Key Takeaways

  • CD rates are mainly influenced by the Federal Reserve’s federal funds rates, which rose steadily throughout 2022.
  • A “good” CD rate could be as high as five or six times the federal funds rate.
  • CD rates are usually expressed as an annual percentage yield, which accounts for the compounding interest most CDs offer.
  • When comparing rates for different CD types or between CDs and other products, consider other factors such as liquidity, risk and your financial goals.

Current CD Rates for November 2023

1 month CD

  • 5.55% Treasury Yield
  • 0.22% National Deposit Rate
  • 0.97% National Deposit Rates Rate Cap Adjusted
  • 7.41% National Rate Cap
  • 7.41% Treasury Yield Rate Cap Adjusted

3 month CD

  • 5.55% Treasury Yield
  • 1.42% National Deposit Rate
  • 2.15% National Deposit Rates Rate Cap Adjusted
  • 7.41% National Rate Cap
  • 7.41% Treasury Yield Rate Cap Adjusted

6 month CD

  • 5.53% Treasury Yield
  • 1.39% National Deposit Rate
  • 2.14% National Deposit Rates Rate Cap Adjusted
  • 7.39% National Rate Cap
  • 7.39% Treasury Yield Rate Cap Adjusted

12 month CD

  • 5.46% Treasury Yield
  • 1.79% National Deposit Rate
  • 2.54% National Deposit Rates Rate Cap Adjusted
  • 7.30% National Rate Cap
  • 7.30% Treasury Yield Rate Cap Adjusted

24 month CD

  • 5.03% Treasury Yield
  • 1.50% National Deposit Rate
  • 2.25% National Deposit Rates Rate Cap Adjusted
  • 6.79% National Rate Cap
  • 6.79% Treasury Yield Rate Cap Adjusted

36 month CD

  • 4.80% Treasury Yield
  • 1.38% National Deposit Rate
  • 2.13% National Deposit Rates Rate Cap Adjusted
  • 6.51% National Rate Cap
  • 6.51% Treasury Yield Rate Cap Adjusted

48 month CD

  • 4.80% Treasury Yield
  • 1.30% National Deposit Rate
  • 2.05% National Deposit Rates Rate Cap Adjusted
  • 6.51% National Rate Cap
  • 6.51% Treasury Yield Rate Cap Adjusted

60 month CD

  • 4.60% Treasury Yield
  • 1.38% National Deposit Rate
  • 2.13% National Deposit Rates Rate Cap Adjusted
  • 6.27% National Rate Cap
  • 6.27% Treasury Yield Rate Cap Adjusted

Source: FDIC

What Are CD Rates?

Put simply, a CD rate is the interest rate on a certificate of deposit (CD). CD rates typically run higher than the rates on traditional savings because CDs require you to leave your money untouched for a set period while your savings grow.

Beyond this requirement, a variety of terms, conditions and marketplace factors can influence a CD rate. Be sure to familiarize yourself with these variables and diligently shop for the top rates nationally if you’re in the market for a certificate of deposit.

Generally, banks and credit unions require you to take action to withdraw your money from a CD at maturity. Failure to formally express an interest to withdraw your funds will usually result in the money rolling over into another CD.

How Are CD Rates Determined?

CD rates are largely influenced by the Federal Reserve’s monetary policy actions and the resulting position of the federal funds rate, which is the overnight rate at which banks lend and borrow funds from each other.

When the Fed acts to put upward or downward pressure on the federal funds rate, banks and credit unions generally respond by moving their savings, money market account and CD yields in the same direction. There is always the possibility for deviation from the federal funds rate, and this occurs whenever a bank or credit union seeks to modify its competitive stance in the market.

What Is a No-Penalty CD Rate?

CD rates are influenced by any variations from the traditional product structure. The most well-known variation is the no-penalty CD. This structure allows for a penalty-free early withdrawal, but typically requires the sacrifice of some yield. Three other common alternative structures are jumbo CD, bump-up CD and step-up CD.

More: Investing for Beginners

How Much Do CDs Pay?

As of April 17, 2023, national CD averages range from 0.24% (1-month term) to 1.37% (5-year term), according to the Federal Deposit Insurance Corporation. These rates could change if the Fed continues to raise rates in 2023, as it did in 2022.

What Makes for a “Good” CD Rate?

The national average of comparable CD rates is a sound starting point for determining a “good” CD rate. However, attaining the average is not a winning objective.

Rather, you should strive to garner the top available rate, which tends to be far superior to the average. In fact, top-paying institutions regularly offer a yield five to six times higher than the national average. This holds firm through varying interest rate environments and across key maturity spectrums.

What Is Annual Percentage Yield?

The interest a CD earns is usually expressed as the annual percentage yield, or APY. This represents the amount of interest your CD will earn in a year. APY differs from a simple interest rate because it takes compound interest into account.

Most CDs offer compound interest, which means your interest is added to your account balance at regular intervals. The next interest payment is calculated based on the combined principal and interest. All this adds up to greater growth potential with compound interest than simple interest, which is calculated using principal only.

