We evaluated more than 140 certificates of deposit (CDs) offered by more than 80 financial institutions, both big and small and in between, to determine the best savings options for you. Our picks don’t just have some of the highest rates available, but also offer good customer service, easy-to-navigate sites and a relatively low minimum balance requirement.
With interest rates at their highest point since the Great Recession, CDs have become a useful place to grow your rainy day fund. Here are the options you should consider.
All rates are as of March 1, 2023.
Compare the best CDs
For easy comparison, here are all the best CDs all in one place.
National average interest rate for CDs
Here are the national deposit rates as of Jan. 17, 2022, according to the Federal Deposit Insurance Corporation (FDIC).
Are CD rates going up?
CD rates rise and fall with the federal funds rate, which is set by the Federal Reserve. The Fed makes rate changes in an effort to grow or suppress the economy, depending on what’s going on with inflation. Increasing the federal funds rate makes borrowing more expensive, and thereby limiting economic activity.
Because money is more expensive, you can get a higher interest rate on your deposits. The money you’re effectively lending to financial institutions commands a better APY. Exactly when CD rates will plateau and how high the rates will reach before they drop, is unknown.
But expect CD rates to continue to look good, especially compared to where they were just a few years ago.
Long-suffering savers got something of a break in 2022: higher CD yields.
After more than a decade of low interest rates following the Great Recession, the Federal Reserve dramatically raised rates by 4.25 percentage points in an effort to snuff out decades-high inflation.
This resulted in the interest rates on one-year CDs, for instance, to jump by almost one percentage point to 1.07% by the end of 2022.
While prices are returning to more normal inflation levels in recent months, it appears that Federal Reserve Chair Jerome Powell will still push the central bank to increase rates, albeit at something of a slower pace.
The Fed raised rates by 25 basis points on March 1, compared to a 50 basis point jump just a few months before. Savers might expect the Fed to incramentally increasing rates until prices are growing closer to its 2% target.
“Powell continues to stress that the Fed is committed to getting inflation down,” said Nancy Davis, founder of Quadratic Capital Management.
How to build a CD ladder
A CD ladder allows you to earn higher rates offered by longer terms without locking up your cash forever.
For example, assume you have $9,000 to invest and you make a ladder of three CDs. You put $3,000 each into one, two and three-year CDs. When the one-year CD matures, you convert it to the higher-rate, 36-month CD, then do the same with the 24-month CD. This way you end up with three 36-month CDs with high APYs, with one maturing each year.
Here are the steps to build a CD ladder of your own:
- Divide the amount of money you want to invest by however many CD terms you want.
- Research the best CDs to find the best providers and the best rates for different lengths.
- Open and set up the CD accounts you want.
- As the CDs mature, reinvest the cash into longer term CDs.
The second step, however, is crucial. Just because the Fed has raised interest rates doesn’t mean that you’ll get the same, or even similar rates, from different financial institutions on the same CD term.
“Even though rates are rising, not all banks will raise your savings interest rate accordingly,” said Tony Molina, a CPA at Wealthfront. “Make sure you move your money to an account that passes on the increased rates to you – otherwise you’re missing out on basically free money.”
A CD ladder gives you the freedom to cash out a hunk of money if you need it or reinvest your money without sweating about locking away your funds—because your next CD is maturing next year.
How are CDs taxed?
In most cases, Uncle Sam counts the money you make from your deposits as taxable income. If you earn $10 or more, a financial institution should send you (and the IRS) an annual 1099-INT form that reports your interest earnings. If you don’t receive a form, you’re still responsible for reporting the income.
If you make at least $1,500, you’ll also need to itemize your sources of interest income on Schedule B of the 1040. The good news is that there are some exceptions, but they mostly apply to investment vehicles issued by the government.
The amount you pay depends on your specific marginal tax bracket.
Income interest from treasury bills, notes and bonds, like I Bonds, are exempt from state and local income taxes.
Methodology
CDs used to play an important, albeit complimentary, role in the finances of everyday Americans. Roughly a fifth of households owned a CD in 1989, according to the Fed. They were still in vogue nearly two decades later, as more than 16% used them in 2007.
