The best CD rates change weekly, and they come from online banks, not the bank branch on your corner

The highest CD rates are almost always at online banks and credit unions, not at Chase, Bank of America, or Wells Fargo. Online banks have lower overhead costs, so they pass higher rates to depositors. As of now, the top rates sit between 4.5% and 5.35% for one-year CDs, depending on the bank and the deposit amount. These rates shift constantly—sometimes daily—so the "best" rate today may not be the best next week.

The banks offering the highest rates tend to be smaller institutions you may not have heard of: Marcus by Goldman Sachs, Ally Bank, American Express Personal Savings, Connexus Credit Union, and Everbank. Each one competes for deposits by raising rates when the Federal Reserve holds rates steady or when they want to attract more money. The tradeoff is that you cannot walk into a physical branch, but you can open an account and manage it entirely online.

Rate shopping takes 15 minutes. Visit Bankrate, DepositAccounts, or the Federal Deposit Insurance Corporation (FDIC) rate tracker, filter by CD term length, and sort by rate. Write down the top five, then visit each bank's website to confirm the rate is still current and check the minimum deposit. Some banks require $500; others require $25,000. The rate you see online is the rate you lock in when you open the account.

Key Takeaways

  • Online banks and credit unions offer rates 1% to 2% higher than traditional banks because they have lower operating costs.
  • CD rates change weekly or daily, so the highest rate available today may be different next week, and you should compare before you deposit.
  • The bank offering the best rate for a one-year CD may not offer the best rate for a five-year CD, so compare across the term length you actually want.
  • All deposits up to $250,000 are insured by the FDIC at banks and by the National Credit Union Administration (NCUA) at credit unions, so safety does not depend on the bank's size.

How to compare rates across different CD terms

A bank's rate for a one-year CD tells you nothing about its rate for a three-year or five-year CD. Some banks pay more for longer terms; others pay less. You have to check each term separately.

Start by deciding how long you can lock your money away. If you need it in two years, do not look at five-year rates—you will pay an early withdrawal penalty if you take the money out before maturity. Once you know your term, visit three to five banks and record their rates for that specific term. Ignore the one-year rate if you want a three-year CD. The difference between banks can be 0.5% or more, which adds up: on a $10,000 CD at 5.0% versus 4.5% for one year, you earn $50 more.

Pay attention to whether the rate is fixed or variable. Most CDs are fixed—the rate stays the same for the entire term. Some banks offer variable-rate CDs that adjust with the Federal Reserve's rate decisions. Variable rates can go up or down, so they carry more risk. Unless you have a specific reason to choose variable, stick with fixed.

Why online banks beat traditional banks on rates

Chase and Bank of America pay lower CD rates because they spend money on branch networks, advertising, and customer service centers. Those costs are real, and they come out of the money available to pay depositors. An online bank like Ally has no branches, no tellers, and no physical locations. That overhead savings gets passed to you as a higher rate.

Traditional banks also rely on checking account customers and credit card users to generate profit. They do not need to pay high CD rates to attract deposits because their customers are already locked in. Online banks have no checking accounts or credit cards—CDs and savings accounts are their only product—so they compete on rate alone.

This does not mean online banks are riskier. Ally Bank is owned by Ally Financial, a publicly traded company. Marcus is owned by Goldman Sachs. American Express is American Express. These are not startups. Your deposits are insured the same way: up to $250,000 per account at FDIC-insured banks, and up to $250,000 per account at NCUA-insured credit unions.

What to watch for when you open a CD

Before you transfer money, confirm three things: the rate, the term, and the early withdrawal penalty. The rate and term are obvious. The penalty is what you pay if you need the money before the CD matures.

Early withdrawal penalties vary widely. Some banks charge three months of interest; others charge six months or a full year. A few newer banks charge nothing. If you are not certain you can leave the money untouched, look for a bank with a low or zero penalty. On a $10,000 CD earning 5%, a six-month penalty costs you $250. That matters.

