A CD’s maturity date is the date when you can take your money out of the CD without paying early withdrawal penalties. The CD’s term has ended, so there are no bank-imposed withdrawal restrictions at maturity. Going forward, you’ll no longer earn the same amount of interest that you were earning on that money. That might be a good or bad thing, depending on what rates have done since you bought the CD.
Maturity Overview
When you buy a CD, the bank promises to pay you a fixed rate of interest for a specific term (the term is the length of time that the CD lasts).
CDs typically pay higher interest rates than rates available from savings accounts because you promise to keep your money locked up for a certain amount of time.
For example, the bank might offer to pay you 3% for a one-year CD, while savings accounts only pay 2.25%. After the year is over (at maturity), the deal ends. You can withdraw your money, and the bank doesn’t have to pay you 3% any longer.
How Long It Takes for a CD to Mature
You get to choose how long your CD lasts. When you “buy” a CD (or invest money into it), you pick the maturity date. Common choices include:
Three months
Six months
One year
18 months
Five years
The maturity date is often part of the CD’s name. For example, if you buy a “six-month CD,” the CD will mature six months after you deposit your money into that account. On your statements (online or on paper), you might see the date you purchased the CD or the date that the CD comes due. If you’re not sure how much longer you need to wait for maturity, ask your bank or credit union.
Early Withdrawal
If you pull your money out of the CD before maturity (sometimes known as “breaking” the CD), your bank might charge an early withdrawal penalty. That penalty is often quoted as several months’ worth of interest, or you might pay a flat fee.
In some cases, the penalty wipes out the interest you earn, and you get 100% (or more) of your money back. In other cases, the penalty can eat into your initial investment, and you receive less than you put in.
Liquid CDs
Some CDs allow you to pull funds out before maturity without any penalty. These “liquid” CDs are increasingly popular because people like flexibility. But there’s no such thing as a free lunch. For the ability to pull out early, you pay a cost in the form of a lower CD rate—you don’t earn as much on your money. Some liquid CDs allow you to pull all of your money out while others set limits.
What Happens When a CD Matures
When your CD matures, you’ve got several options, and it’s best to be proactive.
Maturity Notice
Your bank or credit union is required to send you a notification shortly before your CD matures.1 The notification might arrive by regular mail or email, depending on how you set things up with your bank. Pay attention to these notices, especially:
The maturity date of your CD
The default action if you do nothing (often the CD will renew or rollover to another CD)
The rate on renewing CDs (if this isn’t obvious, make sure you find out—the rollover rates could be lower)
The maturity date for renewing CDs
The deadline to request an alternative (such as transferring the money to your savings account)
Rolling Over
If you do nothing, your bank will usually put your money into another CD with the same length as the CD that just matured. For example, if your six-month CD is maturing, you’ll often have a 10-day window of time after maturity to provide instructions to your bank. If you ignore the notice, your bank will put the money into another six-month CD. However, you might not earn the same rate that you were earning on the last CD—banks will pay what they currently offer to people buying six-month CDs, which might be more or less than you earned previously.2
You’ve Got Options
The most important thing to know is that you have options. You can (among other things):
Let the CD renew and take what you get
Choose a different CD (perhaps a different maturity, or a liquid CD)
Move your money to a different bank and use their CDs instead
Move the money to your checking or savings account and use it for something else
The best thing to do is to evaluate your financial situation and your goals and decide as if you just received this money and need to do something with it.
How Long Your Maturity Should Be
When buying CDs, you get to choose how long the CD will last, and you might not know which maturity to choose. Again, identifying your goals and required cash flows should help guide you toward the right maturity.
Longer Is Higher
In general, longer terms come with higher interest rates. If you want to maximize your earnings, a one-year CD typically pays more than a three month CD.
Interest Rates Change
Locking up for a longer period might or might not be wise. Your bank sets interest rates on CDs (in part) based on interest rates elsewhere and how the economy is doing. Rates can move higher or lower after you buy a CD.
If you think rates will move higher, it might be better to stick with shorter-term CDs, liquid CDs, or bump-up CDs, so you’re not locked in at a low rate. If you think rates will fall, locking in makes more sense.
It’s difficult—or impossible—to predict the timing and direction of interest rate changes, but be mindful of the current interest rate environment.
Ladder for Flexibility
Fortunately, you don’t have to pick just one maturity. It’s smart to spread your money among different maturities.
A portion goes in a six-month CD (and renews using six-month CDs at maturity).
A portion goes in a one-year CD.
The remainder goes in a two-year CD
With that approach, you’ve got a maturity date coming up every six months or so, so you’ll have access to money if you need it. That helps you avoid paying penalties, and you can also manage the risk of getting stuck with the wrong interest rate.
The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk, including the possible loss of principal.
Jumbo certificates of deposit (CDs) usually require a large amount of money (think $100,000) and can sometimes offer even higher interest rates than regular CDs, but usually only within a given bank. However, banks and credit unions often compete more for the best CD rates for regular, non-jumbo CDs, and so—as you’ll see below—the highest annual percentage yields (APYs) offered on non-jumbo CDs are often higher than those of most jumbo CDs.
Each week, we review more than 150 nationally available banks and credit unions to find the best jumbo CD rates with minimum deposits of $50,000 or more. We track APYs daily but re-evaluate the list weekly, and all accounts that make our list are insured by either the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA).
Here are the best jumbo CD rates, plus non-jumbo CD rates for the same term, as of September 9, 2020.
APYs are changing rapidly amid widespread uncertainty about the economy and financial markets. The Balance is monitoring rates and updating them accordingly.