Because CDs use compound interest, APY is the best way to represent how much you’ll earn on your CD throughout its term. For a hypothetical 2-year CD, offering a nominal rate of 2.5%, compounded daily, the APY is as follows:

Image showing how to calculate APY

So, for the above example, the APY of that CD is 2.53%. If you invested $10,000 in that 2-year CD with a 2.53% APY, you’d earn $512.40 in interest.

More: 6% CD Rates and Alternatives

How To Maximize Your CD Rate

Awareness is the key to garnering the best possible CD rate. Make the most of your CD and grow your savings by following these steps.

  • Diligently shop for the top rates nationally.
  • Be cognizant of CD terms, particularly early withdrawal penalties and compounding frequencies. A high withdrawal penalty is to be frowned upon, while more frequent compounding is superior to less frequent.
  • Once invested, keep your funds deposited for the full term to avoid costly early withdrawal penalties.

What Causes CD Rates To Rise?

CD rates rose steadily throughout 2022, and the main cause of rising interest rates was a series of interest rate hikes from the Federal Reserve. As previously mentioned, the Fed’s monetary policies are the biggest factor in the rise or fall of CD interest rates.

The Fed issued seven rate hikes in 2022, boosting the federal funds rates for 5-year CDs from 0.28% in January of 2022 to 1.09% by the end of the year. When the Fed raises their federal funds rates, banks and credit unions tend to follow suit by raising their rates.

But the Fed’s rates aren’t the only factors that banks account for when deciding whether to raise interest rates. Other considerations that might encourage banks to up their rates include how much cash customers have deposited and what rates competitors are offering for CDs with similar terms.

More: 5% CD Rates and Alternatives

How Do You Compare Rates for Different Types of CDs?

When deciding which type of CD to purchase, there’s more to consider than just the interest rate being offered. Different features and benefits can enhance the growth potential offered by a CD beyond its interest rate.

For example, no-penalty or liquid CDs tend to offer lower interest rates than traditional CDs. But a liquid CD could be worth it if you expect interest rates to rise but don’t want to wait to purchase your CD. This way, you can withdraw your money when rates go up and put it into a new, higher-interest CD without paying a penalty.

Someone looking to put a large amount of cash away in a CD might consider a jumbo CD. These savings tools typically have a very high minimum deposit, $100,000 or more, but they also offer high interest rates. This type of CD can make sense if you have significant savings, but keep in mind that you won’t be able to access any of that money during the CD’s term without incurring a penalty.

Variable-Rate CDs

Variable-rate CDs have an interest rate that can change over the maturity period of the CD. The most common types of variable-rate CDs are “bump-up” or “step-up” CDs.

With a bump-up CD, you’ll have one chance to raise the rate of your CD if the bank’s APY changes during the CD’s term. You can request the rate change at any time during the CD’s term to bump up the rate to whatever the bank is currently offering for that CD.

Step-up CDs also allow for a CD’s rate to increase during its term. The difference is that a step-up CD’s rate changes automatically at specific intervals, usually according to a schedule. When interest rates are rising, as they did throughout 2022, step-up and bump-up CDs can be an excellent way to accelerate the growth of your savings.

Comparing CD Rates to Other Financial Options

When comparing CD rates to the interest rates of other personal finance options, it’s important to consider the tradeoffs of growth potential, risk and liquidity.

For example, a popular alternative to a CD is a high-yield savings account. Both bank products offer a decent interest rate and little to no risk, as they are insured by the FDIC.

According to Certified Financial Planner R.J. Weiss, the main difference between CDs and high-yield savings accounts is the liquidity of the two savings tools. “CDs typically have a fixed term; if you withdraw your funds before the term is up, you may be penalized,” Weiss said. “On the other hand, high-yield savings accounts generally have no penalties for withdrawals and offer a higher level of liquidity.”

Another option for growing your savings might be to invest your cash in an IRA. In the long run, investing generally has a higher level of return than saving your cash in a CD, and you can continue to contribute money over time, unlike a CD which only has one initial deposit.

However, there are some drawbacks to investing in an IRA. You’ll face a steep penalty for withdrawing funds from an IRA before you reach retirement age, and because your money is exposed to market fluctuations, you risk losing some of the value of your savings.

Choosing the right course of action for your cash savings will depend on your goals and risk tolerance, said Weiss. You’ll have to look at more than just the rate of return to know which option is right for you.

More: Short-Term vs. Long-Term Rates

Frequently Asked Questions About CD Rates

What is the average interest rate on a CD?

As of Feb. 21, 2023, national CD averages range from 0.18% for a 1-month term to 1.26% for a 5-year term.

What is the rate of return on a CD?

The rate of return on a CD is expressed as the annual percentage yield (APY), which is calculated based on the amount of money deposited in the CD and how often the interest compounds.

What are CD rates based on?

CD rates are based on the Federal Reserve’s federal funds rates, as well as what other banks are offering for similar products.

Please seek the advice of a qualified professional before making financial decisions.
Last Modified: May 14, 2024