In 2019, however, only 7.7% of households had a CD.
The reason? CDs used to be a much better deal. At the beginning of 1989, for instance, a one-year CD offered an 8.30% APY. By 2007, it was just 3.7%.
By 2019, a one-year CD paid just 0.92%.
The story behind drooping CD rates is complicated, and it involves: falling inflation (until recently), an aging population, technological innovations and the Federal Reserve lowering interest rates. The aftermath of the Great Recession, in which the Fed kept interest rates near zero for almost a decade as inflation continually ran under its desired level, is just the most recent trend.
That’s what has made the current moment so interesting. CD yields jumped in 2022 after the Fed raised rates by 4.25 percentage points in nine months.
The upshot, though, is the same: Americans are more likely to consider CDs if they pay more in interest, especially compared to inflation. After all, a one-year CD that pays less than 1% is hardly worth it when prices are rising at twice as high a rate.
We took this historical lesson to heart when crafting our ratings, as you can see below:
- APY: 70%.
- Customer Experience: 10%.
- Minimum Deposit: 5%.
- Compound Interest Schedule: 5%.
- Digital Experience: 5%.
- Available Terms: 3%.
- Availability: 2%.
We looked at the terms of 144 CDs offered by 84 banks and credit unions to reach our rankings. In each category we looked at a variety of factors.
For instance, to determine APY, we documented the interest rate offered on 17 different terms. To rank customer service, we documented how the financial institutions were ranked by the Better Business Bureau and JD Power.
Additionally, we valued accounts with lower minimum deposits, daily compound interest schedules (rather than monthly) and those that are available to everyone, regardless of where they live.
While non-APY factors are important, we believe that your potential earnings should reign supreme.
Why some banks didn’t make the cut
Stare at our rankings for a while and something obvious becomes apparent: a dearth of big banks.
No Chase Bank, no Bank of America, no Citibank and no Wells Fargo. The four largest financial institutions in the nation, which together own nearly $10 trillion in assets, don’t offer a competitive CD.
How come?
Well, they don’t have to.
The big banks enjoy the benefits of generations of customers and high name identification. When the typical person thinks about opening a bank account, their mind tends to drift towards at least one of the big four.
If a bank wants to make a splash, then, they need to offer higher rates.
The story is similar for the next three biggest banks: U.S. Bank, PNC Bank and Truist, regional powers all. Their offerings are either not high enough, or aren’t robust enough, to warrant inclusion.
The only top 10 banks to make the cut prove the point. Capital One and Goldman’s Marcus by Goldman Sachs each offer high rates in an effort to win business from more established banking institutions. After all, Capital One is basically a Gen Zer (it was conceived in the mid-1990s), while Goldman Sachs only recently made the move into consumer banking.
Why you should trust us
We make our selections without favor and completely independent of business considerations. Meanwhile, our process is rigorous. Our data team and editors collect and interpret the data, assign weightings and research contending banks. The piece is written by an experienced journalist and edited multiple times before publication.
Taylor Tepper, the lead banking editor, has more than a decade of personal finance experience, including writing award-winning pieces at Money Magazine, and being published in the New York Times, Time, Fortune, Bloomberg and NPR, among others. He also recently completed the educational requirement to sit for the CFP exam. Jenn Jones, the deputy banking editor, has a wide range of financial experience and a deep interest in sharing knowledge to empower others. She brings years of writing and analytical skills to bear, as she worked in consumer finance prior to her editorial career.
Frequently asked questions (FAQs)
CD rates change on a regular basis. But, of course, a higher CD rate is always better. As of January 2023, the national average interest rate on a 12-month CD is 1.07%. However, you can find many banks offering APYs well above this national average, especially if you consider the winners in our ranking.
You’ll typically need the following pieces of information in order to open a CD: your name, address, Social Security number, government issued identification and phone number. You can provide this information either online, or in person, though you’ll likely find the best rates on the former. Once you’re approved, you’ll be able to fund the CD either with money from a connected bank account or one not affiliated with the bank altogether.