Best Jumbo CD Rates
Term
Bank or Credit Union
APY
Minimum Deposit
Early Withdrawal Penalty
JUMBO 3 Months (2–4 months included)
Michigan State University Federal Credit Union (3–5 months)
0.45%
$100,000
3 months of interest
3 Months (2–4 months included)
Chevron Federal Credit Union and Spectrum Federal Credit Union (3-month, tied)
0.80%
$500
3 months of interest
JUMBO 6 Months (5–9 months included)
Consumers Credit Union (9-month)
0.70%
$100,000
2 months of interest
6 Months (5–9 months included)
CommunityWide Federal Credit Union (6-month)
1.00%
$1,000
Complex formula; exercise caution
JUMBO 1 Year (10–14 months included)
Affinity Federal Credit Union (14-month)
0.95%
$100,000
6 months of interest
1 Year (10–14 months included)
MAC Federal Credit Union (12-month)
1.10%
$1,000
1 month of interest
JUMBO 18 Months (15–20 months included)
Consumers Credit Union (20-month)
1.10%
$100,000
4 months of interest
18 Months (15–20 months included)
Pen Air Federal Credit Union (18-month)
1.05%
$500
6 months of interest
JUMBO 2 Years (21–29 months included)
California Coast Credit Union (24-month)
1.05%
$50,000
6 months of interest
2 Years (21–29 months included)
MAC Federal Credit Union (24-month)
1.25%
$1,000
3 months of interest
JUMBO 3 Years (30–41 months included)
Financial Partners Credit Union (36-47 month)
1.20%
$100,000
6 months of interest
3 Years (30–41 months included)
MAC Federal Credit Union (36-month)
1.45%
$1,000
3 months of interest
JUMBO 4 Years (42–53 months included)
Blue Federal Credit Union (48-month)
1.30%
$100,000
8 months of interest
4 Years (42–53 months included)
MAC Federal Credit Union (48-month)
1.50%
$1,000
3 months of interest
JUMBO 5 Years (54–66 months included)
Wings Financial Credit Union (60-month)
1.46%
$100,000
Loss of amount equivalent 2 years’ dividends (730 days)
5 Years (54–66 months included)
Greenwood Credit Union (60-month)
1.50%
$1,000
6 months of interest
If you’re looking for 10-year CDs, it’s best to look at our list for the best 10-year CD rates for non-jumbo CDs because there just aren’t many options for 10-year jumbo CDs.
If the steep deposit isn’t too much for you, here’s what to know about the institutions behind each of the best jumbo CD rates in our table above. (For more information on the banks and credit unions offering the best non-jumbo rates, see our list of the best CD rates.)
Michigan State University Federal Credit Union: Best 3-Month Jumbo CD
Just like its namesake, Michigan State University Credit Union is based out of Lansing, Michigan. Interestingly, it claims to be the largest university-based credit union in the world, and if you don’t qualify with some connection to Michigan State University, you can also join by first becoming a member of the MSU Alumni organization (membership is free) or Michigan United Conservation Clubs for $35 per year. Additionally, there’s no fee to open an account at the credit union, but you will need to deposit at least $5 to a Spartan Saver account.
Consumers Credit Union: Best 6-Month and 18-Month Jumbo CD
Consumers Credit Union is based out of Gurnee, Illinois, and has more than 80,000 members. You can become a member by joining the Consumers Cooperative Association for a $5 fee, which you can do while you complete your account application. In addition, you’ll need to keep at least $5 in a savings account.
Consumers Credit Union has an even wider range of financial products than most other credit unions. It offers several types of insurances (such as car insurance and long term care insurance), annuities, just about any type of loan you could want, and credit cards—and that’s even before you get to the regular accounts like checking accounts and savings accounts.
Affinity Plus Federal Credit Union: Best 1-Year Jumbo CD
In 1930, a group of Minnesota state employees formed what is now Affinity Federal Credit Union. Anyone nationwide can join with a $25 membership for the Affinity Plus Foundation, which provides financial education in Minnesota, and a $10 deposit in savings. When it’s time to spend your money, you can transfer funds into a free checking or rewards checking account.
California Coast Credit Union: Best 2-Year Jumbo CD
California Coast Credit Union is San Diego’s oldest financial institution, serving its members interests since 1929. It has more branches than any other local credit union and most area banks. California Coast offers convenient ATM access, free mobile and online banking, free checking with eStatements, Checking with ID, theft protection and high-yield checking, savings and money market accounts, certificates and IRAs, and so much more.
In addition to regular and jumbo CDs, California Coasts’ CD line-up also features a “holiday saver certificate” and a “summer certificate.” To get started with any of the certificates, you’ll need a minimum opening balance of $1,000. Anyone may apply to join the credit union with a one-time fee of $5.00.
Financial Partners Credit Union: Best 3-Year Jumbo CD
Financial Partners Credit Union has branches only in California, but it has more than 80,000 members and $1.5 billion in assets. It offers a wide range of banking services, including loans, insurance, investments, savings accounts, checking accounts, and even a car-buying service—but CDs are where this credit union really shines. To join the credit union, you must be a member of the AARP or any other credit union and keep at least $25 in a savings account.
Blue Federal Credit Union: Best 4-Year Jumbo CD
Blue Federal Credit Union serves more than 90,000 members in Colorado and Wyoming, and around the world. As part of a nationwide CO-OP network of credit unions, Blue Federal gives its members access to 5,000 shared branch locations across the U.S., and 30,000 surcharge-free ATMs.
Blue Federal offers a full range of everyday banking services—checking and savings accounts, plus credit cards and loans for both individuals and businesses—along with an impressive line-up of CDs, with terms ranging from six months to five years. Try its “expandable term CD” at 30 months and add money whenever you’d like.
Anyone may join Blue Federal Credit Union by making a $5 donation to the Blue Foundation. You may open a personal term share, or CD, with a minimum of $1,000.
Wings Financial Credit Union: Best 5-Year Jumbo CD
Wings Financial Credit Union, based in Apple Valley, Minnesota, was started in 1938 by a handful of Northwest Airlines employees. Since then, it’s grown to have more than $5.3 billion in assets and 280,000 members, and anyone in the aviation industry or from Atlanta, Detroit, Orlando, Seattle-Tacoma, or parts of Wisconsin and Minnesota is eligible to join. If you don’t meet the eligibility requirements any other way, don’t worry. You can join by becoming a member of the Wings Financial Foundation, which carries a $5 membership fee. You’ll also need to keep $5 in a savings account.
