The Federal Reserve has lowered the federal funds rate three times in 2024, indicating that this may be the last opportunity to secure a competitive CD rate before rates decrease further.
There is a wide range of CD rates available at various financial institutions, so it is crucial to compare and ensure you are receiving the most favorable rate when considering a CD. Here is an overview of the current CD rates and where to find attractive deals.
Traditionally, longer-term CDs used to provide higher interest rates compared to shorter-term CDs as banks aimed to incentivize savers to maintain their deposits for extended periods. However, the scenario has flipped in the current economic environment.
Currently, the most impressive CD rate is 4.50% APY, offered by Marcus by Goldman Sachs on its 14-month CD requiring a minimum opening deposit of $500. LendingClub also presents a 4.50% APY on its 10-month CD with a minimum deposit of $2,500.
Various financial institutions are offering competitive CD rates presently, but specific details depend on location.
The interest earned from a CD is determined by the annual percentage rate (APY), which accounts for the total earnings after a year considering the base interest rate and compounding frequency. If, for example, you invest $1,000 in a one-year CD with a 1.81% APY that compounds monthly, your final balance would be $1,018.25. Choosing a CD with a 4% APY would grow your initial $1,000 deposit to $1,040.74 by the end of the year, including $40.74 in interest.
Increasing the deposit in a CD boosts potential earnings. For illustration, with a one-year CD offering 4% APY, a $10,000 deposit would result in a total balance of $10,407.42 upon maturity, translating to $407.42 in interest.
In addition to the interest rate, consider other types of CDs for different benefits, even if it might mean accepting a slightly lower rate for increased flexibility. These include Bump-up CDs, No-penalty CDs, Jumbo CDs, and Brokered CDs for more tailored options beyond the traditional CDs.