Certificates of deposit (CDs) can be an arrow in your savings quiver, best used to generate good returns on cash you don’t need right away. CD rates mostly rose over the past week, according to data from Curinos. This is in part due to the Federal Reserve raising short-term rates in an effort to curb inflation.
Three-month CD rates
Rates on three-month CDs have experienced a slight increase since last week, rising by one basis point to 0.83% today.
Over the past month, rates on three-month CDs have climbed by 17 basis points.
The current national high for a three-month CD is 5.15%, which would earn more than $315 in interest with a $25,000 deposit.
Six-month CD rates
The top six-month CDs can offer the best of both worlds: strong interest rates and a short-term commitment.
The national average APY for six-month CDs is 1.23%, which is up slightly from last week and 12 basis points higher than a month ago.
The current top national rate for a 6-month CD is 5.41%, according to the data available from Curinos. But you may be able to find better deals by shopping around.
You’d earn almost $670 in interest if you put $25,000 in a six-month CD with a rate of 5.41%.
One-year CD rates
If you’re willing to lock away your savings for 12 months, you can find even better rates. One-year CDs can give you returns as high as, or even higher than, longer-term options.
Rates on 12-month CDs are increasing. The national average APY is 1.50%, two basis points higher than last week and seven basis points from a month before.
The current national high for a 12-month CD is 5.37%, which would earn more than $1,340 in interest with a $25,000 deposit.
Two-year CD rates
Yields on longer-term CDs, such as two-year terms, are also on the rise.
The national average APY is 1.48%, an increase of one basis point from last week and six basis points from one month ago.
The current national high for a 24-month CD is 5.22% APY. Locking in a rate close to this high will maximize your returns on this longer-term investment.
If you invest $25,000 in a 24-month CD at the high rate of 5.22% you’d earn about $2,680 in interest.
Three-year CD rates
The national average APY for a three-year CD stands at 1.43%, which is up one basis point from last week and up five basis points from 1.38% a month ago.
The highest rate was 5.63%, which would net almost $4,465 in interest if you invested $25,000.
Methodology
To establish average certificate of deposits (CDs) rates, Curinos focuses on CDs intended for personal use. CDs that fall into specific categories are excluded, including promotional offers, relationship-based rates, private, youth, senior, student/minor, affinity, bump-up, no-penalty, callable, variable, step-up, auto transfer, club, gifts, grandfathered, internet-only and IRA CDs. The average CD rates quoted above are based on a $25,000 deposit.
Frequently asked questions (FAQs)
You’ll need a few key details to open a CD: your name, address, Social Security number, government-issued ID and phone number. You can open a CD online or in person, but you’ll probably find better rates online. Once you get the green light, you can fund the CD with cash from a linked bank account or one that’s not affiliated with the bank at all.
A CD ladder helps you take advantage of higher rates offered by longer terms without tying up your money indefinitely.
For instance, let’s say you have $12,000 to invest and decide to create a ladder of three CDs. You invest $4,000 each into one, two and three-year CDs. When the one-year CD matures, you convert your principal and earned interest to the higher-rate 36-month CD, and do the same with the 24-month CD the next year. This way, you’ll eventually end up with three 36-month CDs with high APYs, with one maturing each year.
Here’s how you can build your own CD ladder:
Split the amount you want to invest by the number of CD terms you’d like.
- Research the best CDs to find top providers and the best rates for various lengths.
- Set up the CD accounts you’ve chosen.
- As the CDs mature, reinvest the cash into longer-term CDs.
The second step is crucial. Just because the Fed has raised interest rates doesn’t mean you’ll get the same or even similar rates from different financial institutions for the same CD term.
