CD rates vary by bank and change weekly, so the "best" rate depends on your term length and how much you deposit
No single bank always offers the highest CD rates. The banks with the best rates this week may not be the best next week. What matters is matching your money to the right term—a three-month CD, one-year CD, or five-year CD—and then checking which banks are paying the most for that specific length.
Online banks typically pay more than brick-and-mortar banks because they have lower overhead costs. A regional bank or credit union in your area might also beat the national averages. The only way to know is to check multiple places for the term you actually want.
Rates also depend on how much you deposit. Some banks offer higher rates on larger balances—say, $25,000 or more. Others pay the same rate whether you deposit $500 or $500,000. Read the fine print before you commit.
Key Takeaways
- Online banks usually pay higher CD rates than traditional banks because they spend less on branches and staff.
- The best rate for a three-month CD is not the same bank offering the best rate for a five-year CD, so compare within your chosen term.
- Credit unions and regional banks sometimes beat national online banks, especially if you are a member or live in their service area.
- CD rates change weekly, so a rate that was best last month may no longer be competitive—check current rates before you deposit.
- Some banks pay higher rates on larger deposits, while others pay the same rate to everyone, so confirm the rate applies to your deposit amount.
Online banks versus traditional banks
Online banks—such as Marcus, Ally, American Express Personal Savings, and Discover—typically offer rates 0.5% to 1.5% higher than Chase, Bank of America, or Wells Fargo. This gap exists because online banks do not maintain physical branches, do not employ tellers, and do not pay for building leases. They pass those savings to depositors.
Traditional banks with physical locations pay lower rates because their costs are higher. If you have a checking account or mortgage with a brick-and-mortar bank and want to keep everything in one place, you will earn less on a CD there. The convenience may be worth it to you—that is a personal choice—but you should know the cost.
Some online banks are divisions of larger financial institutions. Marcus is owned by Goldman Sachs. Ally was formerly GMAC. American Express Personal Savings is part of American Express. These are legitimate banks with FDIC insurance, not startups. Check the FDIC certificate number on the bank's website to confirm your deposit is insured up to $250,000.
Credit unions and regional banks
Credit unions sometimes offer CD rates that match or beat online banks, especially on longer terms. You must be a member to open a CD, and membership rules vary—some credit unions are open to anyone in a certain geographic area, while others require you to work for a specific employer or belong to a particular organization.
Regional banks—such as Ally (which is technically an online bank but started as a regional lender), PenFed, and various state-based institutions—may also compete on rates. The advantage of a regional bank is that you might have a local branch if you need to speak to someone in person, though most transactions happen online anyway.
To find credit unions near you, search the CO-OP Network or Allpoint ATM locator. To find regional banks, search your state plus "best CD rates" or check sites that aggregate rates across multiple institutions. Many regional banks do not advertise nationally, so you have to look for them.
How to compare rates across different term lengths
A three-month CD, one-year CD, and five-year CD often have different rates at the same bank. Typically, longer terms pay more because the bank keeps your money longer. But this is not always true—sometimes a one-year CD pays more than a two-year CD if rates are expected to rise.
Create a simple spreadsheet with the banks you are considering and list the rate for each term you are interested in. Include the annual percentage yield (APY), not just the interest rate—APY accounts for compounding and is the true number you will earn. Also note the minimum deposit required and any penalties for early withdrawal.
Once you have the rates side by side, multiply your deposit amount by the APY and divide by the number of years to see how much interest you will earn. A 0.25% difference on a $10,000 CD over one year is $25. On a $100,000 CD, it is $250. The math matters more as your deposit grows.
Deposit insurance and safety
Every bank mentioned here is FDIC-insured, meaning your deposit up to $250,000 is protected if the bank fails. This protection applies per depositor, per bank, per account type. If you have a joint account with someone else at the same bank, you each get $250,000 of protection.
If you want to deposit more than $250,000 in CDs, open accounts at multiple banks. A $300,000 deposit split between two banks—$250,000 at one, $50,000 at another—keeps all your money insured. Some people use a service called IntraFi (formerly Promontory) that automatically spreads large deposits across multiple banks, but you can do this yourself for free.
Check the FDIC's Bank Find tool on their website to confirm a bank is insured. Search by bank name and see the certificate number and coverage details. If a bank is not listed, do not deposit money there.
Early withdrawal penalties and what they cost
Most CDs charge a penalty if you withdraw money before the term ends. The penalty is usually a certain number of months of interest. A one-year CD with a three-month penalty means you lose three months of interest if you cash out early. On a $10,000 CD earning 4% APY, that is roughly $100.
Some banks offer "no-penalty" CDs that let you withdraw without a penalty, but they pay lower rates—often 0.5% to 1% less than a standard CD. A no-penalty CD makes sense if you think you might need the money, but if you are confident you can leave it alone, a standard CD with a penalty pays more.
Read the penalty terms before you deposit. A few banks charge a flat dollar amount instead of months of interest. Others charge a percentage of the deposit. The worst penalties can wipe out several months of earnings, so this detail matters.
When rates change and how often to check
CD rates move in response to the Federal Reserve's interest rate decisions. When the Fed raises rates, banks gradually raise CD rates. When the Fed cuts rates, CD rates fall. These changes do not happen instantly—banks adjust their rates over days or weeks, and different banks move at different speeds.
If you are shopping for a CD, check rates at least weekly for a few weeks before you deposit. You will start to see which banks are leading and which are lagging. If rates are rising, waiting a week or two might get you a higher rate. If rates are falling, locking in today's rate protects you.
Once you open a CD, the rate is locked in for the entire term. You cannot change it if rates rise or fall. This is why timing matters—you are making a bet about whether rates will be higher or lower when your CD matures.
Frequently Asked Questions
Can I move money between CDs at the same bank without a penalty?
No. Moving money out of a CD before it matures triggers the early withdrawal penalty, even if you move it to another CD at the same bank. You must wait until the CD matures, then deposit the money into a new CD. Some banks offer a grace period of a few days after maturity to move the money without penalty—check your bank's policy.
What if I need the money before the CD matures?
You can withdraw it, but you will pay the early withdrawal penalty. Calculate whether the interest you have earned so far exceeds the penalty. If you have earned $150 in interest but the penalty is $200, you lose money. If you think you might need the cash, a no-penalty CD or a high-yield savings account is safer than a standard CD.
Do I have to pay taxes on CD interest?
Yes. CD interest is taxable income in the year you earn it, even if you do not withdraw the money. The bank will send you a 1099-INT form at tax time showing how much interest you earned. Set aside money for taxes or ask your tax preparer how to handle it.
Is a five-year CD worth it if rates might rise?
Only if the five-year rate is high enough to make up for the risk that rates will rise and you will be locked in at a lower rate. If a five-year CD pays 4.5% and a one-year CD pays 4%, you are betting that rates will not rise above 4.5% for the next four years. If you are unsure, a ladder strategy—opening multiple one-year CDs and renewing them as they mature—lets you adjust to rising rates.
What happens when my CD matures?
The bank will notify you before maturity, usually 10 to 30 days in advance. You can withdraw the money, open a new CD at the current rate, or move it to a savings account. If you do nothing, most banks automatically renew the CD at the current rate. Read the maturity notice carefully so you do not accidentally renew at a lower rate.