Also check whether the bank allows you to add money to the CD after you open it. Most do not—you deposit a lump sum and that is it. A few banks let you make additional deposits during the term, which can be useful if you receive a bonus or tax refund partway through the year.

How CD laddering can help you access your money sooner

If you have a large amount to deposit but do not want to lock it all away for five years, you can split it across multiple CDs with different maturity dates. This is called laddering. For example, you might open five one-year CDs with $2,000 each. One matures every year, so you get access to $2,000 without penalty every 12 months.

Laddering works best when rates are stable or rising. If rates are falling, you lock in higher rates on the longer-term CDs. If rates are rising, you get to reinvest the maturing CDs at higher rates. You can also ladder across different term lengths—one two-year, one three-year, one four-year, one five-year—so you have access to money at different intervals.

The downside is that you have to track multiple maturity dates and decide what to do with each CD when it matures. Some banks let you set up automatic renewal, which rolls the CD into a new one at the current rate. Others require you to act manually. Check the bank's policy before you open multiple CDs.

Credit unions often match or beat bank rates

Credit unions are member-owned cooperatives, not corporations, and many of them offer CD rates that rival or exceed online banks. Connexus Credit Union, Pentagon Federal Credit Union, and Limelight Credit Union have consistently offered top-tier rates. The catch is that you have to be a member to open a CD, and membership requirements vary.

Some credit unions are open to anyone in a certain geographic area. Others require you to work for a specific employer, belong to a specific organization, or live in a specific county. A few have no restrictions at all. Before you compare rates, check whether you can join. You can search by location and membership requirement on the CO-OP Network website or through the Credit Union Locator.

Credit union deposits are insured by the National Credit Union Administration (NCUA) up to $250,000 per account, the same as FDIC insurance at banks. The insurance is just as solid, and the rates are often better.

What happens when your CD matures

When your CD reaches its maturity date, the bank deposits the principal plus interest into your account. You then have a window—usually 7 to 10 days—to decide what to do next. You can withdraw the money, open a new CD, or move it to a savings account.

If you do nothing, most banks automatically renew the CD at the current rate. That current rate may be much lower than what you locked in originally. If rates have fallen, you want to renew. If rates have risen, you might want to shop around and move your money to a bank offering a higher rate. Set a calendar reminder for one week before maturity so you have time to decide.

Some banks charge a fee to close a CD early or to move money out after maturity. Read the terms carefully. Most online banks do not charge these fees, but it is worth confirming.

Frequently Asked Questions

Can I move a CD from one bank to another without paying a penalty?

Only after it matures. Once a CD reaches its maturity date, you can withdraw the money penalty-free and deposit it at another bank. If you want to move money before maturity, you pay the early withdrawal penalty set by your current bank. The new bank cannot waive that penalty.

Do I have to pay taxes on CD interest?

Yes. CD interest is taxable income in the year it is earned. The bank will send you a 1099-INT form in January showing how much interest you earned. You report this on your tax return. This is true even if you do not withdraw the money—the interest is taxable when it is credited to your account.

What is the difference between a CD and a high-yield savings account?

A CD locks your money away for a set term and pays a fixed rate. A high-yield savings account lets you withdraw money anytime without penalty, but the rate can change. CDs pay more because you give up access. If you might need the money within a year, a savings account is safer.

Should I open multiple CDs at the same bank or spread them across different banks?

Spreading them across banks protects you if one bank fails. FDIC insurance covers up to $250,000 per account at each bank, so if you have $500,000, you need at least two banks to be fully insured. If you have less than $250,000, one bank is fine, but spreading your money can also help you compare rates across institutions.

What if a bank's rate drops after I open my CD?

Your rate does not change. The rate you lock in when you open the CD stays the same for the entire term, even if the bank lowers its rates the next day. This is the whole point of a fixed-rate CD—you are protected from rate drops.