The Federal Reserve didn't cut interest rates at their January meeting. It means savers have more time to lock in an excellent rate, and a certificate of deposit can help you reach your savings goals.
A five-year CD gives you the ability to park your money for short-term goals. Whether you're looking to save for your child's wedding, or a dream, retirement vacation, CDs offer a way to make your goals happen.
You can use our tool — powered by Bankrate — to compare CD rates below.
Why open a CD?
A CD is a type of investment account that holds a fixed amount of money for a fixed term. The APY associated with a CD account is usually higher than that of a traditional savings account, so you’ll be able to earn more thanks to compound interest. Our savings calculator can help you determine just how much you’ll earn in interest once your CD term ends.
Unlike savings accounts, though, you won’t be able to access the cash in your CD before the end of the term, or you’ll be met with a fee. Therefore, it’s a good place to put aside cash you don’t intend on using until a future date — maybe you don’t plan on purchasing a new vehicle for another two years and want to accrue as much savings from interest as possible until then.
CDs are also good options for anyone looking for a fixed, predictable and safe return on their savings. This is because most CD accounts are FDIC or NCUA insured, meaning up to $250,000 per account is safe if the bank goes under. The difference depends on whether you open an account with a bank (overseen by the FDIC) or a credit union (regulated by NCUA).
Short-term vs. long-term CDs
It can be easy to choose between a 1-year CD and a 5-year CD if your money is going toward a particular savings goal. For example, you may be getting married in one year, so it would make sense to open a CD with a similar term.
On the other hand, if you’re looking to open a CD with no particular savings goal in mind, you’ll need to consider how long you'll be able to reasonably go without accessing your cash. If you open a 5-year CD and then realize you need to withdraw that cash at the 3-year mark, you'll have to pay a fee, offsetting any interest earned. If you're unsure if you will need access to cash, you can consider a no-penalty CD.
And since rates on CDs are fixed, you can take advantage of high rates for an extended period of time by opening a 5-year CD, which is why we recommend comparing short-term and long-term CDs following the Fed's meeting.
Top 5-year CD accounts
| Account | APY | Min. Deposit |
|---|---|---|
| Transportation Federal Credit Union | 4.40% | $1,000 |
| Credit Human | 4.31% | $500 |
| Lafayette Federal Credit Union | 4.28% | $500 |
| SchoolsFirst Federal Credit Union | 4.25% | $500 |
| Mountain America Credit Union | 4.25% | $500 |
| MYSB Direct | 4.01% | $500 |
| Securityplus Federal Credit Union | 4.00% | $1,000 |
| CoVantage Credit Union | 4.00% | $1,000 |
| BMO Alto | 3.80% | $0 |
| The Federal Savings Bank | 3.80% | $5,000 |
| Marcus by Goldman Sachs | 3.75% | $500 |
| EFCU Financial | 3.75% | $500 |
| First Internet Bank | 3.65% | $5,000 |
| Seattle Bank | 3.60% | $1,000 |
Pros and cons of CDs
Pros
- CDs offer guaranteed returns on deposits
- Fixed rates on CDs mean that even if rates fall, the APY on your account will remain consistent since it's fixed
- Most CD accounts from banks and credit unions are federally insured for up to $250,000
- Since you can only withdraw funds when your CD account matures, you won't be tempted to spend your money elsewhere
Cons
- If you want to access your money before your term expires, your penalty fee might negate the interest earned.
- You could earn more money with other investment opportunities, depending on market conditions.
- Upon maturity, the purchasing power of the money earned from your CD might be less due to inflation.
Bottom line
Since APYs on CD accounts are still fairly high, now is the best time to lock in rates. More rate cuts might come throughout 2025 and 2026, so saving rates could lower over the coming months. Just be sure you won't need to withdraw any funds from your CD before its maturity date, or you'll offset any interest you may have earned.
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