What Are Jumbo CDs?
A jumbo CD is a special CD that generally requires a very large minimum deposit. There isn’t a set standard for how large of a deposit you need to make to open a jumbo CD. It varies by bank or credit union and can range from $50,000 all the way up to $100,000 or more. The FDIC commonly considers CDs of at least $100,000 to be a jumbo CD.
Banks and credit unions often offer slightly higher rates on jumbo CDs in a bid to get you to deposit more money with them. They’ll also potentially offer higher rates for jumbo CDs with longer term lengths, just like with regular CDs.
There’s a bit of a twist here, though. While individual banks and credit unions may offer better rates on jumbo CDs, you can usually find much better rates on regular CDs if you’re willing to shop around. This is because banks and credit unions often compete with each other and offer promotional rates on regular CDs more often than jumbo CDs.
It’s sort of like the difference between fast-food burgers and gourmet burgers: Fast-food burger chains compete with each other more often on price so you can get a better deal pretty frequently, whereas it may be tough to find coupons or sales on gourmet burgers.
Even better, there’s usually nothing that says you can’t open one of these normal, high-APY CDs with an amount of cash that would qualify as a jumbo deposit. You would just earn more interest by the time the CD matures.
Are Jumbo CDs Safe?
Jumbo CDs are as safe as any other CD. They’re still insured up to $250,000 per institution by the FDIC (for banks) or the NCUA (for credit unions).
“A financial services professional should recommend a jumbo CD to a client when they need a safe investment,” Colin Slabach, Assistant Professor of Retirement at The American College of Financial Services, told The Balance via email. “A safe investment is necessary when the time horizon is only a few years away.”
Let’s think about this for a second. If you have the money and you’re not risking your other financial goals, a jumbo CD can be a great way to save up for a down payment on a house in an area with a high cost of living, for your child’s college education in a few years, or for some other big expense on the looming horizon.
However, jumbo CDs are often marketed as popular ways to save for retirement because they’re among the highest-earning accounts at many banks and credit unions, and because they’re insured. In fact, many banks and credit unions offer special jumbo IRA CDs just for these savers. But just because you’re guaranteed not to lose your money doesn’t mean that there aren’t risks on the flipside.
What Are the Risks of Jumbo CDs?
The biggest risk of saving in jumbo CDs, in the long run, is that your earnings most likely won’t outpace inflation. Inflation has historically been between 2% and 3% in the last 20 years. In other words, if you’re not earning at least 3% on your investment, you’re either running in place or falling behind the pack. And today, most jumbo CDs don’t offer anywhere close to that amount.
Earning a rate below the inflation level isn’t a big deal with most savings since they’re not meant to sustain you forever. But with something like your kid’s college tuition or your retirement savings, it can mean a world of difference.
When your jumbo CD’s term is up you’ll owe taxes on your earnings, and jumbo CDs can earn a lot of interest. Speak with your tax professional, because it may be a good idea to set some of your earnings aside to pay your taxes at the end of the year.
Another risk is having so much money tied up in one place. If you’re a billionaire, a jumbo CD is probably chump change. But if you’re like the rest of us, a jumbo CD could make up a substantial part of your net worth and that’s risky because it ties up a bigger part of your cash in something that’ll cost you a hefty price in penalty fees to access early if you need it. The early withdrawal fees are typically the same or similar for both non-jumbo and jumbo CDs, but because jumbo CDs require larger amounts in general, the early withdrawal penalties can add up to a very large amount of money.
What Are the Pros and Cons of Jumbo CDs?
Pros
Insured up to $250,000 by the FDIC or NCUA
Slightly better rates within the same bank or credit union
Cons
Requires a much larger deposit size than other types of CDs or savings accounts
Early withdrawal penalties will add up to a much higher dollar amount
May require tying up a big part of your net worth in a non-liquid account
May not match the returns of alternative investments, like the stock market
Can get better rates on non-jumbo CDs from competing banks or credit unions
What Are the Alternatives to a Jumbo CD?
There are many alternatives to jumbo CDs. If you’re interested in really putting your money to work, you may want to consider stock market investments such as individual stocks, index funds, ETFs, or mutual funds.
For example, if you deposited $100,000 in a 5-year jumbo CD with an APY of 2.00%, you’d earn $10,408 in interest by the time the CD matures. But if you invest that amount in the stock market instead, with an annual return of 7%, you’d earn $40,255—a whopping $29,847 more.
You can also lose a lot of money in the stock market, so don’t invest anything you can’t afford to lose immediately. Most people invest in the stock market with long-term goals in mind. It’s important to know your risk tolerance before investing any money.
Another option is a high-interest savings account. Depending on the term length of the jumbo CD you’re interested in, you could earn more with a top-rated, high-interest savings account instead. It’s a similar story with money market accounts, many of which offer higher rates than jumbo CDs and still let you access your cash without penalty when you want.
If you prefer instant account access, we have partnered with the following banks to bring you the high-yield savings and money market account offers displayed in the table.
Certificates of deposit (CDs) are usually some of the highest-paying options available at banks and credit unions. But interest rates plummeted as a result of the coronavirus pandemic, leaving CD investors with few attractive options.
So, what should you do with your savings? Does it make sense to lock in a rate at today’s levels? You may want to maximize your interest earnings, but going all-in on long-term CDs right now could backfire. Fortunately, you have a few options available.
By understanding today’s interest rate environment and the drivers behind it, you can evaluate the alternatives and pick a strategy that makes sense. You may end up trying variations on classic CDs, going with different bank products, or just dealing with low rates until the economy heats up again.
How Banks Make Money
Banks and credit unions make money by gathering deposits from customers and lending that money out.1 When you deposit funds into a savings account or CD, you might earn 1% APY or less on your balance. But banks lend that money to borrowers at higher interest rates, and the difference between the amount banks pay and the amount they charge results in profits.
