different financial institutions.

Read on for our list of banks and credit unions offering the best CD rates in the market, and a guide to help you choose the right account for your savings goals.

Our Top Picks for Best CD Rates for December 2023
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Best CD Rates Today

Most of the financial institutions in our list offer competitive CD rates for multiple terms. Below are the top CD rates by terms, alongside the bank and its minimum deposit requirements.

Best 6-Month CD Rates

Financial institution APY Minimum deposit CommunityWide FCU 5.50% $1,000 Synchrony 5.25% No minimum Quontic 5.05% $500
Best 12-Month CD Rates

Financial institution APY Minimum deposit CommunityWide FCU 5.60% $1,000 Bread Savings 5.50% $1,500 LimeLight Bank 5.50% $1,000
Best 18-Month CD Rates

Financial institution APY Minimum deposit LimeLight Bank 5.35% $1,000 PenFed Credit Union 5.35% $1,000 CommunityWide FCU 5.30% $1,000
Best 2-Year CD Rates

Financial institution APY Minimum deposit Connexus Credit Union 4.76% $5,000 CommunityWide FCU 5.00% $1,000 Bread Savings 4.95% $1,500
Best 3-Year CD Rates

Financial institution APY Minimum deposit First National Bank of America 4.85% $1,000 CommunityWide FCU 4.60% $1,000 Bread Savings 4.50% $1,500
Best 4-Year CD Rates

Financial institution APY Minimum deposit First National Bank of America 4.80% $1,000 Barclays 4.45% No minimum Bread Savings 4.25% $1,500
Best 5-Year CD Rates

Financial institution APY Minimum deposit First National Bank of America 4.75% $1,000 Barclays 4.50% No minimum Bread Savings 4.25% $1,500

Best No-Penalty CD Rates

Financial institution APY Term Minimum deposit CIT Bank 4.90% 11 months $1,000 Ally 4.55% 11 months No minimum Marcus 4.60% 13 months $500
Best Bump-Up CD Rates

Financial institution APY Term Minimum deposit Marcus 4.50% 20 months $500 Connexus Credit Union 4.31% 24 months $5,000 Synchrony 4.00% 24 months No minimum

Best CD Rates Reviews

Interest rates quoted are valid as of December 7, 2023, and are subject to change. Check with each financial institution for current rates before making any investment decision.

Highest APY for most CD termsTerms from 12 to 60 monthsCD laddering available$1,500 minimum depositFees for paper statement requests, wire transfers and checks

HIGHLIGHTS

Minimum Deposit$1,500APY4.25% – 5.50%Terms1, 2, 3, 4 & 5 yr.Grace Period10 days

Why we chose this bank: Bread Savings provides some of the highest CD rates for most terms.

Bread Savings formerly known as Comenity Direct, offers a wide range of CDs with higher APY than other banks and credit unions. It also features an app for mobile check deposits and transfer funds.

Like most banks on our list, Bread Savings offers a 10-day grace period after the maturity date. During this period, you can cash out your CD, renew it and/or change your CD term.

Aside from the typical early withdrawal fee, Bread Savings charges $25 for outgoing wire transfers, $15 for official check requests and $5 for paper statements. (Online statements, however, are free.) Additionally, there’s a minimum opening balance of $1,500 and a maximum of $10 million per account owner.

Best Bread Savings CD Rates:

Highly competitive APY rates, 5.16% for 17-months CDsNo checking account required
Insured by the National Credit Union Administration (NCUA)
$5,000 minimum deposit
Dividends are credited quarterly
Must become a Connexus member

HIGHLIGHTS

Minimum Deposit$5,000APY3.91% – 5.01%Terms1, 2, 3, 4 & 5 yr.Grace Period10 days

Why we chose this bank: Connexus Credit Union offers high APY rates for short-term CDs of 12, 24 and 36 months.

Connexus Credit Union offers high-yield share certificates (traditionally called CDs at banks) for terms of one to five years.

With Connexus, dividends (or interest) are compounded and credited on a quarterly basis. You may choose the option to have dividends deposited to a Connexus account or to receive it as a check.

