Certificates of deposit (CDs) can be a great choice if you’re looking for a low-risk investment to generate interest on cash you don’t need to use immediately. CD rates held mostly steady over the past week, according to data from Curinos, even in the midst of a rate hike pause by the Federal Reserve.
Three-month CD rates
Rates on three-month CDs have remained the same from a week ago. The national average rate was 1.22% as of January 17, 2024, the latest data available, the same as the previous week and up two basis points from a month prior.
The current national high for a three-month CD is 5.39%, which would earn more than $330 in interest with a $25,000 deposit.
Six-month CD rates
By choosing a top-rated six-month CD, you benefit from a winning mix of competitive interest rates and a short-term commitment.
The national average APY for six-month CDs is 1.68%, up somewhat from 1.67% last week and 1.64% one month ago.
The current top national rate for a 6-month CD is 5.84%, according to the data available from Curinos. Shopping around can help you find better deals.
With that rate, you’d earn almost $720 in interest if you deposited $25,000.
One-year CD rates
If you’re up for setting aside your savings for a full year, you’ll be able to score even more impressive rates. One-year CDs can give you returns as high as, or even higher than, longer-term options.
Rates on 12-month CDs are rising. The national average APY is 1.88%, up one basis point from last week and one basis point from a month before.
The current national high for a 12-month CD is 5.87%, which would earn roughly $1,460 in interest with a $25,000 deposit.
Two-year CD rates
Rates on two-year CDs have remained fairly stable.
The national average APY is 1.66%, the same as a week ago, although up one basis point from one month ago.
The current national high for a 24-month CD is 5.35% 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 5.35% you’d earn roughly $2,750 in interest.
Three-year CD rates
The national average APY for a three-year CD stands at 1.58%, which is flat to where it stood last week and from a month ago.
The highest rate was 5.10%, which would net almost $4,023 in interest if you invested $25,000.
Methodology
To establish average certificate of deposit (CD) rates, Curinos focused 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)
Generally, the earnings you make from your CDs are considered taxable income by the IRS. If you earn $10 or more, the financial institution should send you (and the IRS) a yearly 1099-INT form reporting your interest earnings. Even if you don’t receive a form, you’re still required to report the income.
For earnings of at least $1,500, you’ll need to itemize your interest income sources on Schedule B of the 1040 form. The silver lining is that there are some exceptions, but they mainly apply to government-issued investment vehicles.
The tax amount you pay depends on your specific marginal tax bracket.
Interest income from treasury bills, notes, and bonds, like I bonds, is exempt from state and local income taxes.
CD rates change on a regular basis, but the higher the better. As of January 17, 2024, the national average interest rate for a 12-month CD sat at 1.88 % APY, according to data from Curinos. But you can find plenty of banks advertising APYs well above this average, especially if you take a look at the top contenders in our ranking of the best CD rates.
A basis point is the term used to describe one hundredth of one percentage point. Therefore, if the yield on a CD increased from 1.50% to 1.60%, it increased by 10 basis points.
