CD rate news 2025

The best CDs available today offer rates ranging from 2.70% to 4.70% annual percentage yield (APY).

The Federal Reserve cut rates three times in 2024 (September, November and December), which caused CD rates to start dropping.

While the Federal Reserve does not directly set CD rates, it does control the federal funds rate. Commercial banks and credit unions use the federal funds rate to determine their own interest rates on products such as deposit accounts, credit cards and loans. The current federal funds rate ranges from 4.25% to 4.50%.

The ideal time to invest in a CD depends on your financial circumstances and goals. However, if you have extra funds to invest, locking in a high-rate CD now could be a smart move.

Current promotional CD rates

Here are three financial institutions that currently offer high-interest CDs. Banks are listed in order from highest to lowest rate.

What is a certificate of deposit?

A CD is a type of savings account that locks in a fixed amount of money for a fixed period of time. In exchange, you’ll typically earn higher yields than a traditional savings account.

You determine how much you want to deposit, ensuring it meets the bank’s minimum deposit requirements and selecting a maturity date that works for you. CD terms generally range from one month to five years. A term is the length of time your money stays in a CD, and banks commonly charge an interest-rate penalty if you cash out early. This means, for example, that you may be charged the equivalent of three months’ interest for an early withdrawal from a 6-month CD.

As you consider opening a CD, you’ll want to examine these important factors:

• Interest rate: CDs typically have a fixed interest rate, which remains stable for the duration of its term. While a fixed rate guarantees a specific return, you generally won’t be able to take advantage of higher-earning CDs if rates rise, unless you open a new CD account.
• Term: Your funds will be tied up for a fixed period, such as six months or five years. So you’ll want to have at least three to six months of living expenses in a savings or money market account that you can tap in an emergency. Otherwise, if you need to access the money in a CD before its maturity date, you’ll likely face an early withdrawal penalty.
• Deposit amount: Some CDs require a minimum deposit amount. You usually can’t add more funds once you open a CD, although some special CDs allow add-on deposits.

Types of CDs

Banks, credit unions and online lenders offer a range of CDs to fit various financial needs. Here are some popular options to consider.

• Traditional CDs: This is a standard CD with a fixed interest rate and term. You’ll often earn a higher rate than with a traditional savings account. If you withdraw funds before the CD’s maturity date, you could incur a penalty and lose out on the remaining interest.
• Variable-rate CDs: With a variable-rate CD, your interest rate will fluctuate over the CD's term based on four main factors: the prime rate, the consumer price index (CPI), Treasury yields and market index levels. While you have the potential to earn more if rates increase, you risk earning significantly less if rates drop.
• No-penalty CDs: A no-penalty CD allows you to withdraw funds without penalties before your CD matures. However, some institutions may require you to close your account after making an early withdrawal. Additionally, rates tend to be less competitive for this type of account.
• Promotional CDs: Some financial institutions offer promotional CDs with special rates to attract deposits. Offers vary by bank and are typically available for a limited time. The rate generally lasts for a short term, often less than a year. If you wish to renew the CD, you will likely have to switch to the standard CD rate.
• Jumbo CDs: If you want to deposit a large amount, such as $100,000 or more, you can usually earn the highest interest rates by investing in a jumbo CD.
• Step-up CDs: A step-up CD starts with a fixed interest rate and then allows you to earn higher rates during your term with automatic scheduled increases. For example, a 24-month CD might begin with a 0.5% rate and increase by 0.1% every six months.
• Brokered CDs: A brokerage firm can provide a broader selection of CD options, although extra fees may be involved for financial planning and asset management.

How to choose a CD

If you’re ready to invest in a CD, here are five steps to help you make the right choice.

1. Determine your financial goals

Ask yourself what you hope to gain from investing in CDs. If you want to build an emergency fund, a high-yield savings account might be a better fit. However, if you’re saving for a long-term goal, such as a down payment on a home, then setting aside funds in a CD can help you stay on track.

2. Find a federally insured financial institution with competitive rates

A high-yield CD can help you get the best return on your savings compared with a standard CD. Research rates and stick to financial institutions backed by the Federal Deposit Insurance Corp. (FDIC) or the National Credit Union Administration (NCUA).

Standard coverage is $250,000 per account holder, per insured institution, per ownership category. An ownership category refers to who owns an account, such as a single or joint account.

3. Pick a CD type and term

Explore the different types of CDs to find the best options for your long-term financial goals. Then, decide how long you feel comfortable locking away your funds. CD terms commonly range from three months to five years, though some banks may offer other choices.

4. Understand early withdrawal penalties

Life can be unpredictable, and you may need to withdraw funds from your CD before its term ends. Before investing in a CD, review the early withdrawal penalties so you can be prepared for a worst-case scenario.

One way to prepare for unexpected expenses is to invest in CD ladders, which are a series of CDs with staggered maturity dates. This way, you can have CDs maturing at regular intervals.

