Best Online CD Rates

Saving on a standard savings account is one of the ways of maximizing your income through accumulated interest rates. What if I told you there was a better way? You could earn even higher interests through certificates of deposits.

We cover everything about CD rates and how you can build your savings. We’ve also sampled some of the best online CD rates. Check them out!

1-Year APY
3-Year APY
5-Year APY
Min Deposit

Best

Marcus

0.55%
0.55%
0.60%
$500

0.35%
0.55%
0.65%
$1,000

0.45%
0.60%
0.70%
$250

1-Year APY
3-Year APY
5-Year APY
Min Deposit

Best

PenFed CU

0.50%
0.60%
0.75%
$1,000

0.50%
0.60%
0.65%
$1,000

0.60%
0.85%
0.90%
$1,500

APR range
Fees
Terms
Amounth
Unemployment protection

Best

Bank 1

6.95%–35.89%
Up to 5% transfer fee
3–5 years
$1,000–$40,000
No

6.95%–35.89%
Up to 5% transfer fee
3–5 years
$1,000–$40,000
No

6.95%–35.89%
Up to 5% transfer fee
3–5 years
$1,000–$40,000
No

What is a Certificate of Deposit (CD)?

Certificates of Deposit (CD) are used by consumers looking to maximize their savings to earn higher interest rates than they would on ordinary savings accounts.

The safety of the money saved in a CD is guaranteed since it’s insured. The Federal Government backs up to $250,000 of the money saved on Certificate of Deposits.

Credit Unions and online banks are common with CD accounts. For credit Unions, the account is called a share certificate and is backed by the government.

CD accounts have fixed maturity dates and interest rates. Withdrawing your money earlier than the agreed maturity date could have you losing some of your money. These accounts also don’t attract monthly charges. For consumers saving for a specific goal like buying a home, vehicle, or home appliance, these definitely worth a shot.

How Online CD rates are calculated?

When it comes to how much you earn from a CD, several factors come into play. The most basic one would be, institutions decide on rates depending on the level of competition. An institution looking to close in many customers is more likely to offer higher rates.

The state of the economy also affects CD rates. A downward trend in the financial markets will likely lower then. Long-term CDs generally have higher interest rates. However, that doesn’t mean you’re guaranteed higher rates should bank rates decline through the years of your savings. Therefore, the length may not always guarantee higher rates.

Diligently find institutions with good rates to maximize your earnings. It’s also crucial that you avoid early withdrawals.

Hot Tip:

Long-term CDs generally have higher interest rates. However, that doesn’t mean you’re guaranteed higher rates should bank rates decline through the years of your savings.

Terms and Risk of Online CDs

Like we earlier noted, the CD is among the safest savings accounts since $250,000 of the total saved is insured by the federal government. All you have to do is play by the insurance rules.

A simple hack to stay safe would be to maintain a balance lower than the insured amount. In the case of larger amounts, you could opt for having your money in different CDs in batches of $250,000. This way, all the amount will be fully insured. Remember to assign them different maturity dates for extra convenience.

For immediate security, institutions put in place such measures as data encryption, 2-step authentication, firewalls, and antivirus to protect consumer data.

We also can’t overlook the risk of declining interest rates. Putting your money in long-term CDs will help reduce this risk by locking your money to some interest upon maturity. This could, however, play to your disadvantage by locking you out of higher interest rates.

That said, unlike uncertain ventures surrounded by unpredictable market conditions like stock exchange, with CDs, you know exactly how much you’ll yield upon maturity of your account.

So, is a CD safe? Yes, your money is FDIC insured if it’s a bank and covered by NCUA for federally-insured credit unions.

Can you lose your money? Yes, if you withdraw early, before the maturity date. Ideally, the penalty will be some interest, usually a month’s interest, and the bank might also take some funds from the principal amount.

You’ll want to make sure you’re comfortable leaving your funds to maturity before committing to a CD.

Short-Term CD vs Long-Term CD

The maturity date is a crucial aspect to consider before committing to a CD.