As of Aug. 13, 2020, the average rate for a 30-year fixed-rate mortgage is 2.96% (plus potential processing fees or points).2 The average credit card rate is 20.21%, according to our database of credit card rates. Banks can also earn extra from annual fees and additional charges for late payments. The difference between those numbers, also known as the “spread,” shows you how much banks can earn.
Banks can also earn revenue from other sources. They might charge monthly service fees for accounts, offer premium services to business customers, and collect revenue if you pay overdraft charges or purchase cashier’s checks.
Where Do CDs Come In?
A CD is a time deposit because you agree to leave funds with the bank for a specific length of time.3 If you need to withdraw funds before your CD matures, you typically pay an early-withdrawal penalty, which encourages you to leave funds untouched and generates revenue for the bank.
Most importantly, for banks, CDs are deposit accounts. The money you place in a CD provides funds that banks can “invest” by lending to other customers.
CD Rates in a Normal Market
During more normal times, CDs are relatively straightforward: Short-term CDs tend to pay a bit more than savings accounts, and your earnings increase as you select longer terms. By giving up flexibility, the bank rewards you with increasingly higher rates. For funds you don’t need for several years, a three- or five-year CD would typically provide a substantially better return than money that’s liquid in a savings account.
As interest rates change, CD rates tend to move in sympathy, although not always in lockstep. For example, when the Federal Reserve raises the federal funds rate, CD rates are likely to creep up. And when the Fed cuts rates, savers should expect rate cuts. But other factors, like economic activity or a bank’s appetite for new deposits, can also affect how much banks pay on CDs.https://datawrapper.dwcdn.net/KjWjT/1/
For example, if a bank anticipates a high demand for loans, the bank might offer an especially attractive rate on CDs to gather deposits. That’s exactly what Cross River Bank did in April of 2020 when it advertised remarkably high rates online. Deposits came flooding in, and the bank was able to fund a large number of PPP loans for struggling small businesses.
In general, smaller financial institutions offer higher deposit rates than large banks, and they’re quicker to raise rates. There may be several reasons for this, including the fact that big banks rely on their megabank status (with an extensive branch footprint—and the overhead that comes with it) to attract customers. Plus, with smaller institutions, it’s easier to move the needle with fewer dollars. Cross River Bank’s move in April put it in a position to become a leading PPP loan processor—and to substantially increase its revenue. Meanwhile, big banks like Wells Fargo also earned fees from funding PPP loans—but may simply donate the fees generated.
CD Rates During the Coronavirus Pandemic
In March of 2020, the Fed slashed the federal funds rate to a target range of 0% to 0.25% in an effort to support economic growth. Shortly after that, CD rates dropped precipitously, leaving savers with few attractive options for safe, long-term deposits.
In a statement on March 15, the Fed said: “The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”4
Put another way, rates will remain low until the economy recovers. The federal government took additional steps to stimulate the economy. Still, only time will tell how effective those moves are, and it may ultimately depend on when the coronavirus is under control. Efforts so far include:
Direct stimulus payments to taxpayers
Enhanced unemployment benefits
Small business relief loans and grants
The Balance continually monitors CD rates nationwide, and we’re seeing lower rates across the board. That said, shopping around is still worth it, as some banks are competing for deposits, and you can make the most of a difficult situation.
What’s Ahead for CD Rates?
It’s probably wise to expect rates to remain low for a while. With an uncertain future, you need to be especially smart about earning interest on your cash going forward.
Try a Ladder
If you’re sold on CDs, a CD laddering strategy may be helpful. With that approach, you put money into a variety of different CDs with maturities spread out over time. Since you can’t know when rates will rise, you avoid locking up all of your money in the wrong CD. You’ll own long-term CDs, which are beneficial if rates stay low, and you’ll own short-term CDs, which provide liquidity and allow you to reinvest at higher rates if rates rise sooner than expected.
Consider Liquid CDs
CDs that allow you to withdraw funds at any time could also make sense. You might want to lock in a rate now—just in case banks decide to cut rates even further. But if you need that cash, or if rates rise and you find a better CD, you have access to your money without worrying about early-withdrawal penalties.
Shop Around
Some banks may still want to compete for deposits, so it’s worth shopping around if you need to invest in a CD. The Balance keeps a list of the best CD rates available nationwide (updated daily), so you can easily focus your search on the highest-paying banks.
Evaluate Alternatives
CD rates may be abysmal, but that doesn’t mean you can’t earn interest at your bank or credit union. Other types of accounts may still offer attractive rates. Interest checking (or “rewards checking”) accounts, in particular, pay remarkably high rates if you meet certain criteria. Those accounts may limit the amount of interest you can earn, but the high rates may make it worthwhile.
CDs are great investments for those who prefer to keep their money safe. Funds can be FDIC-insured, and you’ll earn more interest than you would from a savings account.
But CDs are designed to be longer-term investments. Unlike your checking account—which allows multiple deposits and withdrawals—CDs are meant to be left alone. Cashing in or canceling a CD before it matures can cost you.
Banks and credit unions typically charge penalties for early CD withdrawals.1 You might have no choice but to pay the penalty if a withdrawal is your only option, but in some cases, you might be able to avoid the penalty.
The Reason Behind CD Penalties
The bank wants you to keep your money invested for a set period, such as six months to a year or even perhaps five years. It’s willing to pay you a higher interest rate return if you do so. The bank benefits from having certainty about how long it can use your money.
Banks use the money you deposit into CDs to lend to other customers and buy investments that have maturities, much like CDs. If you demand your money early, the bank might have to pay its own form of penalty elsewhere.
A Sample Penalty Schedule
Banks typically charge a penalty that amounts to a portion of the interest you would have earned if you had held the CD to maturity. You might see it quoted as “90 days of interest” for early withdrawal.2 There’s no maximum penalty amount, so read the fine print.3
A sample penalty schedule for early withdrawal might look like this:
11-month CDs or shorter charge three months’ interest.
12- to 59-month CDs charge six months’ interest.
60-month CDs or longer charge 12 months’ interest.
