Best CD rates today: Turn time into money with today's highest CD APYs — May 21, 2024

Today's best APYs on certificates of deposit are at their highest in decades, offering a safe, secure way to turn time into money by locking your cash into terms of up to 12 months or longer. With guaranteed rates of 5.00% and higher on even shorter terms, you can outpace inflation and build your initial investment to meet a short-term financial goal, plan for a summer vacation or set aside reserves to cover life's unplanned expenses.

Best CD rates for May 21, 2024

The best rates of return are found at FDIC-insured digital banks and online accounts, with the highest yield of 5.40% APY at NexBank on a 12-month term and a minimum $25,000 deposit and 5.00% APY and higher with no or low requirements at BMO Alto, Lending Club and Barclays as of Tuesday, May 21, 2024.

These online-only banks partner with FDIC-insured banks to offer deposit accounts that are federally insured, like those at your neighborhood bank. Your money saved in these accounts is insured for up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA).

Dig deeper: I'm a personal finance expert: Here's why you need to invest in a CD today

How a certificate of deposit works

A CD is a type of savings or deposit account that's offered by banks, credit unions and other financial institutions. Unlike a traditional savings account, a certificate of deposit holds your money for a fixed period of time — terms of one month to five years or longer — paying out the interest your deposit amount earns only after the term expires or "matures."

Typical CD rates are fixed, which means you're guaranteed a rate of return that doesn't change. While you can't add to or access your cash until the CD matures, the trade-off is a safe, stable way to earn a much higher yield than you'd find with a traditional savings account.

Dig deeper: How certificates of deposit work — including 7 types for boosting your savings

CD rates in the news

CD rates strongly correlate with the key interest rate set by the Federal Reserve, the U.S.'s central bank. This Fed rate is the benchmark that affects rates on deposit accounts, loans, mortgages, credit cards and other financial products. Typically, as the Fed rate rises, so do APYs on savings products like CDs, high-yield savings accounts and money market accounts — surging up to 4.5% and higher today to accelerate your savings.

The Federal Reserve increased the target interest rate 11 times from March 2022 to July 2023 in an effort to combat the highest inflation in four decades coming out of the pandemic.

May 1, 2024: Fed holds benchmark rate unchanged for sixth time since July 2023

At the conclusion of its third rate-setting policy meeting of the year on May 1, 2024, the Federal Reserve left the federal funds target interest rate at a 23-year high of 5.25% to 5.50%, marking the sixth consecutive time the Fed's held the benchmark rate unchanged since July 2023.

In its post-meeting statement, the Federal Reserve maintained "there has been a lack of further progress toward the 2 percent inflation objective." The Federal Reserve is focused on a 2% inflation goal that's ideal for keeping employment high and prices low. Despite speculation in March of three rate cuts by the end of the year, the Fed cautioned in its May statement that its rate-setting committee "does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent."

What to expect at the Fed's June policy meeting

It's too early to predict what the Fed will decide at its next policy meeting on June 11 and June 12, 2024. According to the CME FedWatch Tool, which measures market expectations for Fed fund rate changes, there's a 96.4% chance that the Fed will keep rates where they are at its next meeting.

Inflation appears to be on a downward trend, falling from a peak of 9.1% in June 2022 to rates that have ranged from 3% and 4% since May 2023. The May 3 jobs report fell short of employment expectations, showing 175,000 positions added in April — significantly lower than the 315,000 positions added in March — signaling a slowing job market that could relieve inflation worries and set off long-awaited cuts to the Fed rate.

The Consumer Price Index released on May 15 revealed consumer prices rose by 3.4% year over year, down from 3.5% in March — a modest decrease, but a step in the right direction for this widely used indicator for inflation. Producer Price Index data released on May 14 showed a moderate 0.5% increase in wholesale prices — or the prices paid to producers of goods and services — in the 12 months through April. Yet while these newest inflation readings suggest progress, offering hope for a future cut to the Fed rate, it may not be enough for the Fed to lower rates in June.

