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Best CD Rates for 5 Years

Let’s talk about long-term investments. We’re talking about higher yields and guaranteed returns. CDs will give you just that! Investing in long-term CDs is an excellent way to maximize your savings and grow your wealth.


In this article, we’ll highlight all about Certificates of Deposits and kick start your savings journey. We’ll also point you to institutions with some of the best CD rates for 5 years. Take a look.

  • APY
  • Min Amount
  • 0.60%
  • $2,500
TAB Bank
  • 0.75%
  • $1,000
PenFed CU
  • 0.75%
  • $1,000
  • APR range
  • Fees
  • Terms
  • Amounth
  • Unemployment protection
Bank 1
  • 6.95%–35.89%
  • Up to 5% transfer fee
  • 3–5 years
  • $1,000–$40,000
  • No
Bank 2
  • 6.95%–35.89%
  • Up to 5% transfer fee
  • 3–5 years
  • $1,000–$40,000
  • No
Bank 3
  • 6.95%–35.89%
  • Up to 5% transfer fee
  • 3–5 years
  • $1,000–$40,000
  • No

Table of Contents

What is a Certificate of Deposit? 

Certificates of Deposits are arrangements by the financial institutions to allow users to save their money and earn interests at the end of their respective terms.


Certificates of Deposits take on the compound interest approach. 


Banks and credit unions are the most reliable institutions offering some of the best rates in the market.


CDs are the best options for individuals working towards financial freedom. They’re mostly preferred because of their guaranteed returns and safety since they are federally-insured. 


They’ll also keep you free from the market turbulence experienced mostly in the stock market and other money markets.


CD terms range from three months to 10 years, depending on individual institutions. They all attract different rates depending on the length of the term.


Either way, investing in CDs will mean sacrifice and great financial discipline so you don’t go against the lender agreement. 

Hot Tip:

They’ll also keep you free from the market turbulence experienced mostly in the stock market and other money markets.

How CD rates are calculated?

CDs returns are compounded and paid all at the end of the specific term. The financial institution in question adds the earned interests to the principal amount. 


Once you find your preferred institution, you’ll move to choose your preferred term. This can be long (5 years and above), short (1 to 12 months), and mid-term (2- 4 years). 


Long-term CDs attract the highest rates in the market. The present national average rate for long-term CDs (5 years) currently stands at 0.32% APY. 


Because you’ve allowed financial institutions to handle your money for a long time, they pay you higher interest. 


Earlier withdrawal, however, comes with steep penalties, usually a few months’ interests. You, therefore, want to ensure you do your math right before investing in long-term CDs. 


Most financial institutions compound your earnings daily or monthly. However, the more frequently they do so, the higher your earnings will be. Therefore, to maximize your earnings, prioritize institutions compounding your interests daily. 

Choosing the right CD rates

Like we earlier noted, you can choose between short-term, mid-term, and long-term certificates of Deposit. 


Different institutions offer different rates for each of these. However, all of them will offer guaranteed returns and security for your money. 


But, all these depend on how much you wish to invest in CDs. This should guide you on which terms to choose.


Different institutions also offer different incentives based on the term you choose. Shop around for institutions offering not only higher rates but also flexibility and opportunity to take advantage of market rise. 


You’ll also want to seriously consider CD laddering. It’s recommended that you spread out your money on different CDs with different maturity terms. This way, you’ll always have money available to take care of bills you can’t postpone. 


And, in any case, your funds mature when you don’t have an immediate need for cash, you’ll do even better to reinvest it. 


Either way, please note that you shouldn’t invest funds meant for emergency or normal daily uses on CDs. Only invest money you’re comfortable keeping locked up for the agreed term. 


Additionally, shop around for institutions with more friendly terms and better rates. Also, settle for one with affordable joining fees so you’re not cut out on your budget.


While at it, don’t ignore online institutions and relatively smaller ones. As long as they are a member of the FIDC, you can be sure your savings are safe as long as an institution’s policies align with your savings goals, and are FIDC-backed, you can save with them. 

Short-Term CD vs Long-Term CD

Made a choice yet? Let’s make it easier for you.


But first, you’ll have to determine how long you wish to keep your funds locked in. You then move to find an institution whose policies conform with your savings goals. 