Banks set their own policies, and some might be more forgiving than others. Check with your bank before you buy a CD—and certainly before you cash out early.
Walking Away With Less Money
When you incur penalties on a CD withdrawal, you can actually lose money and walk away with less than you deposited, in addition to missing out on interest that you would have earned.
For example, say you have a 12-month maturity CD that you cash out in the 11th month. You’ll probably walk with away more than you initially put into the CD—although not as much as it could have been had you held off one more month.
Continuing with this same example, say you cash out after two months. You haven’t yet earned the six months’ interest as required by the penalty schedule. However, the bank will still take that amount by deducting it from your initial investment deposit. This action is called “invading the principal.”4
How to Avoid CD Penalties
If you absolutely must cash out early, look for a way to dodge any penalties. First, it never hurts to ask. The staff might waive the penalty for you, particularly if it’s an emergency and you’re at a friendly institution or a smaller credit union. Otherwise, all they can do is say no.
You’ll want to make a request for a waiver in person or possibly over the phone. An automated system isn’t programmed to do you any favors.
You can usually qualify for a waiver for death, disability, retirement, and other major life events.5 In those types of cases, speaking directly with a representative is particularly important. Banks are permitted to offer these waivers, but that doesn’t necessarily mean that they will. They’re not required to do so by law.
“Liquid” and No-Penalty CDs
Liquid CDs are similar to standard CDs, but they work more like traditional savings accounts in that they allow you to pull money out early. Sometimes liquid CDs have limits as to how early and how much you can withdraw, and you might have to make at least a minimum deposit, but they’re worth investigating.6
Your “locked in” period is relatively short with these CDs—less than a week in many cases. Of course, no one would invest in traditional CDs if this option were that easy. Since you have more flexibility, you’ll receive a lower interest rate in exchange for this freedom. As an example, in mid-2020, this rate was somewhere in the neighborhood of 0.95% annually—known as the annual percentage rate (APR). During this same period, traditional CDs at a 5-year term were paying around 1.15%.7 While it is less, the liquid CD still tends to return more in interest income than the average savings account.
Other Options
You can try to use other flexible options to avoid penalties when you’re tucking your money away in the future. CDs aren’t bad options, but there might be better alternatives if you find that you keep having to pay penalties.
Laddering CDs is a strategy where you’ll periodically have one of several CDs mature, often on a six-month or annual basis, giving you the opportunity to take the money penalty-free at that time.
Step-up CDs offer more flexible interest rates. Your rate will increase to keep pace when interest rates rise. This alternative can be attractive if your concern is being stuck with a paltry rate for the whole CD term, but again, these CDs pay less on average than traditional CDs.
Money market accounts pay more than savings accounts, but generally not as much as CDs. The advantage is that you can do limited spending from a money market account using a debit card or a checkbook.
Credit cards are an expensive way to borrow, but if you need money quickly and your CD will mature soon it might cost less to put emergency expenses on a card and pay it off as soon as the CD matures. Of course, a much better idea is to keep a solid emergency fund.
We review more than 150 banks and credit unions each weekday to find the best certificates of deposit (CD) rates available nationwide. The top picks have the highest rates for a particular term based on annual percentage yield (APY) and are available to the public.
We also look at certificates of deposit with slightly shorter and longer terms than each category we’ve named to determine the overall best CD rate within a range. For example, for the best 3-month CDs we considered products with terms of two to four months.
When multiple banks or credit unions offer the same rate, we favor those with the lowest minimum deposit and friendly early-withdrawal policies. We track APYs daily but re-evaluate the list weekly, and all accounts that make our list are insured by either the Federal Deposit Insurance Corporation or the National Credit Union Administration.
Here are the best CD rates available as of Sept. 9, 2020.
APYs are changing rapidly amid widespread uncertainty about the economy and financial markets. The Balance is monitoring rates and updating them accordingly.
Best CD Rates
Best 3-Month CDs (2-4 months included)
APY
Minimum Deposit
Early Withdrawal Penalty
Chevron Federal Credit Union
0.80%
$500
3 months of interest
Spectrum Federal Credit Union
0.80%
$500
3 months of interest
BrioDirect
0.50%
$500
3 months of interest
For more, see our best 3-month CD rankings.
Best 6-Month CDs (5-9 months included)
APY
Minimum Deposit
Early Withdrawal Penalty
CommunityWide Federal Credit Union
1.00%
$1,000
Complex formula; exercise caution
Chevron Federal Credit Union (6- to 9-month)
0.80%
$500
3 months of interest
Spectrum Federal Credit Union (6- to 9-month)
0.80%
$500
3 months of interest
For more, see our best 6-month CD rankings.
Best 1-Year CDs (10-14 months included)
APY
Minimum Deposit
Early Withdrawal Penalty
MAC Federal Credit Union
1.10%
$1,000
1 month of interest
Credit Union of Denver (13-month)
1.05%
$5,000
3 months of interest ($20 minimum)
Financial Resources Federal Credit Union (14-month)
1.01%
$500
180 days of interest
For more, see our best 1-year CD rankings.
Best 18-Month CDs (15-20 months included)
APY
Minimum Deposit
Early Withdrawal Penalty
Pen Air Federal Credit Union
1.05%
$500
6 months of interest
USAlliance Federal Credit Union
1.02%
$500
12 months of interest
Pen Air Federal Credit Union (15 months)
1.00%
$500
6 months of interest
Best 2-Year CDs (21-29 months included)
APY
Minimum Deposit
Early Withdrawal Penalty
MAC Federal Credit Union
1.25%
$1,000
3 months of interest
Georgia’s Own Credit Union
1.20%
$500
6 months of interest
Pen Air Federal Credit Union
1.15%
$500
6 months of interest
For more, see our best 2-year CD rankings.
Best 3-Year CDs (30-41 months included)
APY
Minimum Deposit
Early Withdrawal Penalty
MAC Federal Credit Union
1.45%
$1,000
3 months of interest
Georgia’s Own Credit Union
1.30%
$500
9 months of interest
Pen Air Federal Credit Union
1.25%
$500
6 months of interest
For more, see our best 3-year CD rankings.
