| Product | AVG | Top 1% |
|---|---|---|
| 6 Month CD | 3.77% | 5.31% |
| 1 Year CD | 3.31% | 5.30% |
| 2 Year CD | 2.92% | 4.85% |
When you open a Certificate of Deposit or CD account, you deposit a specific amount of money for a set period of time, or a term. In exchange, the financial institution pays a fixed yield for the duration of the term. When the CD matures, you can let the CD auto-renew, and the principal and earned interest will be deposited into the new CD. It is important to note that the rate may change at renewal.
With any CD, which is simply a deposit account that requires money to be deposited for a fixed period of time, you agree to leave your money in the CD account for the length of the term. In return for you committing your money for that term, the bank or credit union agrees to pay you a higher rate than you would otherwise receive in a savings account or money market account. The currently average yield on typical savings account is 0.45% while the highest yield for any CD is at 11.00%.
Once your money is locked in the CD account, your rate is also locked and cannot be raised or lowered until the CD matures, unless the terms of the CD allow a rate change such as with a Bump-Up CD. CDs are ideal for individuals who tend to be risk-averse and prefer the safety of knowing their money is secure and earning a fixed rate.
Should you need to withdraw your money before the end of the term, you will most likely have to pay a substantial early withdrawal penalty. At the end of the term, the CD will in most cases, auto-renew for 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.
CDs are considered relatively low-risk accounts because the rate is fixed, and if you stay within the FDIC or NCUA limits, your money is protected in case of a bank failure. Before selecting the best high yield CD account rates, it is important to understand the following terms:
Annual Percentage Yield (APY): The total interest you receive on money in an account 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 it will earn in a year.
Minimum Required Balance: The smallest amount of money you must deposit or keep in a savings account to avoid a monthly maintenance fee.
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 the CD matures. Withdrawing your funds before the end of the term may cause you to forfeit a portion of your accrued interest and possibly your principal.
Here are some important factor to keep in mind when searching for a CD:
Shop around: Comparing CD rates at various banks is an easy way to find the best CD for your needs. Luckily, we've done all of the hard work for you and have brought together 9-month CDs from banks all across the country on BankGrader site. Keep in mind that you don't always have to have all of your CD accounts with the same bank, as many online banks offer higher rates than traditional banks.
Beware of 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.
| The rates currently being offered on many CDs are at a recent high, in some cases higher than the yields on high-yield savings accounts. | If rates continue to rise, you will not be able to take advantage of the higher rates until your CD matures. |
| Your rate is locked in for length of the term. If rates go down, your rate will not change and you earn more interest. | If you withdraw your money before the CD matures, you will most likely incur an early withdrawal penalty, which may cause you to lose some or all of your earned interest. |
| Having an early withdrawal penalty forces you to not withdraw your money and lets your money grow. | CDs are non-transactional accounts, which means you cannot access your funds for everyday deposits or withdrawals. |
| As long as you are within the FDIC or NCUA limits, your money is safe and secure for the entire length of the term. |
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 an 18-month CD, which ties up your money, a personal savings account is highly liquid but offers low yields.
A checking account is a form of transactional account that can be opened at a bank, traditional or online, or a credit union. Checking accounts allows you to deposit funds and then withdraw from them to pay bills or make purchases. Keep in mind that the money in your checking account is money that you intend to use in the short term to meet your daily expenses. Unlike an 18-month CD, a checking account offers a low yield, with some banks offering no yields at all.
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 3.58% and higher are now available from online banks. This is the one type of account that offers yields similar or higher than an 18-month CD, with the drawback being that yields are variable and can fluctuate.
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 an 18-month CD.
Annual Percentage Yield (APY): The total interest you receive on money in an 18-month 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 18-month CD will earn.
Minimum Opening Deposit: This is the lowest amount of money you must deposit to open your 18-month CD account.
Interest: Interest is the money you earn from depositing your cash with a bank into your 18-month 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 18-month 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 18-month 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.
Since many seniors are retired and live on fixed incomes, managing their money is very importance. It's essential to select a bank account that's senior-friendly and offers benefits such as free checks, higher-than-average APY and no monthly service charges. Additionally, many seniors might like a bank with a wide network of branches that makes it convenient for them to visit when they need to process a transaction. Here are some of the best senior checking accounts we've identified based on our research:
If you want to teach your child the importance of saving money for the future, there's no better way than a savings account, especially one with a competitive APY. On average, these accounts don't offer very high APYs but are an excellent option that allows children to learn how to save their money for future financial goals. Here are some examples of the banks offering the best Children's Savings Accounts for November 2024:
A personal money market account combines the best of both worlds between a checking account and a savings account. They typically offer check-writing and come with a debit card. They differ from a business money market account by limiting the number of withdrawals as per Federal Regulation D, which caps withdrawals at six per month or statement cycle. The best money market account is currently offering a yield of 5.30%, which is much higher than the national average for a conventional savings account with a yield of 0.45%. Here are some of the best personal money market accounts we've identified:
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.