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Compare Certificate Of Deposits (CDs) Rates
Compare CD rates, terms, minimum deposit, and early withdrawal fees to find the perfect CD for your needs with The Smart Investor's easy-to-use CDs comparison tool
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How To Compare CDs?
When comparing Certificate of Deposits (CDs), there are several factors you should consider:
Interest rates: Check the interest rates offered by various financial institutions. Look for competitive rates that will maximize your return on investment. Keep in mind that longer-term CDs generally offer higher interest rates.
Term lengths: CDs have fixed term lengths, which can range from a few months to several years. Compare the available term lengths and select the one that aligns with your investment goals.
Minimum deposit requirements: Determine the minimum amount required to open a CD account. Some banks have higher minimum deposit requirements, so choose one that fits your budget.
Early withdrawal penalties: CDs are known for their fixed terms, and withdrawing funds before the maturity date may result in penalties. Compare the penalties associated with early withdrawals across different institutions. Choose a CD with penalties you can tolerate or select a no-penalty CD if you anticipate the need for early access to your funds.
CD renewal policies: Understand the renewal policies of the CD. Some banks automatically renew CDs at maturity unless you instruct them otherwise. Be aware of this and evaluate whether you would like your CD to renew or if you want to take the funds out at maturity.
FDIC insurance: Ensure that the financial institution offering the CD is FDIC-insured. This insurance protects your deposit up to $250,000 per depositor, per institution.
Online reviews and reputation: Research the reputation and customer reviews of the financial institution offering the CD. Look for feedback on their customer service, ease of account management, and overall satisfaction.
CD APY Range | Minimum Deposit | |
|---|---|---|
Marcus | 3.90% – 4.80% | $500 |
First Internet Bank | 4.14% – 4.94% | $1,000 |
Barclays Bank | 0.10% – 5.10% | $0 |
PNC Bank | 4.75% | $1 |
Quontic Bank | 3.50% – 5.10% | $500 |
PenFed Credit Union | 2.00% – 4.35% | $1,000 |
Alliant Credit Union | 4.80 % – 4.70 % | $1,000 |
Sallie Mae | 4.75% – 4.90% | $2,500 |
Bread Financial | 4.25% – 4.75% | $1,500 |
Capital One | 3.90% – 4.50% | $0 |
Chase Bank | 3.25% – 4.75% | $1,000 |
Discover Bank | 2.00% – 5.10% | $2,500 |
CIT Bank | 0.30% – 3.50% | $1,000 |
Ally Bank | 3.75% – 4.90% | $0 |
Citi Bank | 0.05% – 4.51% | $500 |
Connexus Credit Union | 3.51% – 4.85% | $5,000 |
Merrick Bank | 3.90% – 5.04% | $25,000 |
Fidelity | 3.85% – 4.95% | $1,000 |
Charles Schwab | 5.04% – 4.15% | $1,000 |
Vanguard | 3.70% – 5.00% | $1,000 |
BMO Harris | 0.05% – 4.50% | $1,000 |
Wells Fargo | 4.25%- 4.50% | $2,500 |
Synchrony Bank | UP TO 4.85 % | $0 |
Citizen Bank | 2.75% – 5.25% | $1,000 |
TD Bank | 1.00% – 5.00% | $250 |
Navy Federal | 4.85% | $1,000 |
LendingClub | 4.00% – 5.20% | $2,500 |
Will CD Rates Keep Increasing?
The implementation of the most significant interest rate increase in history by the Federal Reserve has resulted in interest rates reaching a level not seen in the past 15 years, pushing CD rates higher, in some cases above 5% APY:
Despite the Federal Reserve's efforts to combat inflation, it is important to acknowledge that inflation still remains above the target level.
Consequently, the possibility of future interest rate hikes remains, as the Federal Reserve is potentially considering additional increases. However, it is necessary to consider opposing factors.
The Federal Reserve has expressed concerns about the growing banking crisis, which has been an ongoing issue. In light of this situation, the Federal Reserve may adopt a cautious approach and choose to monitor developments before making any further decisions.
Does CD Is A Good Hedge Against Inflation?
With the current inflation rates, certificates of deposit (CDs) are may be a good option for those who need to hedge against inflation. They can be suitable for conservative investors who prioritize capital preservation and want a stable source of income
On the other hand, if the inflation pace is higher than the CD yield, you may lose purchasing power. CDs offer a fixed interest rate for a specified term, typically ranging from a few months to several years. These rates are determined at the time of purchase and remain constant throughout the CD's term.
In an inflationary environment, the purchasing power of money decreases over time, which means the fixed interest rate offered by CDs may not keep up with inflation. This can result in a loss of real purchasing power.
If the inflation rate exceeds the interest rate earned on a CD, the real value of your investment will decline.
What Is CD Ladder And Why You Should Consider It?