Connexus share certificates require a minimum deposit amount of $5,000, which is comparatively higher than most competitors in our list. Many banks don’t require a particular minimum deposit, and those that do typically ask for deposits ranging from $500 to $1,000.

Connexus is available nationwide. However, you must become a member to open a share certificate account.

To join you must make a one-time donation of $5 to the Connexus Association and deposit $5 into a Connexus savings account. Members from affiliated organizations and residents of select counties in Illinois, Minnesota, Ohio and Wisconsin may also join without having to make a donation.

Best Connexus Credit Union CD Rates:

High APY rates on short-term CDsAutomatic monthly disbursements availableCo-owner or beneficiary can be added

$2,500 minimum depositLow returns on long-term CDs

HIGHLIGHTS

Minimum Deposit$2,500APY2.00% – 5.40%Terms6 & 18 mo. 1, 2, 3, 4 & 5 yr.Grace Period10 days

Why we chose this bank: Live Oak Bank stands out for its high APY rates on short-term CDs.

Live Oak Bank offers seven different CD terms, from six months to five years with relatively high APY rates for short-term CDs. However, a minimum deposit of $2,500 is required, which is relatively higher than most competitors.

With Live Oak, you can set automatic interest disbursements of your returns every month and add a co-owner (or multiple beneficiaries) to your account.

Live Oak is one of the few banks that discloses a maximum deposit amount. Customers can only deposit up to $250,000 per account, which is the amount insured by the Federal Deposit Insurance Corporation (FDIC).

Best Live Oak CD Rates:

No minimum opening balance14-day grace periodAllows interest monthly disbursementsFunds withdrawal must be requested over phone or in writing
No branch locations

HIGHLIGHTS

Minimum DepositNo minimum APY4.45% – 5.35%Terms18mo., 3, 4 & 5 yr. Grace Period14 days

Why we chose this bank: Barclays offers online CDs with competitively high yields and no minimum deposit requirements.

Barclays is an online bank that offers high-yield CDs, with terms ranging from 18 months up to 60 months.

Barclays doesn’t require a minimum balance to open CDs nor does it charge monthly fees. However, like most banks, it charges an early termination fee if you withdraw your principal before maturity.

In addition, Barclays offers a longer-than-average 14-day grace period (most banks typically offer 10 days). This means that you have 14 days after maturity to renew or withdraw your funds without penalties.

Best Barclays CD Rates:

No minimum balance requirementCan be opened online or at a branch officeInterest disbursement availableDoesn’t offer no-penalty CDs

HIGHLIGHTS

Minimum DepositNo minimum APY4.10% – 5.25%Terms6, 9, 11, 18 & 30 mo. 1, 2, 3, 4 & 5 yr.Grace Period10 days

Why we chose this bank: Capital One has both online banking and nationwide brick-and-mortar presence, meaning you can open an account either online or in person.

Capital One has over 300 bank branches and cafés throughout the U.S., and offers solid online banking features. This makes it a great contender for customers who prefer having a place to visit when they need customer support, but also for those who mostly prefer an online bank.

Capital One offers 360 CD accounts, which are basically CDs with no minimum balance requirements and high fixed-rate returns. CD terms range from six months to 60 months.

With Capital One interest is accrued daily but compounded and credited on your CD monthly. Interest disbursement may be requested on a monthly or yearly basis, which you can route to another Capital One account or an external account.

Capital One CDs renew automatically unless you redeem it at maturity or within the 10-day grace period. You also have the option of assigning up to 10 individuals as payable beneficiaries in case of death.

Like most banks, Capital One charges an early withdrawal penalty: three months of interest for CDs of 12 months or less, and six months of interest for longer terms.

Best Capital One CD Rates:

No minimum deposit required0.05% loyalty reward when you renew your CD High-yield CDs have a 10-day best rate guaranteeAlso available as an IRANo penalty-CD is only available with an 11-month term

HIGHLIGHTS

Minimum DepositN/AAPY3.00% – 5.15%Terms3, 6, 9, 12, & 18 mo. / 3 yr. & 5 yr.Grace Period10 days

Why we chose this bank: Ally Bank’s no-penalty CDs and bump-up CDs offer one of the highest APY rates compared to most competitors.

