CD Rates

Like savings and money market accounts, certificates of deposit—more commonly known as CDs—are deposit accounts that offer a safe place for consumers to stow their cash. That safety comes in the form of federal deposit insurance, either through the FDIC (for bank CDs) or the NCUA (for credit union CDs). So if your bank or credit union fails, you’ll get your money back, up to a standard limit of $250,000 per account holder, per institution. Coverage includes both the account principal and any interest that has accrued at the time of the failure.

Interest rates and yields can be higher for CDs than for savings or money market accounts. But this increased earnings potential comes with decreased liquidity. When you open a CD, you put in a fixed amount of money and commit to keeping it there for a fixed period of time, called the maturity. CD maturities can be as short as three months or as long as five years—sometimes even longer. If you withdraw your money before the CD reaches maturity, you are subject to an early withdrawal penalty fee.

As a rule, the longer the maturity of your CD, the higher your interest rate should be. That’s because banks put depositors’ money to work, and they’re willing to reward you for letting them use it for a longer period of time. By the same token, customers making larger deposits can expect a higher interest rate than those making smaller deposits. The best CD rates are typically reserved for the longest-term jumbo CDs, that is, CDs with a balance of $100,000 or more.