The Federal Reserve is widely expected to lower its benchmark rate once again on Wednesday, and many consumers are paying close attention. Whether you’re a saver, an investor or a borrower, your finances would likely experience a ripple effect from a lower federal funds rate.
For instance, savers have enjoyed high yields on savings accounts and certificates of deposit (CDs) in recent years, thanks to a federal funds rate that had gradually reached a 23-year high. The Fed chose to lower this benchmark rate in September 2024 and again in November, and many banks responded by decreasing their deposit account yields.
During the two most recent Fed meetings, the federal funds rate was lowered by a total of three-quarters of a percentage point, or 75 basis points. What’s more, market watchers expect officials to lower the rate by another 25 basis points this week, which could spur further decreases in deposit account annual percentage yields (APYs).
In a falling-rate environment, one bright spot for savers can be fixed-rate CDs. By locking in a high yield now, you’ll continue to earn that APY throughout the CD’s term, even if your bank starts to lower the APYs on new CDs it issues. If you’re in the market for a high-yield CD, read on for options of various term lengths, all available from well-rated, federally insured banks and credit unions.
Bank5 Connect: 6-month CD
APY: 4.50%
Minimum deposit requirement: $500
Interest you’d earn with a $10,000 deposit: $223
Bankrate’s rating of Bank5 Connect’s CDs: 3.9 stars out of 5
Bankrate’s overall rating of Bank5 Connect: 4.3 stars out of 5
Additional details: Bank5 Connect offers one of the highest-earning six-month CDs among banks monitored by Bankrate. It requires a relatively low minimum deposit of $500. In total, the bank offers eight CD terms, several of which earn competitive APYs. With the 24-Month Investment CD, you can add funds any time throughout the CD’s term.
See more top six-month CD rates.
CIBC Bank USA: 1-year CD
APY: 4.31%
Minimum deposit requirement: $1,000
Interest you’d earn with a $10,000 deposit: $431
Bankrate’s rating of CIBC Bank USA’s CDs: 4.6 stars out of 5
Bankrate’s overall rating of CIBC Bank USA: 4.3 stars out of 5
Additional details: CIBC Bank USA offers one of the highest yields among one-year CDs Bankrate monitors. Its minimum deposit requirement falls in line with what various other banks require. In total, the bank offers seven terms of CDs, all of which earn competitive yields.
See more top one-year CD rates.
Bread Savings: 2-year CD
APY: 4.00%
Minimum deposit requirement: $1,500
Interest you’d earn with a $10,000 deposit: $816
Bankrate’s rating of Bread Savings’ CDs: 4.0 stars out of 5
Bankrate’s overall rating of Bread Savings: 3.9 stars out of 5
Additional details: Bread Savings is an online-only bank that offers nine terms of standard CDs that range from three months to five years. The bank’s CDs and savings account all earn APYs that are well above national averages.
See more top two-year CD rates.
TAB Bank: 3-year CD
APY: 4.03%
Minimum deposit requirement: $1,000
Interest you’d earn with a $10,000 deposit: $1,258
Bankrate’s rating of TAB Bank’s CDs: 4.5 stars out of 5
Bankrate’s overall rating of TAB Bank: 4.5 stars out of 5
Additional details: TAB Bank offers six terms of CDs, all of which currently earn APYs above or slightly below the 4.00 percent threshold. Terms under one year aren’t available, however, so savers in the market for shorter terms will need to look elsewhere.
See more top three-year CD rates.
Synchrony Bank: 5-year CD
APY: 4.00%
Minimum deposit requirement: $0
Interest you’d earn with a $10,000 deposit: $2,167
Bankrate’s rating of Synchrony Bank’s CDs: 4.8 stars out of 5
Bankrate’s overall rating of Synchrony Bank: 4.2 stars out of 5
Additional details: Synchrony Bank is one of a small handful of banks still offering five-year CDs earning 4.00 percent or higher. Unlike many other banks, Synchrony doesn’t require any minimum deposit amount for its CDs (or for its savings or money market accounts). In addition to nine terms of standard CDs, it offers an 11-month no-penalty CD and a two-year bump-up CD.
See more top five-year CD rates.
Note: The above CD rates are accurate as of Dec. 16 and are subject to change at any time.
Factors to consider when selecting a CD
Three important factors to keep in mind when shopping around for a CD include APY, term length and minimum deposit requirement.
APY
APY is a percentage that indicates how much interest your account will earn in a year, including compound interest — which is the interest you’ll earn on interest.
It pays to shop around for a CD that earns a high APY, considering competitive banks are offering rates several times greater than average CD rates. For instance, the average APY on a one-year CD is currently 1.74 percent, while you can find APYs of up to 4.52 percent from competitive online banks.
What does this translate to in dollars? Sometimes a lot. For example, putting $10,000 into a top-earning one-year CD at 4.50 percent APY will earn you $450 in interest; depositing that amount into a one-year CD that pays a rock-bottom APY of 0.01 percent will earn you just one dollar.
Term length
In addition to looking for a CD that earns a high yield, it’s important to choose a term length with which you’re comfortable. Only lock money into a CD that you’re sure you won’t need access to before the CD’s maturity date. Otherwise, you’ll likely be subjected to an early withdrawal penalty that could eat away at your interest and possibly even some principal.
When choosing a term length, consider when you’ll want to access the funds again. For instance, if you plan to purchase a home in two years, an 18-month CD could be a way to earn some interest on money for your down payment.
A no-penalty CD is an option that provides a fixed APY and doesn’t charge a penalty for early withdrawals. However, note you’ll likely be earning a lower yield than you would from a standard CD.
Minimum deposit requirement
Many CDs require a set minimum deposit amount, and this varies from bank to bank. Synchrony Bank, which we listed above, doesn’t require any set minimum deposit amount. Other banks require minimum amounts of $500, $1,000 or $2,500, and some even require you to deposit at least $10,000.
One perk of a fixed-rate CD is you can determine up front exactly how much money the CD will be worth when it matures. Bankrate’s CD calculator can come in handy in figuring out this amount.
Similar to considering a CD’s term length, determine up front how much you’re comfortable locking away in a CD. If you’ll need the money sooner for emergencies or to pay for living expenses, the money is better off in a liquid savings account.
Bottom line
CD rates have been decreasing gradually in 2024, both leading up to and after the September and November Fed rate cuts. Rates could continue to decrease should the Fed cut rates again. However, competitive CD APYs remain higher, overall, than they’ve been in years. In fact, some CD watchers refer to 2024 as the year of the CD.
Locking in a fixed-rate CD now that earns a high yield, on a term you’re comfortable with, allows you to benefit from that APY until the CD matures — even if banks continue to lower their rates on new CDs.
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