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October 24, 2022 – Forbes Advisor

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Today’s best interest rates on CDs (certificates of deposit) are as high as 3.95%, depending on the term of the CD. And average yields are increasing. Find out the highest rates and typical returns offered on CDs of different durations.

Related: Compare the best CD prices

Highest CD rates today: 1 year, 6 month, 9 month terms

The highest interest rate currently offered on a 12-month CD — one of the most popular CD terms — is 3.90%, according to data from Bankrate.com. If you land a 12 month CD with a rate in that neighborhood, you get a good deal. A week ago the best rate was the same.

The average APY, or annual percentage yield, on a one-year CD is now 1.81%, down from 1.70% a week ago. APY provides a more accurate representation of the annual interest you will earn with a CD because it takes compound interest into account. This is the interest you earn not only on your deposit (or principal) but also on the interest itself.

If you want a CD with a term of less than a year, the current best rate on a six-month CD is 3.54%. That compares to 3.30% a week ago. The current average APY for a six-month CD is 1.27%, down from 1.14% last week at this time.

Nine-month CDs are offered today at an average APY of 1.65%, up from 1.44% a week ago.

Highest CD rates today: 15 month, 18 month and 2 year terms

On a 15-month CD, today’s best interest rate is 0.00%; you’ll do well if you can find a rate close to that. A week ago, the highest rate was 3.81%.

The highest rate on an 18-month CD is currently 3.95%, the same as a week ago. The average APY is 2.43%, down from 2.35% a week ago.

If you can hold out for two years, 24-month CDs today are offered at interest rates as high as 3.83% APY. The highest rate last week at this time was 3.34%. Two-year CDs now have an average APY of 2.05%, up from 1.90% last week.

A CD is a type of savings account with a fixed interest rate and lock-in term. You are not expected to touch your deposit until the end of the CD term, whether in six months, one year or five years. Your patience is rewarded with interest that is usually better than what you would earn with a regular savings account.

If you withdraw money from a CD before ‘maturity’ – when it reaches the end of its term – and you can be slapped with hefty penalties. For example, you can lose up to six months’ interest if you pre-withdraw a one-year CD.

Highest CD rates today: 3-year and 5-year terms

CDs with longer terms tend to have some of the most attractive interest rates and APYs, if you’re willing to keep your money locked away for years.

Today’s highest rate on a three-year CD is 3.68%, so you’ll want to shop around for that rate or something close. Last week at this time, the best rate on a three-year CD was also 3.68%. The average APY on a three-year CD is now 2.13%, down from 2.00% a week ago.

On a five-year CD, the highest rate today is 3.50%, the same as a week ago. APYs are averaging 2.29%, down from 2.17% in the same period last week.

The longer the duration, the more severe the early withdrawal penalty. It is not uncommon to losing an entire year of interest or more if you break a five-year-old CD too soon. Be absolutely certain that you understand the penalty before making your investment.

The Benefits of Building a CD Ladder

Want to earn a higher return, but worry about keeping your money shackled for years? A CD ladder can help you get good returns and make your investment more liquid.

You build a ladder by investing your money in multiple CDs with different duration terms. You can buy a one-year CD, a two-year CD, a three-year CD, a four-year CD, and a five-year CD. As each of the short-term CDs matures, you replace it with a new five-year CD.

Follow this plan, and in a few years you’ll have a better-yielding five-year CD that matures every year. If you ever have a bad year, you can take some of the money from the expiring CD and use it to pay bills instead of pouring it all into a new CD.

You have to compare the prices to find the best CD prices. Banks and credit unions compete by offering attractive returns to land your business, so shopping around before buying a bank CD or credit union stock certificate is a must.

Do CDs cost anything?

CDs generally come free of charge, which means your money won’t be eaten away by the monthly maintenance fees typical of many savings, checking, and money market accounts.

The big cost is – obviously – the deposit, especially if there is a minimum deposit you need to meet. But as long as you don’t withdraw money from your CD before it matures, you’ll keep any interest you earn. This makes CDs a great free way to grow your money.