Best 4-Year CDs (42-53 months included)
APY
Minimum Deposit
Early Withdrawal Penalty
MAC Federal Credit Union
1.50%
$1,000
3 months of interest
Georgia’s Own Credit Union (44-month)
1.40%
$500
12 months of interest
Pen Air Federal Credit Union
1.30%
$500
6 months of interest
Best 5-Year CDs (54-66 months included)
APY
Minimum Deposit
Early Withdrawal Penalty
Greenwood Credit Union
1.50%
$1,000
6 months of interest
Wings Financial Credit Union
1.41%
$10,000
730 days of dividends
Georgia’s Own Credit Union
1.40%
$500
15 months of interest
For more, see our best 5-year CD rankings.
Best 10-Year CDs (114-120 months included)
APY
Minimum Deposit
Early Withdrawal Penalty
Apple Federal Credit Union
1.10%
$500
1,095 days of dividends
North American Savings Bank
1.01%
$1,000
6 months of interest
EmigrantDirect.com (60-120 Months)
1.00%
$1,000
6 months of interest
For more, see our best 10-year CD rankings.
Chevron Federal Credit Union: Best 3-Month CD
If the logo for Chevron Federal Credit Union looks a little familiar, there’s a good reason why. The credit union was founded in 1935 and has more than 100,000 members. It primarily serves members employed by the Chevron Corporation (i.e., the gas stations you’re probably familiar with). If that’s not you, and you don’t qualify through other means, a $15 donation to join the Contra Costa County Historical Society also makes you eligible for membership. Additionally, you’ll need to keep $25 in a savings account, which is a tad bit higher than most credit unions.
In addition to Chevron FCU branches in California, members have access to more than 5,000 CO-OP branches and 85,000 fee-free ATMs nationwide. Chevron FCU also offers checking and savings accounts, loans, and other services.
For more information on the banks and credit unions offering the best 3-month rates, see our list of the best 3-month CD rates.
CommunityWide Federal Credit Union: Best 6-Month CD
CommunityWide Federal Credit Union was founded in 1967 and is based in northern Indiana. If you don’t live in the area or meet its employment-based membership criteria or have a family member who’s already a member, you easily can join by becoming a donor member of a partner organization such as the Marine Corps League of St. Joseph Valley, which starts at $15 per year. You must deposit $5 in savings. It’s also part of the CO-OP shared branching network.
For more information on the banks and credit unions offering the best 6-month rates, see our list of the best 6-month CD rates.
Pen Air Federal Credit Union: Best 18-Month CD
Founded in 1936, Pen Air Federal Credit Union is the largest and oldest local credit union in Pensacola, Florida. Though there are only 15 locations in Northwest Florida and Southeast Alabama, there are more than 111,000 members nationwide.
In addition to CDs ranging in terms from three months to five years, Pen Air also offers personal and business savings and checking accounts, along with various other types of accounts and lending products.
It may be easier to join Pen Air Federal than some of the other credit unions on this list, as all you need is to join the Friends of Navy Marine Corps Relief Society if you don’t have the other affiliations listed on the Pen Air website. There’s no fee to join because Pen Air will make a $1 donation to the organization for you. You’ll also need to make a $25 deposit in a savings account to join.
MAC Federal Credit Union: Best 1-Year, 2-Year, 3-Year, and 4-Year CDs
MAC Federal Credit Union offers members financial products like checking, savings, and money market accounts, credit cards, insurance, and more. Originally founded in 1952 to serve the active duty and civil service personnel in Fort Wainwright, Alaska, the credit union is now open to anyone who purchases a two-year membership to the Association of the United States Army for $40. When applying for the membership, just change the chapter to the Polar Bear Chapter in Fort Wainwright, Alaska.
For more information on the banks and credit unions offering the best 1-year, 2-year, and 3-year rates, see our lists of the best 1-year, best 2-year, and best 3-year CD rates.
Greenwood Credit Union: Best 5-Year CD
Founded in 1948, Greenwood Credit Union is a Rhode Island-based institution that boasts more than $450 million in assets. It offers business accounts alongside personal offerings such as checking, saving, and money market accounts, credit and gift cards, loans, and CDs with 3-month to 5-year terms. The credit union has more than 50,000 members, and the open membership means you don’t have to be affiliated with any particular organization to become one of them. Just open a savings account with $5 to start using its products and services.
For more information on the banks and credit unions offering the best 5-year rates, see our list of the best 5-year CD rates.
Apple Federal Credit Union: Best 10-Year CD
Apple Federal Credit Union was founded in 1956 and has branches in northern Virginia. But customers nationwide can access accounts and use shared locations (including more than 53,000 ATMs) through shared branching. If you’re not already eligible to join the credit union, you can qualify by joining the nonprofit Northern Virginia Athletic Directors, Administrators, and Coaches. NVADACA, which supports student athletes, offers membership at $20 per year. To get started with Apple Federal Credit Union, you’ll need to open a savings account with at least $5.
For more information on the banks and credit unions offering the best 10-year rates, see our list of the best 10-year CD rates.
What Is a CD?
A CD is a “time deposit” that pays a fixed interest rate for a specific length of time. For most people, a CD is an account that you use at a bank or credit union, but you can also purchase CDs through brokerage accounts. Either way, you select a length of time to invest in the CD, and you earn interest during that time.
How Do CDs Work?
A CD holds your money for a specified length of time (such as six months or two years), and your bank or credit union pays you interest based on the amount of your deposit and the length of the term.
When you use a CD, you typically commit to leaving your money in the account. In return for that commitment, banks usually pay higher interest rates than they do in more liquid savings accounts. But if you need your money before the term ends, you may have to pay an early withdrawal penalty.
How Do Early Withdrawal Penalties Work?