You’ll have to choose between short, mid and long-term CDs.


Short-term CDs mature within a year or less. They generally attract lower rates compared to mid and long-term CDs.


Short-term CDs tend to attract lower penalties should you withdraw before maturity.  They are also an excellent option for those looking to lock up their money for a short period. 


They are known for their flexibility. Before you know it, your money will have matured.


Long-term CDs, on the other hand, are quite different. They are known to attract the highest interest rates. They are basically any CDs with a maturity term of 5 years and above. 


However, they are known to carry the highest early withdrawal penalties, too, usually a couple of months’ interests.


So, which one should you choose? Let’s do a quick summary.


Go for short-term CDs if you’re looking to save for a short period and enjoy the flexibility and lower early withdrawal fees.


Long-term CDs, on the other hand, are best for those looking to significantly grow their savings over a long period. Usually, those with long-term investment plans like buying a house, car, or major asset in the future. 


Long-term CDs are the most preferred. You’ll enjoy significant growth in your money and you could also benefit from institutions’ programs allowing you to add on your savings and earn higher rates. 

Hot Tip:

Saving on CDs is an excellent plan. Long-term CDs will significantly grow your money and instill financial discipline and a savings culture in you.

Pros and Cons of CD rates for 5 years

These are the advantages and disadvantages of 5-Years CD Rates.


Higher yields – Long-term CDs generally attract higher rates compared to short-term CDs. Since you’re trusting banks with your money for 5 years or more, they reward your loyalty and commitment with increased rates.

Higher penalties – Long-term CDs attract very steep early withdrawal penalties. Withdrawing before maturity will see you lose lots of interest out of your total earnings.

Guaranteed returnsYour interests are calculated before the onset of your term. You’ll then earn them upon maturity of your term regardless of the market conditions during the CD term.

Lower returns – compared to stocks and bonds, CDs tend to attract lower rates.

Guaranteed safety – Whether or not your money will be safe is a crucial consideration, especially if you intend on keeping it untouched for a long time. Money invested in CDs is totally safe. Your savings are federally insured. The Federal Deposit Insurance Corp. (FDIC) insures up to $250,000 of your savings. If yours is above this, consider spreading it on different CDs.

Fixed returns CD rates are determined using the present market rates at the time of entering the agreement and remain intact throughout your term. This works to your disadvantage should there be a rise in the market rates during the term.

Locked returnsSince your returns are locked, you’ll remain immune to turbulence in the market rates. This way, there’s no chance of making losses whatsoever.

A good savings plan -  Saving on CDs is an excellent plan. Long-term CDs will significantly grow your money and instill financial discipline and a savings culture in you.

Requirements to Qualify

Since CDs resemble traditional savings accounts, there isn’t a huge difference in the requirements for opening them. 


You need to be a legal resident of the United States. You’ll also need to have attained the majority age, usually 18 years in most states.


To prove your age and residential status, most lenders will require that you present such legal documents as a National ID, valid passport, or driving license. 


Most financial institutions will also ask for such personal information as your residential address, social security number, and legal names.


However, these requirements may differ from one institution to another. Carefully go through the requirements before investing in any CDs. 


Prioritize banks and credit unions. These are more likely to better understand your situation and even advice you based on that.  


Plus, most of them often raise their rates, sometimes above the market’s average, to attract new clients. You could take advantage of that and significantly grow your savings. 


You should also consider investing in no-penalty CDs. These are an excellent option if for some reason you feel you may want to withdraw before maturity. They’re an easy way to curb uncertainties that come with keeping money locked for 5 years. 


CDs, especially long-term CDs are an excellent savings plan. Be sure to consider investing in some.

Frequently Asked Questions (FAQ)

Anytime you’re looking to save some money, especially when there’s a climbing rate on the market’s interest rates.

The current market average for 5 year CDs stands at 0.32% APY. The above lenders have some of the best rates in the market today.

Yes. For CDs, the longer you keep your money locked, the higher the interests you’ll earn. 5-year CDs attract some of the market’s highest rates.

Anyone looking to save and grow their savings over a specific term.

CD rates are compounded daily or monthly using the compound interest approach. You’re then paid all the accumulated interests upon maturity of your term.

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