Since the Federal Reserve started lowering the federal funds rate towards the end of last year, deposit account rates have also been decreasing.
The upside is that you can secure a competitive return on a certificate of deposit (CD) today to maintain your ability to earn money. Here are the current CD rates and where to discover the best deals.
CD rates remain relatively high, particularly for shorter terms compared to historical averages. Rates of around 4.00% APY or higher can be found for terms of one year or less. Although rates for longer-term CDs are slightly lower, the best rates hover around 3%-4% APY for terms exceeding three years.
Presently, the highest CD rate is 4.50% APY, available on Marcus by Goldman Sachs for its 14-month CD, with a minimum $500 opening deposit requirement.
Notable CD rates from our trusted partners are shown below.
The outlook for CD rates is determined by the federal funds rate which influences deposit account rates; following the Fed's movement of its target rate up or down.
The Federal Reserve retained interest rates for most of last year, with a target rate of 5.25%-5.50%. However, as inflation eased and economic expansion improved, the Fed reduced the federal funds rate by 50 basis points in September and by an additional 25 basis points in November and December, now standing at 4.25%-4.75%. It is anticipated that more rate cuts will happen in the upcoming year.
Consequently, CD rates have started to decline. This suggests that it may be advisable for savers to act promptly to secure the current higher CD rates on offer.
Various factors should be considered in deciding whether to invest in a CD. While earning a competitive interest rate is crucial, it is not the sole factor to think about. Factors such as current interest rates, financial targets, and liquidity requirements should also be weighed.
CDs can be obtained from most banks, but looking beyond your existing bank may reveal better options, as not all banks provide competitive rates. Online banks, credit unions, and community banks are excellent places to explore for high-yield CDs.