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, especially on the high end, have ticked up slightly over the past week as banks continue to live in the high-interest rate world brought on by the Federal Reserve’s effort over the past year to stymie inflation.
Three-month CD rates
Rates on three-month CDs have seen no change since this time last week, remaining at 1.05% today.
Over the past month, rates on three-month CDs have climbed marginally.
The current national high for a three-month CD is 5.83%, which would earn more than $355 in interest with a $25,000 deposit.
Six-month CD rates
When you opt for leading six-month CDs, you get a winning combination: solid interest rates and a commitment that’s only short-term.
The national average APY for six-month CDs is 1.48%, upsomewhat from 1.47% last week and 1.43% one month ago.
The current top national rate for a 6-month CD is 5.60%, according to the data available from Curinos’ database. But you may be able to find better deals by shopping around.
You’d earn almost $700 in interest if you put $25,000 in a six-month CD with a rate of 5.60%.
One-year CD rates
If you’re willing to lock away your savings for 12 months, you can pick up 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 1.74%, up two basis points from last week and five basis points from a month before.
The current national high for a 12-month CD is 5.60%, which would earn around $1,400 in interest with a $25,000 deposit.
Two-year CD rates
Interest rates on CDs with longer terms, such as those spanning two years, are climbing.
The national average APY is 1.60%, a one basis point increase from last week and up three basis points from one month ago.
The current national high for a 24-month CD is 5.60%. By locking in a rate close to this high, you’ll make the most of your returns on this longer-term investment.
If you invest $25,000 in a 24-month CD at the high rate of 5.60%, you’d earn around $2,880 in interest.
Three-year CD rates
The national average APY for a three-year CD stands at 1.52%, up slightly from last week and up two basis points from a month ago.
The highest rate was 5.35%, which would net almost $4,233 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 September 6, 2023, the national average interest rate for a 12-month CD sat at 1.74 % 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.
