CD rates vary by bank, term length, and deposit amount, but most banks currently pay between 4.5% and 5.5% annual percentage yield (APY) on standard CDs

The rate you receive depends on three things: which bank you choose, how long you lock your money away, and how much you deposit. A one-year CD at a large national bank might pay 4.75% APY, while a five-year CD at the same bank could pay 5.25% APY. Online banks and credit unions often pay higher rates than brick-and-mortar branches because they have lower overhead costs. The difference between the lowest and highest available rate for the same term can be 0.75% or more, which matters significantly on larger deposits.

Rates change constantly—sometimes daily—because they follow the Federal Reserve's benchmark interest rate. When the Fed raises rates, banks raise CD rates to attract deposits. When the Fed cuts rates, CD rates fall. This means the rate you see today may not be the rate you get if you wait a week, and it will definitely not be the rate available next month.

Key Takeaways

  • Most banks currently pay between 4.5% and 5.5% APY on CDs, with online banks typically offering higher rates than traditional banks.
  • Longer CD terms (three to five years) usually pay more than shorter terms (three to six months), but rates can vary by 0.75% or more between banks for identical terms.
  • Your actual rate depends on the bank, the CD term you choose, and the deposit amount—some banks offer higher rates for deposits above $100,000.
  • CD rates change frequently because they follow Federal Reserve decisions, so comparing rates across multiple banks before you deposit is essential.
  • You can lock in a rate by opening a CD immediately, but rates may be higher or lower in a few weeks depending on Fed policy and market conditions.

How CD rates differ by bank and term

National banks like Bank of America, Wells Fargo, and Chase typically pay 4.5% to 5.0% APY on one-year CDs. Online banks like Ally, Marcus, and American Express Bank often pay 4.85% to 5.35% on the same term. Credit unions vary widely depending on the institution, but many pay competitive rates similar to online banks. The difference between a national bank and an online bank on a $10,000 deposit over one year can be $50 to $85 in extra interest.

Term length matters more than most people expect. A six-month CD might pay 4.5% APY, a one-year CD might pay 4.85%, and a five-year CD might pay 5.35%. Banks pay more for longer commitments because they want to hold your money longer and can lend it out for extended periods. However, this pattern is not may provide—sometimes short-term rates are higher than long-term rates if the Fed is expected to cut rates soon.

Some banks offer higher rates for jumbo CDs, typically defined as deposits of $100,000 or more. These accounts might pay 5.5% to 5.75% APY while standard CDs pay 5.0% to 5.25%. A few banks also offer promotional rates for new customers, paying an extra 0.25% to 0.50% for a limited time. These promotions change monthly, so checking multiple banks before you deposit is the only way to find the best available rate.

What affects the rates banks offer

The Federal Reserve's benchmark rate is the primary driver of CD rates. When the Fed raises its target rate, banks raise CD rates within days or weeks. When the Fed cuts rates, CD rates fall. The Fed has raised rates significantly since 2022, which is why CD rates are currently much higher than they were in 2020 and 2021. If the Fed cuts rates in the future, CD rates will fall, making today's rates a better deal than rates available later.

Competition between banks also affects rates. When one online bank raises its CD rates to attract deposits, competitors often follow within a few days. This is why online banks tend to offer higher rates than national banks—they rely on deposits from customers nationwide and must compete on rate alone, since they have no physical branches. During periods of high competition, rates can shift by 0.1% to 0.25% in a single week.

The amount you deposit can influence the rate you receive. Banks offer tiered rates: $1,000 to $10,000 might pay one rate, $10,000 to $100,000 might pay a slightly higher rate, and $100,000 and above might pay significantly more. Some banks also offer relationship discounts or bonuses if you have a checking account with them, though these are usually small (0.1% to 0.25% extra).

How to compare CD rates across banks

The most reliable way to compare is to visit the websites of at least five banks—include one or two national banks, two or three online banks, and your local credit union if you have one. Write down the APY for each term length you are considering (six months, one year, three years, five years). Pay attention to the fine print: some banks require a minimum deposit of $25,000 or more, and some impose penalties if you withdraw early.

Rate comparison websites like Bankrate, DepositAccounts, and CD Ladder show rates from multiple banks in one place, updated daily. These sites are free and do not require you to enter personal information. However, they do not always include every bank, so checking a few banks directly is still worthwhile. Look for the APY figure, not the interest rate—APY accounts for how often interest is compounded and gives you the true annual return.