Responding to inflation concerns, Federal Reserve Chair Jerome Powell said on May 15 that while he expects inflation to come down, "I think it’s more likely that we’ll be at a place where we hold the policy rate where it is.”

The Powell-led rate-setting panel will announce a rate decision at the conclusion of its meeting on June 12, at 2 p.m. ET.

Dig deeper: When’s the next Federal Reserve meeting? The FOMC — and how it affects your finances

FDIC averages on CD products: Rates steady or up on most terms in April

The Federal Deposit Insurance Corporation tracks monthly average interest rates paid on certificates of deposit and other savings accounts. Created by Congress, the FDIC is an independent government agency charged with maintaining stability and public confidence in the U.S. financial system and providing insurance on consumer deposit accounts.

Here's how FDIC national deposit rates on a $10,000 minimum deposit compare between May and April 2024, showing a dramatic increase in the rate on terms of six months.

The FDIC is an independent government agency charged with maintaining stability and public confidence in the U.S. financial system and providing insurance on consumer deposit accounts. New data is due for release on June 17, 2024.

How to compare CDs

When choosing the best certificate of deposit for your budget, compare these key factors against your specific savings or financial goals.

• Term length. A CD is ideal for saving toward a specific goal with money you’re not likely to need until the account matures. Look to shorter terms for saving toward, say, a family holiday or new appliances. Terms of one to five years or longer can help you lock in today’s highest APYs before interest rates are expected to drop.

• Rate of return. Look for the highest APY for the term you’re interested in. The APY is the amount of interest the CD earns in a year — including compounding. Unlike a savings account, CD rates are fixed, meaning they won’t change over your term.

• Minimum deposit. While you can find CDs without minimum starting deposits, most CDs require $100 to $1,000 to open an account. Generally, if you have the money for a higher initial deposit, you can earn a higher APY — just be sure that amount isn’t a hardship on your budget.

• Type of bank or financial institution. Today’s best interest rates are offered by digital banks, with few exceptions among traditional brick-and-mortar banks or credit unions. If you aren’t comfortable with an online-only bank, look to a high-yield savings account or money market account offering a high rate without withdrawal penalties.

• Penalties and fees. Life happens, and you might find yourself needing to tap into your money before the CD matures. Early withdrawal penalties are typically expressed in months of interest you’re giving up — for example, 90 days of interest for CD terms of up to 24 months. Often the longer the term, the higher the penalty fee.

Dig deeper: When is it worth it to break a CD? A finance expert's thoughts on early withdrawals and breaking even

Benefits of a certificate of deposit

• Guaranteed returns. With a CD, you make one deposit and earn a guaranteed interest rate over your term that’s yours after the CD matures.

• Higher rates than traditional accounts. Many banks and financial institutions offer CDs at rates that are higher than you’ll earn with the average savings or money market account — with digital and online banks offering the highest rates on average.

• Range of CD terms. You can find CD terms of three months to five years or more to fit your financial goals. Rates for six-month CDs can outpace the average bank account, and longer terms offer rates comparable to the best high-yield savings accounts.

Drawbacks of a certificate of a deposit

• Penalty for early withdrawals. If you need to access your money before your CD term expires, you face fees equal to several months of interest — as much as three to six months’ worth, depending on the account.

• Not the highest investment returns. CDs are a safe way to steadily earn interest, but you stand to earn more over the long term through stocks, bonds or securities. And by locking your money in a CD, you could miss out if average rates increase.

• You can’t add more money. After your CD locks, you aren’t able to add to your balance until after the CD matures — at which point, you can move your money to another account or roll it over to a new CD.

Alternatives to a certificate of deposit

A certificate of deposit isn’t the only low-risk way to earn interest on your savings. Look to these alternatives that offer safe, steady returns — with the flexibility to add to or withdraw your money without penalty.

• High-yield savings account. An HYSA offers a way to quickly grow your savings investment at variable rates of 4.5% APY or higher with no penalty for withdrawals.

