Thanks to the Federal Reserve's historic 2022-2023 rate-hike campaign to combat post-pandemic inflation, certificate of deposit (CD) rates surged to 20-year highs in late 2023—reaching above 6%.
CD rate forecast: 2024-2025
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. The next Fed rate cut may occur as early as March 2025, according to CME FedWatch (accessed on Dec. 18, 2024).
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.
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.
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.
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.
Unlike traditional or high-yield savings accounts, which have variable APYs, most CDs lock your money into a fixed interest rate the day you open the account. That's why if you suspect interest rates will drop further, it can be a good idea to put money in a CD to preserve the high APY you would earn.
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.
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?
Meanwhile, after APYs on competitive CDs rose in 2022 and 2023, they began to level off and decline in 2024. At the end of 2024, the top APY offered on a one-year CD was more than 100 basis points lower than it was at the start of the year.
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.
The risk of having a CD is very low. Unlike how the stock market or a Roth IRA can lose money, you typically cannot lose money in a CD. There is actually no risk the account owner incurs unless you withdraw money before the account reaches maturity.
The following CD accounts offer some of the top rates available today: Third Federal Savings and Loan 6-month bonus CD — 6.00% APY: To open this CD, you'll need to deposit a minimum of $500.
Certificates of Deposit (CDs)
In return, you'll get more interest than with a savings or other account you can access any time. One-year CDs are currently paying rates of 3.50 – 4.50%, which comes out to $2,000 in interest on a $50,000 CD.
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.
Don't give up early. Request to speak with other representatives or managers. Branch managers often have authority to negotiate. The more money that you're going to deposit, the better chance of receiving a higher rate.
When you're investing a large amount of money in a CD, a high yield can earn you thousands of dollars more than a low one. If you were to deposit $100,000 into a one-year CD that pays a competitive APY of 5 percent, you'd have around $5,000 in interest when the term is up, for a total balance of $105,000.
Many jumbo issuers require a minimum investment of $100,000, but others set lower or higher minimums. Jumbo CDs are of the greatest use to large companies or institutional investors that looking for a safe place to park some spare cash for a set time period.