Ally Bank offers three different types of CDs: High-Yield CD, Raise Your Rate CD, and No-Penalty CD. These CDs don’t require a minimum deposit, and offer competitive APY rates and access to online banking.

Ally’s high-yield CDs are available with terms of three months up to five years. No-penalty CDs, however, are only available with an 11-month term.

Ally Bank Raise Your Rate CDs, on the other hand, give you the option to bump up your CD’s interest rate if the APY were to increase during the term. This means you can increase your rate once or twice (depending on the term) without having to wait for their maturity dates to make changes. However, you can only choose between a 2-year CD and a 4-year CD.

Other perks include a 10-day best rate guarantee that lets you claim the highest CD rate offered for your term and deposit amount if it goes up during that time, and a 10-day grace period after your maturity date. You can also get a 0.05% increase in your rate as a loyalty reward if you renew your CD with Ally Bank.

Best Ally Bank CD Rates

No-Penalty CD (11 months)

High APY rates for 5- and 7-Year termsIRA Certificates and Education Savings Certificates also available6-month CDs don’t use compound interestMust become a PenFed member

HIGHLIGHTS

Minimum Deposit$1,000APY3.00% – 5.35%Terms6, 12, 15 & 18 mo. 2, 3, 4, 5 & 7 yr.Grace PeriodN/A

Why we chose this bank: PenFed offers account holders relatively high APY rates for long-term CDs.

PenFed Credit Union has three different types of certificates: Money Market Certificates, IRA Certificates and Education Savings Certificates.

Its Money Market Certificates — otherwise known as CD in most banks — require a $1,000 minimum deposit and are available in nine different term options, ranging from six months up to seven years.

Education Savings Certificates have a $500 minimum opening deposit and have terms of one to seven years. IRA certificates have the same terms, but a $1,000 minimum balance.

With the exception of 6-month certificates (which don’t accrue compounded interest), dividends are compounded daily and credited monthly. During the application, you can decide if periodic dividend payments should be added to the certificate itself, a PenFed account or sent to you in a check. You can also decide beforehand whether you want to automatically renew your certificate at maturity or to transfer the principal and its dividend to a specific PenFed account.

As is the case with most credit unions, PenFed requires you to become a member in order to apply for any of its products or services. To join you need to open a member savings account with at least $5.

Best PenFed Credit Union CD Rates

Offers high-yield and no-penalty CDsCompetitive APY rates, up to 5.30%30-day period to fully fund your CD after opening an account No physical branchesNo IRA CDs

HIGHLIGHTS

Minimum Deposit$500APY4.00% – 5.30%Terms6, 9, 12, 13, 18 & 20mo. / 2, 3, 4, 5 & 6 yr. Grace Period10 days

Why we chose this bank: Marcus by Goldman Sachs provides multiple CD options, including no-penalty CDs.

Marcus by Goldman Sachs is one of the few online banks that offers three types of CDs: high-yield, no-penalty and bump-up. All of them require a $500 opening deposit and have a 10-day CD-rate guarantee, so you can claim any published rate if it changes within 10 days of opening your account.

Unlike most CDs, no-penalty CDs let you withdraw your full balance at any time without paying penalties.

Marcus offers fairly high returns across all CD terms. High-yield CDs range from six months up to six years, whereas no-penalty CDs are available for up to 13 months.

Marcus Rate Bump CDs are available for a 20-month term. Bump-up CDs let you increase your rate at least once over the life of your CD. The amount of times you can request a rate increase depends on the length of the CD term.

To increase your CD rate, you simply need to submit a request by logging in to your account. According to Marcus, requests are typically processed within a business day if you make them before 6:00pm ET, but may take up to two days.

We like that Marcus offers the option of transferring the interest you earn from your CD principal to any Marcus Online Savings Account or an external bank account before the maturity date without penalties.

In addition, CD accounts have a 10-day grace period after their maturity date. During this period you can make changes to your plan and/or renew with different terms using their CD Maturity Center online.