Banks and credit unions often penalize you for withdrawing funds from a CD before the term is up. In many cases, they calculate the penalty as a certain number of months’ worth of interest. For example, Discover Bank charges six months’ worth of interest if you pull out of a 1-year CD early. That penalty increases to 18 months’ worth of interest on 5-year CDs.1
Paying a penalty is never fun, and it can be particularly problematic when you cash out early in the term. Depending on how long your money stays in a CD, you might even receive less back than you originally deposited.
What Are the Pros and Cons of CDs?
Pros
Higher interest rates than savings accounts
Earnings won’t change if interest rates drop
Cons
Must lock up your money
Potential early withdrawal penalties
Might get stuck with a low rate while other interest rates rise
Pros explained: CDs often pay higher interest rates than you can earn in a savings account. Banks and credit unions tend to pay more when you agree to lock up your money for a specific length of time. Plus, if interest rates fall (and the bank pays new customers lower rates), you keep earning the same higher APY throughout the term of your CD.
Cons explained: To earn a higher rate, you need to commit to leaving your money with the bank. Pulling out early may result in early-withdrawal penalties, which can wipe out your earnings. Also, if interest rates rise, you may be stuck with a relatively low rate until your CD matures.
How Can You Manage These Risks?
To help reduce your risk, some banks offer liquid CDs that allow you to withdraw funds early or request a rate increase. But there’s no such thing as a free lunch. Those products might start with lower rates than standard CDs, which is only fair, considering you can get out easily. More on that in the No-Penalty CD section below. You can also use a laddering strategy to manage some of the challenges that come with investing in CDs.
What Is a CD Ladder?
A CD ladder is a set of multiple CDs you purchase with different maturity dates, which helps you avoid locking up all of your money at once. With that approach, you might purchase a series of CDs with maturities in six-month increments. As a result, you periodically have cash available for planned (and unplanned) needs, or you can buy a new CD at the going rate. For example, if you have $10,000 to put into CDs, you might invest the following:
6-month CD: $2,500
12-month CD $2,500
18-month CD $2,500
24-month CD: $2,500
Ideally, every time one of these CDs matures, you would buy a new 24-month CD with the proceeds to begin the cycle again.
Rates might be higher or lower when you reinvest into a new CD, but constantly cycling your money could still have benefits. You maintain flexibility and avoid putting all of your money into long-term CDs at a bad time.
Is Money Safe in a CD?
When your funds are federally insured, they’re safe from bank and credit union failures. There may be a brief delay in receiving your money (or no delay at all) immediately following a bank failure, but when you’re using CDs, you’re probably weren’t planning to use the funds immediately anyway. To verify that your cash is protected, look for the following types of coverage:
FDIC insurance at banks
NCUA coverage at federally-insured credit unions
Both of these programs insure your money up to $250,000 per depositor, per institution, so it’s critical to keep your balances below the insured limits. You might be able to have more than $250,000 insured at one place, depending on how your accounts are titled.
What Influences CD Rates?
Several factors affect how much you earn from a CD. For starters, banks decide how competitive they want to be. If they have an appetite for new customers, they may nudge rates higher. Economic factors also influence CD rates. As rates rise or fall in financial markets, savings and CD rates tend to move in synchrony, although they might not react immediately (especially when it’s time to pay you more).
The length of your CD is critical. In general, you might expect longer-term CDs to pay more because you’re taking more risk—you’re committing to more months or years of unknowns. But the relationship is not always as direct as you might think. For example, if banks think rates might fall in the next several years, long-term CDs might pay rates that are similar to (or lower than) 1-year and 2-year CDs.
As a rule of thumb, long-term CDs have higher rates than short-term CDs. Still, it’s worth comparing rates from several banks for any terms you’re interested in.
What Should You Look for in a CD?
As you shop among banks, find a CD that’s the best fit for your finances. Pay careful attention to the features below.
Interest rate: The higher the rate, the faster your money grows. The easiest way to compare rates is to use the annual percentage yield (APY), which banks typically provide for you. That quote takes compounding frequency into account and helps you make an apples-to-apples comparison.
Minimum deposit:How much do you need to invest to use a CD? Some banks do not set any minimum, while others might require more than $1,000 to get started.
Fees: Monthly fees in CD accounts are rare, but it’s smart to verify that you won’t pay additional charges to use a CD. Anything you pay will reduce your earnings.
Joining fees: All of the credit unions we include on our best CD lists are available nationwide, but sometimes you’re required to make a donation to an organization in order to join the credit union. This fee is usually small, but it’s one more hoop you have to jump through to get the CD.
Penalties:Examine the early-withdrawal penalties, and evaluate how likely it is that you’ll need to cash out early. Weigh the pros and cons of liquid CDs.
Calculate how much extra you can earn by getting the highest rate available, and decide if that’s what you really need. If you have a relatively small account balance, a difference of a few tenths of a percent may not make much difference and there may be other factors that are more important to you.
As you compare banks, you may notice language about compounding frequency (daily or monthly compounding, for example). All other things being equal, more frequent compounding is best. But you can ignore those details by simply comparing each bank’s APY, which includes compounding.
What Is a No-Penalty CD?
Some CDs allow you to withdraw money before maturity. These “no-penalty” or “liquid” CDs can provide flexibility for unexpected expenses and other situations. For example, you might be allowed to withdraw 100% of the money you deposit after six days, but the account pays a guaranteed rate of interest for 11 months.
What’s the catch? In many cases, no-penalty CDs start at a lower rate than standard, inflexible CDs. You enjoy the benefit of flexibility, and the bank has less certainty about how long it can use your money. As a result, you earn slightly less.
Do You Have to Pay Taxes on Interest From CDs?
You typically have to pay tax on the interest you earn from CDs in taxable accounts, including joint accounts, individual accounts, and other types of accounts. If you use CDs in a retirement account, such as an IRA, you generally would not pay taxes on the earnings each year—but you might owe taxes when you take distributions from that account.
Tax rules are complicated, and they change periodically. Ask your tax advisor how to handle the interest you earn from your CDs.
What Are Some Alternatives to CDs?
CDs are excellent tools for growing your money, but other products from banks and credit unions might also do the job.
