A 2-year Certificate of Deposit, or CD, is a type of savings account that keeps money locked up for a term of two years at a fixed rate. The current rate being offered for the best 2-year CD is 5.60% with the average rate at 1.58% based on the hundreds of banks we've analyzed. This is much higher than the average savings account rate of !AvgRateSavingsAccount!. Here are some of the best 2-year CDs for April 2025 on the market:
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What is a 2-year CD and how does it work?
Having a two-year CD means that you are agreeing to give the bank or credit union your money for two years in exchange for them paying you a fixed rate. Most small, mid-sized, and online banks that are competing to attract deposits will generally offer rates that are in line with the Fed Funds rate. As mentioned previously, the top rate for a 2-year CD for April 2025 is at 5.60%, which is in line with the Fed Funds rate.
For the most part, once you fund your CD, your rate is locked until the end of the term. A few banks offer step-up or bump-up CDs that will allow a one-time adjustment to your rate should rates go higher during the course of the term. At the end of the term, the CD will generally auto-renew at the same term length, but the rate may not be the same. It is important to be aware of when your term ends, as banks will only allow a short window of 5-7 days to cancel your CD without potentially incurring early withdrawal penalties.
How much interest will I earn on a 2-year CD?
The interest rate on a CD is determined by the amount invested, the term of the CD, and the APY. There are plenty of CD calculators available online to get a good idea of how much interest you will earn based on the amount, term, and compounding frequency.
For example, if you were to deposit $10,000 into the best 2-year CD with a hypothetical APY of 5.00%, your total pre-tax interest earned for the first year is $500 and $525 for the second year as the APY applies to the $10,500 balance at the end of the first year.
How do I select the best 2-year CD?
CDs are a wonderful alternative when you need to find somewhere to park extra cash for long-term goals or money that you want to keep safe for a fixed amount of time, in this case, two years. When searching for the best 2-year CD, keep in mind that you cannot access your funds for two full years. If you do, you will incur a potentially significant early withdrawal penalty. Here are some important things to keep in mind when evaluating CDs:
Shop around: Comparing CD rates at various banks is an easy way to find the best CD for your needs. Keep in mind that you don't always have to have all of your CD accounts with the same bank, as many online or neobanks offer higher rates than traditional banks.
Do not incur early withdrawal penalties: Leaving your money in your CD for the full length of the term allows you to earn the maximum interest. Withdrawing your money early will most likely cause you to lose part or all of your interest, as banks typically charge penalties.
Pros and cons of having a 2-year CD
| You get to lock in your rate for two full years. If rates go down, your rate will not change for the duration of the 2-year term. | Two years requires a substantial commitment and meant for individuals for longer term goals. |
| As long as you are within the FDIC or NCUA limits of $250,000, your money is safe and secure. | If you withdraw your money before the CD matures, you will most likely incur an early withdrawal penalty, which depending on the bank, can be hefty. |
| The rates currently being offered on 2-year CDs are at a recent high, which will allow your money to grow faster. | If rates should happen to rise, your rate is locked in at a lower rate, causing you to lose out on additional interest. |
| A 2-year CD may offer a higher APY than a shorter term CD, savings account, etc. |
Alternatives to 2-year CDs
Shorter Term CDs
If you think you may need your money sooner than the commitment a 2-year CD requires, it may be beneficial to consider a shorter term CD such as a 9-month, 6-month or 3-month CD that may offer a comparable yield without the longer commitment.
Personal Savings Accounts
A savings account is a type of interest-bearing, depositary account available at banks and credit unions. Banks typically pay a variable interest on deposits but may limit the number of withdrawals per month. Unlike a 6-month CD, which ties up your money, a personal savings account is highly liquid but offers low yields.
Longer Term CDs
Longer term CDs such as a 1-year, 15-month, and 18-month CDs currently offer slightly higher yields but require you to commit your funds for longer periods of time. If you prefer the security of a fixed rate for a longer term, these CDs may be an excellent alternative to a 9-month CD.
High-yield Savings Accounts
A high-yield savings account is a form of savings account that pays a much greater interest rate than other types of savings accounts. Rates of 3.95% and higher are now available from online banks. This is the one type of account that offers yields similar or higher than a 6-month CD, with the drawback being that yields are variable and can fluctuate.
Money Market Accounts
A money market account (MMA) is a type of interest-bearing savings account that also allows you to use a debit card and write checks. MMAs generally limit the number of purchases and transfers to six per month, although ATM withdrawals are typically unrestricted. In general, MMAs offer lower, variable yields than a 6-month CD.
Frequently Asked Questions
Important terms to know
Annual Percentage Yield (APY): The total interest you receive on money in 1-year CD over the course of a year is expressed as an APY. The interest rate on an account is only one component of the APY, which also considers how frequently your interest compounds. The annual percentage yield (APY) of an account provides a more precise estimate of how much money your 1-year CD will earn.
Minimum Opening Deposit: This is the lowest amount of money you must deposit to open your 1-year CD account.
Interest: Interest is the money you earn from depositing your cash with a bank into your 1-year CD. When you deposit money with a bank, the bank borrows it from you and will lend a portion of it to clients or other banks, and the money they pay on your 1-year CD, is the interest.
Compound Interest: Compound interest is the interest you earn on interest you have already been paid. This may be demonstrated using simple math: if you have $100 and it generates 5% interest every year, you will have $105 at the end of the first year. You'll have $110.25 by the end of the second year, because you earned interest on the $105, and so on and so forth.
Early Withdrawal Penalty: An early withdrawal penalty is a fee banks may charge if you withdraw funds before your 1-year CD matures. Withdrawing your funds before the end of the term may cause you to forfeit a portion of your accrued interest and possibly some of your principal.
Additional offers from banks that might be useful
4-Year CDs
A 4-Year CD locks up your money for a fairly long period of time but can be very beneficial as it forces you to save towards your goals. There are other CDs with shorter terms that may offer similar yields but for those that are more risk-averse, a 4-Year CD is a good option. We've checked banks all across the country to find the best 4-Year CDs offered by banks and credit unions. The highest yield is currently at 4.75% for April 2025. Here are some other options to consider:
1-Month CDs
A one-month CD is very liquid as it has a very short term, which makes it a convenient alternative to traditional savings accounts and longer-term CDs. We did our research, and some of the top banks are offering APYs as high as 4.80% with the average APY of 0.01%. Here are some of the best 1-Month CDs offered by banks and credit unions for April 2025:
3-Month CDs
When you open a CD account, you agree to deposit your money for a set term, in this case, three months, in exchange for a fixed rate, or APY. The advantage of a 3-month CD is that the money is only tied up for a few months. As of today, the average yield for 3-month CDs is at 3.00% and the best 3-month CD is offering a yield of 5.51%. This rate is multiples higher than the average yield for a conventional savings account, which is currently at !AvgRateSavingsAccount!. Here are some 3-month CDs worth considering:
Methodology
Our editorial staff continually updates the information contained on our website. Our editorial staff has analyzed virtually all of the banks and credit unions that it follows, and it does weekly rate analysis for more than 250 prominent banks and credit unions. These institutions were chosen because they provide competitive APYs, low fees, and other factors we find important. These banks and credit unions often provide accounts that are available nationally. All of these banks are FDIC-insured, and all of these credit unions are NCUA-insured. Choosing an FDIC-insured bank or an NCUA-backed credit union assures that your money is protected as long as it stays within insurance limits and requirements.