Best Marcus by Goldman Sachs CD Rates

No-Penalty CD (13 months)

No minimum deposit requiredTerms from three to 60 monthsOffers IRA CDsNo checking account available

HIGHLIGHTS

Minimum DepositNo minimumAPY2.25% – 5.50%Terms3 – 24 mo. / 3, 4 & 5 yr. Grace Period10 days

Why we chose this bank: Synchrony Bank offers a 15-day Rate Guarantee, one of the longest in the market.

This online-only bank has terms ranging from three up to 60 months and competitive APY rates in all its CD products, which include no-penalty, bump-up and traditional CDs.

With Synchrony, you get a 15-day rate guarantee period during which you can claim the highest available interest rate if the published rate increases.

A drawback is that Synchrony doesn’t offer a checking account, which means you have to fund your CD via an electronic transfer from an external bank, a Synchrony Bank High-Yield Savings account or a Money Market Account. This applies to transfers of interests earned as well.

Best Synchrony Bank CD Rates

Wide range of maturity terms — from three months to 10 yearsIRA CD available$2,500 minimum depositDoesn’t offer no-penalty CD

HIGHLIGHTS

Minimum Deposit$2,500APY2.00% – 5.30%Terms3, 6, 9, 12, 18, 24 & 30 mo. / 3, 4, 5, 7 & 10 yr.Grace Period9 days

Why we chose this bank: Discover offers a wide range of CD terms, giving customers multiple options for CD laddering.

Discover Bank is about more than just credit cards — it offers great CDs too, compared to other major banks. While most banks offer only three or four different increments, Discover offers 12 different terms ranging from three months up to 10 years.

Discover’s wide range of CD terms is a good option if you’re interested in setting up a CD ladder, which consists of opening multiple CDs with varying maturity dates or terms (usually in monthly increments). This way you can earn interest and have more frequent access to your money, while your high-yield CDs mature.

However, you will need a minimum deposit of $2,500, which may be a drawback for some.

Best Discover Bank CD Rates

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Other banks we considered

We looked at an array of financial institutions to find the best CD rates. The following list includes some of the companies we reviewed that, while they didn’t make the final cut, we still consider noteworthy.

Quontic
APY ranging from 4.30% to 5.30%
Low minimum deposit — $500
Account can be open online within minutesOnly offers five CD terms

As is typically the case with online banks, Quontic offers higher yields than many brick-and-mortar banks. However, it only features five CD terms — from six months to five years — and currently doesn’t feature four-year CD terms. It also requires a $500 minimum deposit.

CommunityWide FCU
Certificates don’t renew automaticallyIRA Certificate available
Physical branches are located in Indiana onlyMust become a member

CommunityWide Federal Credit Union members can invest a minimum of $1,000 for anywhere from six months up to five years. However, while anyone in the U.S. can become a member through CommunityWide online portal, physical branches are only available in Indiana.

First National Bank of America
Wide variety of CD terms, including 72 and 84 months. High APYs in most CD termsIRA certificates of deposit available $1,000 minimum depositInterest compounds quarterly Only three branch locations

First National Bank of America (FNBA) is one of the few banks that offers CD terms of 72 and 84 months. The bank’s CD rates are also consistently high across all terms, although it requires a minimum deposit of $1,000.

Citibank
Minimum opening deposit is $500No penalty CDRates for regular CDs are somewhat lower that the competitionRates vary across regions

Citibank features fixed-rate, no penalty and step up CDs with terms of three months to five years. However, fixed-rate CDs have lower APYs than most competitors.

CIT Bank
Offers Jumbo, No-Penalty and rising rate CDsNo fees for account opening or maintenanceRates are below the competition’s (0.30% APY for a 1-year CD)

CIT Bank is another online-bank that offers multiple CD options with terms ranging from three months up to five years. CIT Bank offers a considerably high APY rate for 6-month CDs and no-penalty CDs. However, most CD terms, including its one-year CD, feature lower-than-average APY rates.

