Snapshot of leading offers
While large brick-and-mortar institutions often publicize headline rates below 2%, several digital platforms are still paying considerably more. Below is a representative view of competitive APYs available on Feb. 14:
- Marcus by Goldman Sachs: 1-year CD, 4.00% APY
- Ally Bank: 11-month High-Yield CD, 3.90% APY
- PenFed Credit Union: 1-year Money Market Certificate, 3.85% APY
- Synchrony Bank: 9-month CD, 3.80% APY
- Capital One: 18-month CD, 3.70% APY
Rates can change at any time and often vary by region or membership eligibility, so consumers should verify terms directly with each institution before funding an account.
How different APYs affect returns
The APY reflects the total amount of interest a deposit earns in one year, accounting for the base rate and the frequency of compounding. CDs commonly compound either daily or monthly, and those intervals are factored into the published APY.
Consider a saver who deposits $1,000 into a one-year CD that pays 1.61% APY with monthly compounding. After 12 months, the balance would reach approximately $1,016.22—an increase of $16.22. If the same principal were placed in a one-year CD at 4.00% APY, the ending balance would grow to about $1,040.74, delivering $40.74 in interest. On larger sums, the contrast is more pronounced: a $10,000 deposit at 4.00% APY would mature at roughly $10,407.42, yielding $407.42 in earnings over the same period.
Key considerations beyond the headline rate
Although APY is the primary factor most consumers evaluate, several other features can influence which CD best matches an individual’s financial goals.
Bump-up CDs allow one-time requests for a higher rate if the issuer increases its offer during the CD’s term. This flexibility can be helpful in a rising-rate environment, though bump-up products often launch with a slightly lower starting APY than standard CDs.
No-penalty (liquid) CDs permit early withdrawal without an interest penalty. Savers who may need access to funds before maturity can benefit from this structure, but they should expect the APY to trail comparable fixed CDs by a modest margin.
Jumbo CDs require large minimum deposits, commonly $100,000 or more. While jumbo accounts previously carried meaningfully higher rates, today’s market shows a narrow spread between jumbo and conventional CDs, diminishing the advantage of tying up a six-figure sum.
Brokered CDs are distributed through brokerage firms instead of directly by banks. Some carry competitive yields or atypical terms, yet investors must confirm that each issue is insured by the Federal Deposit Insurance Corporation (FDIC). Brokered CDs that lack FDIC backing expose holders to additional risk.
Strategies for selecting the right term
Because top yields are concentrated in maturities of roughly one year or less, laddering can help balance return and liquidity. A simple ladder divides available cash into equal portions spread across several maturities—for example, three-, six-, nine- and 12-month CDs. As each tranche matures, the funds either cover upcoming expenses or roll into a new CD at the then-prevailing rate. This approach provides periodic access to principal while preserving exposure to higher short-term yields.
Investors expecting interest rates to decline sharply may opt to lock in a single 12-month CD at or near the 4% peak, accepting reduced flexibility in exchange for certainty of return. Conversely, those comfortable with potential rate fluctuations might blend a no-penalty CD into their portfolio, gaining the option to redeploy funds should a better opportunity surface later this year.
Opening and funding a CD
The application process generally takes less than 15 minutes at most online institutions. Applicants supply basic personal information, select a term, and transfer funds electronically from an external checking or savings account. Minimum opening deposits range from $0 at some digital banks to $5,000 or higher at certain credit unions and brokerages.
Once a CD is opened, additional deposits are usually prohibited until maturity, so savers should deposit the full amount they intend to keep on hold for the term’s duration. Early withdrawals from fixed CDs typically trigger a penalty equal to several months of interest, undermining the effective yield.
FDIC insurance limits
Standard CDs issued by FDIC-member banks are insured up to $250,000 per depositor, per insured institution, for each account ownership category. Credit union CDs carry similar protection through the National Credit Union Administration (NCUA). Investors with balances approaching the insurance ceiling should distribute funds across multiple banks or ownership categories to maintain full coverage.
In today’s environment of softening policy rates, locking in a competitive CD can preserve purchasing power without sacrificing safety. While the 4% APY now available on select one-year terms represents a high-water mark relative to current market offerings, rate conditions remain fluid. Savers who act promptly can capture attractive yields before further Fed action nudges deposit returns lower.
Crédito da imagem: Marcus by Goldman Sachs