5. Deposit funds

Banks may have minimum deposit requirements that can vary greatly by financial institution. Some banks don’t require a minimum deposit, while others set a steep minimum of $25,000. A $1,000 minimum deposit can be a common requirement.

Pros and cons of CDs

Is a CD right for you?

Ultimately, the decision of whether to open a CD comes down to your financial goals and needs. For example, if you want to buy a new car in a year, opening a 12-month CD can provide guaranteed earnings, so you’ll know how much money will be available for the purchase. On the other hand, if you’re looking for a place to stash your emergency savings, you’ll want an account that has fewer limitations on withdrawals, such as a traditional or high-yield savings account.

Getting a CD can also help you build discipline with your savings. Because you may be charged a penalty for early withdrawals, you’ll be less likely to dip into your savings prematurely, helping you stay on track to reach your goals.

How to build a CD ladder

A CD ladder is a savings strategy that involves buying multiple CDs and staggering their maturity dates to allow regular access to cash without penalties. You may want to spread your funds evenly over several CDs or allocate larger amounts to a couple of them.

Here’s an example of how someone could invest $15,000 into a CD ladder:

• Take the total investment — in this case, $15,000 — and divide it by five. That means you have $3,000 to invest in five CDs.
• Start by putting $3,000 in a high-earning 1-year CD.
• Now, you’ll spend $3,000 on each of the remaining four “rungs” of the CD ladder. Here’s how that will look: You’ll invest $3,000 in a 2-year CD, $3,000 in a 3-year CD, $3,000 in a 4-year CD and $3,000 in a 5-year CD.
• When each CD matures, you can either cash out or keep your ladder going by reinvesting your savings using the same timeline.

How much does a $10,000 CD make in a year?

Your earning potential with a CD depends on the rate, term and deposit amount. Unlike a traditional savings account, you can’t keep adding more funds to your CD after opening it.

Here’s a breakdown of how much you could earn with a $10,000 CD using different rates and terms. You should understand that the frequency with which your interest compounds will depend on your account and financial institution. Many CDs use monthly compounding, meaning that the interest earned every month is added to the principal amount. In contrast, some CDs compound daily or annually. Below are examples of CDs that compound interest annually.

Alternatives to CDs

Although CDs normally earn higher rates than other types of savings accounts, they might not be the best option for achieving your financial goals. For example, if you need regular access to your savings or want to set up automatic deposits, one of the following savings accounts might be a better choice.

• Traditional savings account: Banks and credit unions offer traditional savings accounts, allowing you to link your checking account for quick transfers. While generally best for flexibility, these accounts tend to have low rates compared with other deposit accounts.
• High-yield savings account: These accounts typically offer more competitive rates than traditional savings accounts, but you may need a minimum balance to earn the advertised APY. You can often access the highest rates with an online bank, although some brick-and-mortar banks offer respectable rates.
• Money market account: Rates can be high, but money market accounts may also require large deposits or limit your monthly transactions. Many money market accounts come with convenient checking account features, such as debit cards and checks.
• Short-term bond fund: These can be ideal for conservative investors seeking a high return over a short period of time. Investments are usually in corporate or other fixed-income securities.
• Brokerage account: A brokerage account allows you to hold savings and invest funds in various ways, such as buying and selling stocks, mutual funds and exchange-traded funds (ETFs). Some brokerage accounts are free, while others charge fees, especially if you use brokerage-assisted services.
• Retirement account: If you want to maximize your long-term savings and take advantage of tax benefits, a traditional individual retirement account (IRA) may be a good choice. However, strict rules and penalties apply to early withdrawals.

Frequently asked questions

What happens if I withdraw from a CD early?

The exact penalties will depend on the details outlined in your CD account agreement. That said, federal law determines the minimum penalties for early withdrawals. For example, if you withdraw funds within six days of opening a CD account, you will need to pay seven days' worth of simple interest. You can estimate how much an early withdrawal might cost you with our early withdrawal penalty calculator.

How are CDs taxed?

Any income earned from your CD accounts will be taxed as interest income for the tax year in which it was earned. You should receive a 1099-INT in January outlining the interest earned during the previous tax year. Use this form when filing your tax return.

Should I put my emergency funds in a CD?

Because you’ll need quick access to emergency funds, a CD may not be the best choice for storing them. Instead, you may want to put these funds in a high-yield savings account or money market account. You could consider dividing your emergency savings between multiple accounts for short-term expenses and using a CD ladder for longer-term expenses.

Do CDs charge fees?

Most CDs are free to open and don’t charge the maintenance fees of some traditional savings or money market accounts. However, brokered CDs may carry commission or asset-based fees. Also, most CDs charge early withdrawal fees if you decide to cash out before the end of the term.

Can you lose money on a CD?

Because CDs have fixed interest rates, the primary way to lose money is by making an early withdrawal. Even then, the earned interest might be enough to cover the penalty your bank charges. CDs do have an opportunity cost — if interest rates rise, you’re locked into a lower rate. Similarly, if inflation increases, it can erode the purchasing power of your money over time.