LimeLight Bank
Competitive rates for 3-year CDs
Full online banking
Only offers CD terms up to 3 years
1,000 minimum deposit

LimeLight Bank is an online division of Capital Community Bank. The bank currently offers one of the highest rate for 12-months CDs. However, it has a limited selection of CD terms (from six months to 36 months) and a minimum deposit of $1,000.

First Technology Federal Credit
CD terms from six to 60 months
Offers bump-up and jumbo share certificates
Lower APR rates for regular share certificates

First Technology Federal Credit is a credit union that provides customized products and financial services to technology-oriented companies and their employees. It features traditional shared certificates, bump-up and jumbo certificates.

First Tech stands out for its relatively high APY rates for its 13-month bump-up shared certificates. However, its rates for traditional share certificates are somewhat lower compared to competitors in our list.

Navy Federal Credit Union
Terms from 3 months up to 7 years21-day grace periodOffers Jumbo CDs Standard CDs require a $1,000 initial deposit
Membership is only available for veterans and their family members

Navy Federal offers multiple CD term lengths and share certificate accounts options, which tend to have lower minimum deposits and more flexible terms. However, its services are only available for veterans and their family members.

American Express
Terms of up to 10 yearsOver 4,700 branches across the USLow APY ratesRequires a qualifying Chase checking account$1,000 minimum

American Express offers CD rates with terms of between 11 months up to five years and no minimum balance requirement. Although it offers competitive rates for its 11-month CDs, most rates are considerably lower than competitors in our top list.

Chase
Terms of up to 10 yearsOver 4,700 branches across the USLow APY ratesRequires a qualifying Chase checking account$1,000 minimum

Chase offers most banking services, including savings accounts and CDs. Although you can choose terms between one month and 10 years, its CD rates are considerably lower compared to competitors in our top list. Additionally, Chase CDs are only available to customers with a linked Chase checking account.

Best CD Rates Guide

Read our guide to learn more about certificates of deposit (CD), how they work and what strategies you can use to take advantage of the best rates.

What is a CD?

A Certificate of Deposit, or CD, is essentially a type of savings account where you deposit a lump sum for a term length ranging from three months to six years at a fixed interest rate.

During the fixed term, your money earns interest at a higher annual percentage rate (APY) than what you usually find in checking accounts or online saving accounts.

The main difference is that you can’t withdraw your money unless you pay a penalty fee or the CD reaches its fixed withdrawal date, otherwise known as the maturity date.

At the maturity date, you can also renew your CD, change its terms or claim any higher rates the bank may be offering. Some banks, however, offer more flexibility and let you make changes to your CD before its maturity.

How does a certificate of deposit works

Most CDs have the following features:

Opening Minimum Deposits. CDs tend to have higher minimum deposit requirements than most savings accounts, usually $500 or more. However, some banks don’t have an established minimum requirement at all. Fixed Term Lengths. Common CD term lengths range from six months up to 72 months, at most banks. Higher APYs for Longer Terms. CD rates depend on the term and the amount deposited. Generally, longer-term CDs have higher APY rates, giving you more substantial returns on your principal than shorter-term CDs. Penalties for Early Withdrawals. You’ll usually be charged a penalty if you choose to withdraw money before the CD reaches its maturity date; however, some banks do feature no-penalty CDs. How APY works in a CD

The Annual Percentage Yield (or APY) represents how much money you would earn in one year, taking into account compounding interest.

CD accounts offer pre-established or fixed APYs, meaning that the money you deposit into the account will typically earn that amount of interest monthly for the entire term of the CD.

Most certificate of deposit accounts accrue interest in one of two ways: simple interest or compound interest. The difference between these two types of interest is how your yield is calculated.

Accounts with simple interest generate interest on the principal amount only, whereas compound interest is calculated based on both the principal and the accumulated interest from previous periods.

Types of CD accounts

Depending on the bank, you may choose different types of CDs to grow your money. Here’s an overview of what each type offers.

