Yes, you can get 6% on a CD now. As of January 10, 2025, the Financial Partners Credit Union is offering 6.00% APY on their CD rates for 8 months. The minimum deposit is $1,000.00, up to a $5,000 maximum. Check out the latest CD rates from over 400 banks and credit unions.
While there aren't any financial institutions paying 7% on a CD right now, there are other banks and credit unions that pay high CD rates. Compare today's top CD and savings rates.
Key Takeaways. Cashing out a CD early will usually trigger some sort of penalty. CD early withdrawal penalties are worth incurring when you need the money for an emergency or down payment, or when rates have risen so much that you'd be better off reinvesting the funds into a more lucrative option.
From mid-2023 to September 2024, many banks offered attractive certificate of deposit (CD) rates of around 5%. But now that the Federal Reserve has been cutting rates, CD yields are dropping too. Despite lower rates, CDs remain a solid option for growing your savings.
As Beene notes, "The recent rate cuts by the Fed have already produced small drops in the rates of CD and savings accounts at many major banks, and we're going to see that continue if interest rates drop. If you want to lock in a certain rate a CD currently provides, it would be a good idea not to wait."
One major drawback of a CD is that account holders can't easily access their money if an unanticipated need arises. They typically have to pay a penalty for early withdrawals, which can eat up interest and can even result in the loss of principal.
If your CD's term is less than one year and matures within the same year you open it, you'll report these earnings on your tax return for that year. But if your CD's term is longer than one year — or spans multiple years — you'll pay taxes on the interest you earn at the end of each year.
The major drawback of withdrawing early from a CD is a penalty imposed by the bank or credit union. The exact CD early withdrawal penalty varies based on the CD's terms. This typically involves forfeiting some or all of the interest earned, and sometimes even a portion of the principal.
Branch managers often have authority to negotiate. The more money that you're going to deposit, the better chance of receiving a higher rate. Banks are typically only willing to negotiate on their standard rates and not on their promotional rates.
In general, credit unions offer better savings account rates than banks. Of course, rates differ among credit unions and among banks. According to the NCUA, average credit union CD interest rates are higher than bank CD rates for a $10,000 CD deposit. This is true for every term, from three-month CDs to five-year CDs.
Key Takeaways
CDs insured by the Federal Deposit Insurance Corp. (FDIC) for up to $250,000 cannot lose money even if the bank fails. However, some CDs that are not FDIC-insured may carry greater risk, and risks may come from rising inflation or interest rates.
Decide your deposit amount - Determine how much you'd like to deposit in one or more CDs. To qualify for most jumbo certificates, you'll usually need at least $100,000—though occasionally, you'll find a certificate available for a minimum $50,000 deposit.
Where are the best CD rates today? CDs today typically offer rates significantly higher than traditional savings accounts. As of January, 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, which is offered by NexBank on its 1-year CD term.
For example, a $10,000 deposit in a five-year CD with 3.50% APY would earn around $1,877 in interest. The same CD with a 1.50% APY would earn around $773 in interest, and the same CD with a 0.01% APY would earn only $5 in interest.
If the CD is placed in a tax-deferred 401(k) or individual retirement account (IRA), any interest earned on the CD may be exempt from paying taxes in the year it was earned. 2 Instead, you will pay taxes on that money when it is withdrawn from the 401(k) or IRA after you retire.
Typically, yes. Banks tend to automatically renew CDs that you don't cash out from during a grace period. The renewed term is the same or similar to the previous term, but the rate is based on the current rate that that bank offers for that CD term. You can opt out of a CD during the grace period.
CDs are commonly taxed the year the interest income is earned and not at maturity, however, an inherited CD and its income accrued before the holder's death are not taxable for the recipient. The only part that's taxable is the interest income from the date of death.
Safety and security: You can save money in a CD without worrying about a stock market plunge or other risks. CDs come with fixed interest rates and FDIC or NCUA insurance, which could protect your money even if your bank fails.
Any amount you deposit in a CD should be money you're comfortable locking up for the full term length. First, you should have enough cash in an emergency fund to cover at least three months of expenses, and this cash should be in an account where you can access it at any time without penalty.
You can earn hundreds of dollars or more
If you open a 2-year CD with a rate of 4.20%, for example, you'll earn approximately $483 on your $5,000 deposit. If you keep the money in longer, you'll make even more. A $5,000 5-year CD at 4.35% will leave you with a profit of around $1,187.
The cons of CDs
With CDs, you typically can't withdraw the money whenever you want—at least not without paying a penalty. Another disadvantage is that CD interest rates can sometimes struggle to keep up with inflation. When inflation rises, the value of your dollar goes down.