Savings Accounts
Savings accounts provide more flexibility when you need money, but they don’t have fixed rates. That can work in your favor when rates rise. But if rates fall or remain stagnant, you might be better off in a CD.
Money Market Accounts
These are similar to savings accounts, but they may make it easier to spend money from your account. Some money market accounts provide a debit card or checkbook for spending, while others may require you to move your savings to a checking account before you spend.
If you prefer instant account access, we have partnered with the following banks to bring you the high-yield savings and money market account offers displayed in the table.
CDs aren’t for everyone, and they might not fit your specific needs. Some of the reasons to steer clear include:
Early withdrawal fees: The main disadvantage is that your money is tied up for the life of the certificate. You pay a penalty if you need to withdraw your money before the term is up. However, there are several types of CDs that provide a certain amount of flexibility, so don’t forget to ask your bank about options.
Interest rates could rise: You run the risk that interest rates will go up on other products during your term. If it looks like interest rates are rising, you can get a no-penalty CD. It allows you to get your money back without charge any time after the first six days. They pay more than a money market but less than a regular CD.
APYs lag behind inflation: CDs don’t pay enough to keep up with the rate of inflation. If you invest only in CDs, you’ll lose your standard of living over time. The best way to keep ahead of inflation is with stock investing, but that is risky. You could lose your total investment. You could get a slightly higher return without risk with Treasury Inflation-Protected Securities or I-Bonds. Their disadvantage is that you’ll lose money if there is deflation.
Before deciding whether or not to invest in a CD, consider your specific needs. Some of the reasons to consider a CD include:
Your money is insured: The FDIC insures CDs up to $250,000. The federal government guarantees you will never lose your principal. For that reason, they have less risk than bonds, stocks, or other more volatile investments.
Better rates than checking and savings: CDs usually offer higher interest rates than interest-bearing checking and savings accounts. They also offer higher interest rates than other safe investments, such as money-market accounts or money market funds.
You can comparison shop: You can shop around for the best rates. Small banks will offer better rates because they need funds. Online-only banks will offer higher rates than brick and mortar banks because their costs are lower. In addition, you likely will find higher-than-usual rates if you deposit a sizable amount of cash in the form of jumbo CDs.
If you’re sitting on a lump sum of cash in a traditional savings account and you’re reasonably sure you’re not going to need that money for a while, putting it in a CD could be just the thing for you. It almost certainly will allow you to earn more interest on that money. Depending on how long you want to tie up your money and the amount of your deposit, you might actually double the amount of interest you earn.
If the money in your savings account is your emergency account set aside as a hedge against job loss or illness, you might want to just leave that money in place. Perhaps you could start a new savings account with the idea of eventually investing that money in a CD.
Be sure the money you are putting into CDs is money you won’t need for unexpected expenses. Taking out a loan to address an emergency would almost certainly end up costing you far more in interest than you would ever earn on a CD.
If you’re interested in using CDs as a key part of your savings plan, you might consider a ladder, a common CD investing strategy. The process involves first buying several CDs with different terms so they’ll mature at regular intervals and then reinvest the money into longer-term CDs as the initial ones mature.
For example, if you are saving $5,000, you can place $1,000 in each of five CDs with maturity dates a year apart. When the 1-year CD matures, you would move that money into a new five-year CD, which would mature the year after your initial five-year CD does. Because a CD would mature each year, you could continue this process indefinitely until you needed the cash in any given year.
Liquid CDs allow you to withdraw your funds early without paying a penalty.5 This flexibility enables you to move your funds to a higher-paying CD if the opportunity arises, but it comes at a price.
Liquid CDs may pay lower interest rates than CDs that you’re locked into.6 This makes sense if you look at it from the bank’s point of view. They’re taking on the risk of rising interest rates. Still, earning less for a short period might be worth it if you can switch to a higher rate later—and if you’re confident rates will rise soon.
Make sure you understand any restrictions if you’re thinking of investing in a liquid CD. Sometimes you’re limited to when you can withdraw funds and how much you can take at any given time. You also might be required to invest a greater amount upfront than with other types of CDs.6
Bump-up CDs
Bump-up CDs provide a benefit similar to liquid CDs. You don’t get stuck with a low return if interest rates rise after you buy one. You get to keep your existing CD account and switch to the new, higher rate your bank is offering.7
You might have to inform your bank in advance that you want to exercise your bump-up option. A bank assumes that you’re sticking with the existing rate if you do nothing. Also, you don’t get unlimited bump-ups.8
Like liquid CDs, bump-up CDs often start out paying lower interest rates than standard CDs.9 You can come out ahead if rates rise enough, but if rates stay stagnant or fall, you would have been better off with a standard CD.
Step-up CDs
These come with regularly scheduled interest-rate increases so you’re not locked into the rate that was in place at the time you bought your CD. Increases might come every six or seven months.10 11
Brokered CDs
Brokered CDs are sold in brokerage accounts. You can buy brokered CDs from numerous issuers and keep them all in one place instead of opening an account at a bank and using their selection of CDs.12 This gives you some ability to pick and choose, but brokered CDs come with additional risks.
Make sure that any issuer you’re considering is insured by the FDIC. Not surprisingly, CDs without insurance are likely to pay more. Getting out of a brokered CD early can be challenging as well.1
Jumbo CDs
As the name suggests, jumbo CDs have very high minimum balance requirements, usually in excess of $100,000. It’s a safe place to park a large amount of money because as much as $250,000 of it is FDIC-insured and you’ll earn a significantly higher interest rate.13
Maturity Dates
CDs mature at the end of their terms, and you’ll have to decide what to do next. Your bank will notify you as you near this date, and it will give you several options. If you do nothing and your CD was subject to automatic renewal, your money will be reinvested into another CD.14 If you were in a six-month CD, it would be rolled over into another six-month CD. The interest rate may be higher or lower than the rate you previously were earning.15
Let your bank know before the renewal deadline if you want to do something other than roll your money into a new CD. You can transfer the funds to your checking or savings account, or you can switch to a different CD with a longer or shorter term.