If you’re looking to enhance your savings portfolio, now is an ideal time to consider investing in a certificate of deposit (CD). The most lucrative CD rates currently available offer an impressive 4.35% APY. By funding a certificate today, you can potentially lock in these high rates for several years, ensuring your money works harder for you. With market experts anticipating that the Federal Reserve may further reduce the federal funds rate in the coming months, delaying your investment could mean missing out on these significant returns.
The highest CD rate available today is a remarkable 4.35% offered by Ivy Bank on its three-month CD. Fortune continuously monitors the top rates provided by leading U.S. financial institutions to assist readers in obtaining the best possible return on their CD investments. Below are some of the highest CD rates currently available:
Wells Fargo Capital One Chase Bank of America Discover Bank Northern Bank Direct Ally Bank Newtek Bank Popular Direct Citibank Sallie Mae BankMany of the institutions mentioned above may not be household names, as certificates of deposit often do not generate significant income for major financial institutions. Established banks like Chase, PNC, and U.S. Bank typically focus on attracting customers through more profitable products, such as loans and credit cards, rather than offering competitive CD rates. As a result, the interest rates on CDs provided by these larger banks tend to be lower than those available at smaller regional banks or online institutions.
Additionally, obtaining a competitive rate at these larger banks may require you to open additional deposit accounts or meet higher minimum deposit requirements. Therefore, it’s crucial to compare rates across various banks to find the best option tailored to your specific financial goals.
Investors should recognize that CD rates often move in tandem with Federal Reserve monetary policy decisions. When the fed funds rate rises or falls, CD rates typically follow suit. Keeping a close eye on shifts in central bank policy is essential for CD investors looking to effectively plan for potential rate adjustments.
As of now, the federal funds rate stands at 4.00%-4.25% after the Federal Open Market Committee (FOMC) met on September 16-17. In 2024, the Fed cut rates three times, bringing the federal funds rate to a range of 4.25%-4.50% by December. These rate cuts were implemented to support the U.S. economy as inflation began to recede from its pandemic-induced highs. This monetary easing has resulted in lower CD rates compared to those experienced in the previous years.
Historically, CD rates surged into double digits during the early 1980s, which starkly contrasts with today’s lower rates. By 2019, the APY for a 5-year CD had surpassed 3.00%. In recent years, we have seen a period of increasing rates, with the best offerings surpassing 5.00% APY for 1-year CDs in 2024. However, these APYs are now stabilizing, and we are witnessing fewer rates exceeding this threshold in 2025.
Determining what constitutes a “good” CD rate involves balancing the highest available rate with your willingness to keep funds locked away for a specific duration. For instance, opting for a 5.00% APY CD over five years might not be ideal if you anticipate needing access to your funds sooner or if interest rates are expected to rise, potentially diminishing your overall returns.
Generally, rates exceeding the national average are considered advantageous. It’s essential to compare rates across different banks and consider key factors such as:
Term Length: Ensure it aligns with your savings objectives and time frame. APY: Higher rates are typically offered for longer terms. Minimum Deposit: Verify that you can meet the required initial balance. Penalties: Understand the costs associated with early withdrawal before maturity. Deposit Insurance: Confirm that the bank is FDIC or NCUA insured for deposit protection.Consider exploring offerings from online banks, as they often provide higher interest rates compared to national banks. Large financial institutions primarily derive revenue from loans and fees, while smaller banks and online fintech companies attract customers through competitive APYs on deposit accounts.
A CD ladder is an excellent strategy for savers looking for flexibility without locking their funds for extended periods. By diversifying your savings across CDs with different maturity dates, you can balance short-term accessibility with higher long-term interest rates. For example, you could invest $3,000 in three staggered CDs (1-year, 2-year, and 3-year terms). As each CD matures, you can reinvest the funds into a new 3-year CD, allowing annual access to your funds while benefiting from higher interest rates.
There are various types of CDs designed to meet different financial needs:
Brokered CDs: Purchased and sold through brokerage accounts, often offering higher APYs. Callable CDs: Allow the issuing institution to terminate the CD before maturity, returning principal and accrued interest. Bump-up CDs: Allow you to request a higher APY if interest rates increase after opening the account. No-penalty CDs: Do not charge penalties for early withdrawals, though they may offer lower APYs. Jumbo CDs: Require a substantial minimum deposit (often starting at $100,000) and generally offer higher APYs. Variable-rate CDs: APY changes in response to prevailing interest rates, carrying more risk than traditional CDs.By carefully evaluating these options, you can select the right type of CD that aligns with your savings strategy and financial objectives.
