Certificates of deposit: 3% APY or higher
The most competitive rates on CDs for three-month to one-year terms remain above 4% annual percentage yields, with the best long-term CDs (three- to five-year terms) above 3.50%, according to NerdWallet analysis in mid-December 2024.
Bankrate's key CD insights and 2025 forecast
McBride predicts that by the end of 2025, the national average APYs for 1-year and 5-year CDs will be 1.25% and 1.35%, respectively. By year's end, top-yielding 1-year CDs will earn 3.70% APY, while top 5-year CDs will earn 3.95% APY, according to McBride.
Should I open a CD now or wait? It might be a good idea to get a CD now, since rates are expected to drop in the future. "If they want to get in the market for a CD, now might be the better time to lock in that higher yield, so they're shielded — at least for the near term — as rates continue to drop," says Stroup.
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The National Association of Home Builders expects the 30-year mortgage rate to decrease to around 6.5% by the end of 2024 and fall below 6% by the end of 2025, according to the group's latest outlook.
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.
The bottom line. CDs are a safe investment that can net you a higher return than most savings and money market accounts. And with APYs dropping, now can be a good time to lock in your rate if you've been thinking of opening a CD. Just be sure to weigh the pros and cons in light of your savings goals.
CDs are one option that can help protect your investment from times of turmoil by providing stable income. The returns gained from these investments usually won't be as high as those provided by stocks but they can serve as a cushion to balance your portfolio and keep it afloat when the market is down in the dumps.
While longer-term CDs may tie up your funds for years, a 6-month CD allows you to access your money relatively quickly. If you suddenly need your $5,000 for an emergency or a more lucrative investment opportunity arises, you won't have to wait years to access your funds without incurring hefty penalties.
You'll see money market account rates drop at financial institutions when the Fed cuts rates and rise when the Fed raises rates. The Federal Reserve cut rates in December 2024. This followed rate cuts in November 2024 and September 2024, for a total cut of 100 basis points, or 1.00% of interest.
This depends on the CD rate. A five-year CD at a competitive online bank could have a rate of 4.00% APY, which would earn around $108 in interest in five years. A five-year CD with a 1% rate would earn about $26.
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.
There are two high-yield checking accounts with interest of at least 7%, though: BCU PowerPlus Checking and Landmark Credit Union Premium Checking Account. Both come with major downsides, though. Are 7% interest savings accounts safe?
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.
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.
CD rate forecast: 2024-2025
The Fed lowered its rate by one-quarter percentage point to a rate range of 4.25% to 4.50% after its eighth meeting of 2024 on Dec. 17-18. Projections suggest that the Fed will continue to drop its rate for the next few years, and it's unlikely that we'll see any rate increases.
Is CD interest taxable? All types of income you earn in a taxable year must be reported to the IRS. That includes the interest on your CDs. As you earn interest on your CD even before it is fully matured, it is still considered taxable income and subject to the annual federal income tax.
CD rates have been falling as the Fed cuts the federal funds rate. Further rate cuts are expected in 2025, although the current outlook is less dramatic than originally predicted. CD rates are expected to decline in 2025, but some institutions will still offer above-average CD rates.
Which bank gives the highest interest rate on FD? As of 2024, Canara Bank offers the highest interest rate of 7.25% for 444 days.