High-Yield CD

High-yield CDs feature higher-than-average APY rates. These are typically available from online banks and credit unions, which tend to offer better rates than traditional banks. In most cases, high-yield CDs also have low (or no) minimum opening deposit requirements

No-penalty CD

No-penalty CDs let you withdraw your money before its maturity date without incurring in early withdrawal penalty fees. This type of CD offers more flexibility and liquidity in terms of accessing your money, however, it offers lower rates than high-yield CDs

Bump-up CD

Bump-up CDs, also called step-up or raise-your-rate CDs, let you increase your rate around the middle of your term if a higher rate is available. For instance, if after two years of opening a 4-year bump-up CD the bank offers a higher rate, you would be able to request a boost to the current rate. Some banks may let you increase your rate up to two times, depending on your term length.

Jumbo CD

A jumbo CD is a certificate of deposit that requires a larger opening deposit, typically of $100,000 or more. Because you’re investing a higher amount, jumbo CDs tend to offer a higher rate of return than traditional CDs.

IRA CD

An IRA CD is a savings vehicle that lets you invest a portion of your IRA retirement investment money in certificates of deposit. Do note that both IRA accounts and CDs charge penalties for early withdrawals, meaning you may end up paying two penalties if you break the term length.

Pros and cons of a certificate of deposit

Certificates of deposit are a reliable investment, ideal for those looking to earn some return with very little risk.

Here are some benefits and drawbacks to consider when deciding whether a CD is right for you:

Benefits of a CD
Competitive rates: CDs provide higher interest rates than most high-yield savings accounts, which can make a big difference when committing larger amounts to long-term CDs. Fixed returns: CDs feature fixed APY rates which makes it easy to calculate how much you’ll earn upon maturity. No monthly fees: Most CD accounts don’t charge monthly maintenance fees. Low-risk investment: CDs are not subject to the ups and downs of the stock market which makes them a great option if you want to grow your money safely. Great for long-term savings: CD accounts are useful saving tools for money you won’t need until a later date. Drawbacks of a CD
Early withdrawal penalty. You’ll have to pay a penalty if you want to withdraw the money early, and the amount of this fee varies from bank to bank. Accessibility. Some banks may let you withdraw the interest you accrue every month, but generally accessing your money involves additional fees. Fixed rates. When you open a CD, you’re locking a fixed interest rate for the duration of the CD term. This might be a potential drawback, specially in a rising interest rate environment where rates can change with some frequency.
How to choose a CD

CDs can be a great tool for saving for long-term goals, especially if you lock in a good rate at a reasonable length term. When looking for the right CD for you, consider the steps below:

Determine how much money you want to lock in. The first thing to consider is whether or not you can spare the money you have available and for how long. Preferably, it should be money you won’t need immediately, or at least for three to six months which are the shorter terms most banks offer. Pick a type of CD. Most banks offer different types of CDs accounts, some with different features that make them stand out from more traditional CDs. These features could include letting you raise your rate once or twice during the term of the CD, or not charging withdrawal penalties. Choose a CD term. CD terms can range from six months to five years. It’s important to be clear about how long you’re willing to put your money away as, in most cases, banks will charge a penalty if you want to withdraw the money early. You might also want to consider a CD ladder. Compare CD rates. Rates vary widely by bank and credit union. Take the time to shop around, research your options and compare rates so you can make sure you’re locking the highest rate available. Check minimum deposit requirements. Some banks require minimum deposits. Make sure these align with how much money you’re putting into your CD. How to open a CD

In many ways, the process for opening a CD is similar to that of a checking or savings account. Generally, it will consist of the following steps:

Find an insured bank or credit union. CDs are federally insured up to $250,000 (per depositor) by the Federal Deposit Insurance Deposit (FDIC) or the National Credit Union Administration (NCUA). Make sure your financial institution is insured by one of these two government agencies. Create an account. Unless you already have an account with the bank, you’ll need to create one. This can be easily done online or in person if the bank has branches near you. Most financial institutions ask for your personal information, which may include your Social Security number, external bank account information, address and phone number. Fund your CD. Once you create an account you’ll be able to fund your CD. You can typically do this via an electronic fund transfer, a phone transfer or by mailing a check. What happens when a CD matures?