Once you have found the highest rate for your chosen term, open the CD immediately if you are ready to deposit. Rates can change overnight, and waiting even a few days can cost you money. If you are uncertain about locking in your money for a long term, a shorter-term CD lets you reinvest at a potentially higher rate when it matures. Some people use a "CD ladder" strategy, opening multiple CDs with different maturity dates so they can reinvest portions of their money at different times.

What happens to your rate if the Fed changes policy

Once you open a CD, your rate is locked in for the entire term—it will not change even if the Fed raises or cuts rates. This is the trade-off: you get certainty about your return, but you also miss out if rates rise. If you open a one-year CD at 4.85% and the Fed raises rates to 5.5% six months later, you are stuck at 4.85% until your CD matures. Conversely, if rates fall to 4.0%, you are protected at 4.85%.

This is why the timing of opening a CD matters. If you believe the Fed will raise rates soon, you might wait. If you believe rates will fall, you should lock in today's rate. However, nobody can predict Fed decisions with certainty, so most financial advisors suggest opening a CD when rates are attractive to you, rather than trying to time the market perfectly.

When your CD matures, you have a choice: withdraw the money, open a new CD at the current rate, or let the bank automatically renew it at the new rate. Most banks automatically renew unless you tell them otherwise, but the renewal rate may be lower than the original rate. Check your CD's maturity date and decide what to do before it arrives, rather than accepting whatever rate the bank offers by default.

Penalties for early withdrawal and other restrictions

If you withdraw money from a CD before the maturity date, the bank charges an early withdrawal penalty. This penalty varies by bank and term length. A six-month CD might have a penalty of one month's interest, while a five-year CD might have a penalty of six months' interest. On a $10,000 CD paying 5.0% APY, a six-month penalty equals roughly $250. Always read the penalty terms before you open a CD, because they vary significantly between banks.

Some banks offer "no-penalty CDs" that let you withdraw without a penalty, but they pay lower rates—typically 0.5% to 1.0% less than standard CDs. These are useful if you think you might need the money, but they defeat the purpose of locking in a high rate. A few banks also offer "step-up CDs" that increase the rate partway through the term, or "bump-up CDs" that let you increase the rate once if rates rise. These specialty products usually pay slightly less than standard CDs but offer more flexibility.

How much interest you actually earn

The amount of interest depends on three factors: the APY, the deposit amount, and the term length. A $10,000 deposit at 5.0% APY for one year earns $500 in interest. A $10,000 deposit at 5.0% APY for five years earns approximately $2,763 in interest (because interest compounds annually). A $50,000 deposit at 5.0% APY for one year earns $2,500.

The difference between a high-rate CD and a low-rate CD adds up quickly on larger deposits. If you have $50,000 and choose a bank paying 4.5% instead of 5.25%, you lose $375 in annual interest. Over a five-year CD, that difference compounds to roughly $2,000. This is why comparing rates across banks is worth the 15 minutes it takes—the difference between the best and worst available rate can be hundreds or thousands of dollars depending on your deposit size and term length.

Frequently Asked Questions

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. If you are in a high tax bracket, the after-tax return on a 5.0% CD might be closer to 3.5% to 4.0%, depending on your federal and state tax rates.

Can I open multiple CDs at the same bank?

Yes. There is no limit to how many CDs you can open at one bank or across multiple banks. Some people open several CDs with different maturity dates (a CD ladder) so they can reinvest money at different times. Each CD is insured separately by the FDIC up to $250,000, so opening multiple CDs does not reduce your insurance coverage as long as they are in different names or have different ownership designations.

What if a bank fails while my CD is open?

The FDIC insures CDs up to $250,000 per depositor per bank. If a bank fails, the FDIC pays you the full amount of your CD plus any accrued interest, up to the $250,000 limit. Your CD does not disappear—you receive your money. This is why opening CDs at FDIC-insured banks (which includes all major national banks and most online banks) is important.

Should I open a CD now or wait for rates to go higher?

Nobody can predict whether rates will rise or fall. If rates are currently attractive to you and you do not need the money, opening a CD now locks in that rate. If you think rates might rise significantly in the next few months, you could wait, but you risk rates falling instead. A middle approach is to open a shorter-term CD (six months to one year) now, then reassess when it matures.

Is a CD better than a savings account?

CDs currently pay 0.5% to 1.0% more APY than high-yield savings accounts at the same bank. The trade-off is that your money is locked up for a set period and you pay a penalty to withdraw early. If you need access to your money, a high-yield savings account is better. If you can commit to leaving the money untouched, a CD pays more interest.