• Money market account. Also called a money market savings account, the rate on an MMA can beat those of traditional savings accounts, with the same flexible access to your money.

• Higher-risk investments. Stocks, index funds and mutual funds average higher returns than CDs, though with higher potential losses.

Frequently asked questions about CDs

Learn more about how certificates of deposit work when comparing the best for your budget and financial goals.

How does a CD compare to a high-yield savings account?

CDs can attract higher rates of return than a high-yield savings account in exchange for locking up your money, while HYSAs can earn you more than a traditional savings account with greater access to your money than a CD. Compare how CDs and HYSAs differ in access, flexibility and type of interest earned before deciding on the best for your investment.

How do banks make money with a CD?

Banks charge higher interest rates on money they lend out than the interest they pay on customer deposit accounts. The difference is called a spread, and it’s what banks rely on to make money. Unlike a traditional savings account that allows for flexible movement of your money without penalty, a CD requires you to lock in your deposit over a specified period of time, returning your principal plus interest after the account matures. That lock-in period — and penalties that discourage your early withdrawal — allows a bank to better plan how long it has to make money off your deposit, and it’s typically willing to pay a little more for that reliability.

Is my money safe with an online-only bank like Lending Club or SoFi?

Yes. These fintech (short for financial technology) companies are either FDIC-insured chartered banks or partner with more recognizable banks to offer deposit accounts that are protected by the government for up to $250,000. The FDIC insures the safety of your money, even if the fintech were to fail or go out of business. Look for terms like "member FDIC," "FDIC insured" or "NCUA insured" when comparing your options.

What is compound interest?

Compound interest is often described as earning interest on your interest. It’s a powerful way to boost your savings over time by earning interest on both your initial deposit and any interest you earn along the way. An account's APY is the total amount of interest you'll earn on your deposit over one year, including compound interest, expressed as a percentage.

What is a jumbo CD?

A jumbo CD is a certificate of deposit that requires a minimum of $100,000 to open the account. Like regular CDs, jumbo CDs come with a fixed interest rate and term. In the past, jumbo CDs offered a way for people and businesses to safely invest money at higher rates than available with a traditional CD.

However, with the Fed holding interest rates at 23-year highs, it’s not always true that jumbo CDs have a higher interest rate than traditional CDs. Learn more about jumbo CDs and why it's wise to shop around before locking your money into one.

What is a no-penalty CD?

A no-penalty CD — also called a liquid CD — is like a traditional CD through which you lock in a deposit for a guaranteed rate of return over a stated period of time, but with the flexibility of withdrawing your money without penalty before the CD matures. This flexibility comes with trade-offs, however, including lower rates of return than a traditional CD. With rates at historic highs, a high-yield savings account may offer comparable or even higher rates than a no-penalty CD with the same flexibility.

What is a CD ladder?

A CD ladder is a savings strategy designed to spread out your money across multiple CDs to leverage high rates without tying up your full investment into one long-term CD. The result of CD laddering is access to a portion of your investment at regular, timed intervals. With rates at all-time highs, a short-term CD ladder combines the high rates of return of a long-term CD with the flexible access to your money that a shorter-term CD offers.

Learn how a short-term CD ladder can help you lock in today's highest rates while enjoying rolling returns — before rates drop.

Editor's note: Annual percentage yields shown are as of Tuesday, May 21, 2024 at 8:10 a.m. ET. APYs and promotional rates for some products can vary by region and are subject to change.

Sources

• National Rates and Rate Caps, FDIC. Accessed May 21, 2024.

• Consumer Price Index Summary, U.S. Bureau of Labor and Statistics. Accessed May 16, 2024.

• Producer Price Index News Release summary, U.S. Bureau of Labor and Statistics. Accessed May 15, 2024.

• Employment Situation Summary, U.S. Bureau of Labor and Statistics. Accessed May 10, 2024.

• CME FedWatch Tool, CME Group. Accessed May 21, 2024.