A CD ladder is an investment strategy that involves spreading your funds across multiple certificates of deposit (CDs) with varying maturity dates. The term “ladder” refers to the staggered arrangement of CDs, with each rung of the ladder representing a different CD and its corresponding maturity date.
To create a CD ladder, you typically start by dividing your investment into equal parts and purchasing CDs with different term lengths. For example, you might purchase a 1-year CD, a 2-year CD, a 3-year CD, and a 4-year CD. Each CD will mature at a different point in time, providing you with access to a portion of your funds on a regular basis.
By implementing a CD ladder, you can benefit from several advantages:
Liquidity: The staggered maturity dates of the CDs in the ladder provide you with regular access to a portion of your funds. This allows you to have liquidity and flexibility in managing your finances.
Interest rate optimization: As interest rates change, the CDs in your ladder will mature at different times, allowing you to adapt and reinvest in new CDs with potentially higher rates.
Diversification: By investing in multiple CDs with different terms, you diversify your investment across various interest rate environments and reduce concentration risk.
CDs Pros And Cons
Opening a CD is like any other investing option, and therefore it's a good idea to consider the pros and cons before making a decision. Here are some pros and cons of CDs:
Pros | Cons |
|---|---|
Safety | Limited liquidity |
Predictable returns | Lower potential returns |
Diversification | Lack of flexibility |
Easy to understand |
- Safety
CDs are generally considered low-risk investments. They are typically offered by banks and credit unions and are FDIC-insured up to $250,000 per depositor, per institution, providing protection for your principal investment.
- Predictable Returns
CDs offer fixed interest rates for a specified term, allowing you to know exactly how much interest you will earn over the CD's duration. This predictability can be advantageous for individuals seeking stable and guaranteed returns.
- Diversification
CDs can be used as a component of a diversified investment portfolio. By allocating a portion of your funds to CDs, you can balance risk and potentially earn a higher return than traditional savings accounts.
- Easy To Understand
CDs have straightforward terms and conditions. They are relatively simple to open and manage, making them accessible to a wide range of investors.
- Limited Liquidity
Unlike savings accounts, CDs have fixed terms and withdrawal before maturity can result in penalties. If you need access to your funds before the CD matures, you may face early withdrawal fees or forfeit a portion of the earned interest.
- Lower Potential Returns
While CDs offer stability and security, their interest rates are generally lower compared to riskier investments such as stocks or bonds. If your primary objective is to maximize returns, other investment options may provide higher yields.
- Lack Of Flexibility
Once you purchase a CD, you typically cannot make additional contributions or adjust the terms. This lack of flexibility limits your ability to take advantage of changing market conditions or adjust your investment strategy.
Long vs Short Term CDs
In general, longer-term CD rates should be higher than shorter-term CD rates because they involve a greater level of commitment from the depositor. On the surface, with long–term CD you are committing to leaving your funds with the bank for a longer period of time, and the bank is willing to offer a higher rate of return in exchange.
Although many people assume that long–term CDs always offer higher rates compared to short-term CDs, a closer comparison between the two reveals that this is not always the case. While some banks and credit unions may offer higher rates for long–term CDs, there are many others that offer similar or even higher rates for short-term CDs of 6-months up to 1-year. This may seem unexpected, but there is a good explanation for it.
The current trend of lower interest rates on long–term CDs can be primarily attributed to the expected reduction in rates by the Federal Reserve (Fed) in the medium to long term. With recent signs of decreasing inflation, higher risks for the banking sector, and the fastest monetary tightening ever, the risk of a recession has increased significantly.
As a result, the market anticipates a recession and expects the Fed to reduce interest rates within the next 1-2 years, leading to uncertainty regarding future interest rates. This uncertainty has motivated banks and financial institutions to offer similar or even lower rates for long–term CDs compared to those offered for shorter terms.
This expectation creates an opportunity for investors who believe this scenario will happen, as they can lock in the current rate for the long term, such as 4 or 5 years CD, and get a guaranteed return on their investment.
Financial Institution | 6 Months APY | 12 Months APY | 36 Months APY |
|---|---|---|---|
4.40% | 4.70% | 4.15% | |
4.25% | 4.50% | 3.75% | |
3.00% | 3.50% (13 months) | 0.40% | |
N/A | 4.10% | 3.00% | |
4.25% | 4.70% | 3.75% | |
3.00% | 4.00% | 3.40% | |
4.70% | 4.35% | 3.90% | |
4.65% | 4.80% | 4.00% | |
4.00%
| 5.00%
| 4.10%
| |
4.50% | 4.70% | 2.00% | |
5.00% | 4.40% | 4.30% | |
4.90% | 4.70% | 3.75% | |
4.75% | 4.70% | 4.15% | |
3.75% | 4.00% | 2.00% |