When a CD reaches its maturity date you generally get a grace period that ranges from seven to 21 days depending on the bank. During this period you can decide whether you want to open a different CD account, renew your CD or withdraw your money.

If you let the grace period pass, the bank will most likely automatically renew your CD for the same term but with the current interest rate, which might be lower than your original rate. If this happens and you want to withdraw your money, you may have to pay a penalty fee or wait until the CD’s new term ends.

What happens if you close a CD early

Banks will typically charge you a withdrawal fee if you close a CD account prior to maturity.

This early withdrawal penalty varies depending on the bank’s policy, the CD term length and the principal. In most cases, the penalty is deducted from your dividends, and can equal anything between 90 to 270 days of simple interest.

Banks sometimes offer no-penalty CDs which let you withdraw your money before its maturity and without incurring in fees. This type of CD sometimes offers lower APY rates, although some banks offer competitive products, like Marcus and Ally Bank’s no-penalty CDs.

What is a CD Ladder?

A CD ladder is a savings strategy that consists of spreading your money across multiple certificates of deposit (CDs) with different maturity dates — typically with a 1-year interval between each CD.

The goal is to space out your maturity dates evenly so you can have access to your money more frequently and benefit from any higher interest rates available at the end of each term.

How CD Ladders Work

Long-term CDs pay higher rates than short-term CDs; however, losing access to that money for five years or more can be a big risk.

This is where a CD laddering strategy might come in handy: you can earn money at relatively high interest rates while still having periodic access to your savings.

Let’s say you have $5,000 to open a new CD. Using a CD laddering strategy, you can open five certificates, each for $1,000 and each with a different maturity term.

You’d place $1,000 each in a 1-year, 2-year, 3-year, 4-year, and 5-year CDs respectively. Then, each time a CD matures, you can either withdraw the money if you need it or roll it over, with the compound interest, into a new 5-year CD. After five years, all of your money will be locked away in 5-year CDs.

However, because of the staggered maturity dates, you’ll still be able to withdraw a portion of the deposited money yearly — all without paying any penalties and while benefiting from the higher yields of long-term CDs.

Other alternatives to a CD account

CD accounts are certainly not the only option when it comes to earning high yields on your savings.

CDs vs IRA

A certificate of deposit (CD) is a deposit account where you keep funds for a specific period of time at a fixed APY. Funds in a CD are not invested in the stock market — they’re simply kept in the account, collecting interest.

An Individual Retirement Account (IRA), on the other hand, is a tax-advantaged retirement account. The funds deposited there can be invested in bonds, stocks, money market accounts or other investment vehicles. Like CDs, IRAs have penalties if you withdraw your funds before age 59, although there are some exceptions.

CDs vs Money Market Accounts

Both CDs and money market accounts (MMAs) are types of savings accounts that earn interest. The difference is that MMAs offer some checking account features, such as access to your funds and the option to add money regularly. MMAs may also offer access to debit cards and ATM withdrawals.

However, when it comes to returns, CD accounts typically offer higher rates than most MMAs, however, in most cases, you forgo the ability to make any deposits or withdrawals before the end of the term.

CDs vs High-Yield Savings Accounts

High-yield savings accounts are typically available from online banks. These accounts offer higher interest rates (up to 25x times higher) than traditional savings accounts. Some of the best high-yield savings accounts feature rates similar to those found on short-term CDs. This makes them a good option for emergency funds since you can earn interest while keeping your money accessible.

Yet, compared to high-yield savings accounts, CDs offer higher interest rates which makes them a better option if you’re looking to grow your money faster.

Check out our guide on high-yield savings accounts vs. CDs to learn more about the difference between these financial products.

CDs vs Bonds

CDs and bonds are both low-risk investments that pay a fixed interest rate. However, there are some key differences on how they work and the risk involved.

For instance, bonds are a type of loan investors give to the government or a reputable company that’s subject to market fluctuations, whereas CDs are a type of account where you put money and let it earn interest for the desired term length.

Check out our guides on CDs vs Bonds and How to Buy Bonds to learn more about this low-risk investment alternative.

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