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- PERSONAL FINANCE NEWS
- CD NEWS
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KEY TAKEAWAYS
- CD rates reached their highest level in more than 20 years this fall, thanks to the Federal Reserve's aggressive battle against decades-high inflation.
- With it appearing likely the Fed will start lowering interest rates sometime in 2024, it's a smart time to lock in one of today's historically high CD rates for a term of 2 years or longer.
- Though maturities of 18 months or shorter pay the highest APYs, opening a CD with a longer term guarantees you'll earn today's rates much further down the road.
- Our daily rankings of the best CDs in longer terms include 25 great options paying as high as 5.39% APY.
Why Today’s CDs Are Paying Record Rates
In March 2022, the Federal Reserve embarked on an aggressive rate-hike campaign in a fight against decades-high inflation. With 11 increases to the federal funds rate, the central bank raised its benchmark rate a cumulative 5.25%. That's the highest level for the fed funds rate since 2001.
As a result, CD rates surged in 2023, as you can see below. Take 1-year certificates as an example. The top nationwide rate before the Fed's rate-hike campaign began was 0.80% APY. But at its recent peak, it climbed to a remarkable 6.00% APY. Today the top 1-year rate has edged down to 5.66% APY, but that's still historically high.
Where Are CD Rates Headed?
Inflation has cooled considerably in recent months, allowing the Fed to take its foot off the gas on rate hikes. After its latest rate-setting meeting, which concluded Dec. 13, the Fed announced it was maintaining the federal funds rate at its current level. That's the third meeting in a row it has implemented a rate hold.
Further, it released its quarterly "dot plot" report, which shows that, at the time of the December meeting, roughly 80% of the Fed committee members predicted implementing two to four rate cuts of 0.25% each in 2024. The dot plot also shows forecasts of further rate decreases in 2025 and 2026.
Because CD rates are directly impacted by movement in the federal funds rate, it's expected that CD returns will fall this year, and likely over the next two years—though forecasts that far out should be treated cautiously.
Locking in One of Today's Rates for 2 Years or More is a Smart Move
With the prospect of falling CD rates, it's a smart move to stash money you won't need access to for a while in a CD at one of today's historically high rates. And the longer you can do so, the longer you're likely to earn a much higher return than savings and money market accounts will be paying in the next year or two.
Currently, the highest APYs are available on CDs ranging up to an 18-month term. But since the odds are high that interest rates could be entering a two- to three-year slide, it's worth locking in a rate for at least two years, or even longer if you feel confident you can live without access to the funds.
Below are the 25 best CDs with terms of 2 to 5 years. Each is available to customers nationwide, even if it's offered by a credit union. And, all are offered by federally insured institutions—covered by the Federal Deposit Insurance Corporation (FDIC) for banks or the National Credit Union Administration (NCUA) for credit unions. That means even in the very unlikely case that the institution fails, your deposits of up to $250,000 are protected.
The 25 Top-Paying CDs with Terms of 2 to 5 Years
Click the link for the term you're shopping for full details on all of these CDs.
For money you don't want to commit to a CD, consider one of the options in our daily rankings of the best high-yield savings accounts and the best money market accounts, which are also paying record rates right now.
Rate Collection Methodology Disclosure
Every business day, Googlawi tracks the rate data of more than 200 banks and credit unions that offer money market, savings accounts, and CDs to customers nationwide, and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account's minimum initial deposit must not exceed $25,000.Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.