Short-term CD will help you securely save your money and grow interests over a short period. Their interests are typically more than that of a traditional savings account. The Federal Reserve calls it a time deposit. And, consumers usually save for 12 months, but it could be less depending on user preference. Short-term CDs come with a great sense of flexibility that’ll let you access your funds when you want and decide whether or not to renew them upon maturity.

On the flipside, short-term CDs carry lower rates compared to long-term CDs. 3-month CDs carry an average APY of 0.07% while the one-year counterparts 0.22%. Long-term CDs, on the other hand, carry the highest returns on investment in the market today. They offer the highest APY, way more than the short-term CDs. Long-term CDs are good for locking your interest and protecting yourself from a possible drop in the general market rate.

Because they’re long, usually 5 years, they’re good for those looking to save for long-term projects such as purchasing a home, vehicle, or any other major purchase.

Long-term CDs call for lots of commitment, but it’s worth all the effort. Have some idle money? Something you’re planning on using for your retirement, maybe? Then long-term CDs would give you the returns you need.

Banks and credit unions may allow a one-off or repeat increase in your rate through the term of your loan.

If you have a hard time choosing between the two, have all of them at once to have a taste of both experiences.

Hot Tip:

5-years CD Rates are good for those looking to save for long-term projects such as purchasing a home, vehicle, or any other major purchase.

Pros and Cons of CD

PROS	CONS
Higher interest rates: CD attracts higher rates compared to traditional savings accounts. Short-term CDs have high rates while long-term CDs boast the highest rates	Early withdrawal penalties: Withdrawing your money before the agreed maturity date will have you lose part of your interest and part of your premium
Guaranteed returns: Unlike bonds and stocks, with CDs, you know exactly what you’ll earn after a certain period. This saves you from possible losses and volatility.	A fixed-rate of return: You’ll basically earn a fixed rate regardless of whether or not the interest rates in the market fall
It’s a secure method of saving: CDs are federally-insured. The federal government backs up to $250,000 of the amount saved on CDs.	Lower rates of returns: CDs have typically lower returns compared to stocks and securities.
Suitable for long-term savings: Long-term CDs can help you save money for long-term projects and such future plans as retirement.	Automatic roll-over: Most banks and credit unions will automatically enroll you for a new CD upon expiry of an existing one if you forget to mention otherwise.
No monthly charges: CDs are cost-effective. You won't be charged monthly charges common with traditional savings accounts.
No minimum deposits: Most CDs won't specify a specific amount you should have in your account.

Best 1-year CD rates

A 1-year CD locks your money for 12 months at a fixed rate. Online banks and credit unions have some of the best CD rates. These may not have the highest interest rates in the market. However, there’s no huge difference between a 1-year and a 5-year APY.

The Federal reserve’s emergency cut has hurt the rates of banks and other institutions. The current national average for 1-year CDs currently stands at 0.16%.

1-year CDs are an excellent way to grow your money with accumulated interests in a short period as long as you find one that aligns with your goals and is offering the highest APY.

Be sure to also check out the compounding schedule and such charges as early withdrawal penalties.

What are the averages of online CD rates?

Under a normal economic state, banks tend to offer higher rates on CDs as a way of compensating for holding your money. When it comes to CD rates, the rule of thumb is always – the longer your term, the higher the interest rates.

Online banks tend to have some of the best rates. A possible explanation for this would be the fact that they don’t incur any costs running branches. Therefore, they transfer the benefits to customers through savings accounts and CDs.

The current average for a 1-year CD is 0.22% while that of a 5-year CD stands at 0.37%. Some institutions may offer you even higher rates should you agree to deposit more.

Bottom Line

Certificates of deposits are proving to be a one-way ticket to competitive interests. If you have the money you don’t intend to touch for a relatively long time, investing it in CDs is an idea worth exploring.

Unlike traditional savings accounts, certificates of deposits attract higher interests. Your money is also secure since it’s insured by the federal government. All you need is the commitment to take a step back and watch your money grow.

What’s more, your savings are also protected from the negative fluctuations of interest rates in the future economy. We have sampled some of the top institutions with the best online CD rates. Be sure to give them a shot.