CD rates have risen over the last two years in tandem with rising interest rates, as the Federal Reserve attempted to moderate inflation. But the central bank has taken its foot off the pedal lately, holding rates steady for a fourth time in a row at its January meeting. CD rates are likely to start to decline when the central bank begins lowing interest rates later this year.
Since 2022, the Federal Reserve has raised interest rates in an attempt to lower inflation, hiking the federal funds rate to its highest rate in over two decades. While these rate increases have driven mortgage rates to record highs and pushed many into credit card delinquency, there is one silver lining. Rates on high yield savings accounts and CDs have also increased.
At the most recent policy-setting meeting, the Fed held interest rates steady for the fourth consecutive time, holding the federal funds rate at a target range of 5.25% to 5.5%. However, since the Federal Reserve decided to hold interest rates steady earlier this year, savings rates have started to fall. And if the Federal Reserve cuts interest rates later this year, as expected, savings rates will likely drop even further. For this reason, it’s a good idea to take advantage of savings rates while they remain high.
A CD, or certificate of deposit, is a type of investment account that holds a fixed amount of money for a fixed term — which can be anywhere from one year to five years. The annual percentage yield (APY) on CD accounts is typically higher than rates for traditional savings accounts, helping you maximize your savings with minimal effort.
However, if you look around you'll find many accounts are already offering much higher rates than that. In some cases, we've seen 1-year CDs with yields of more than 5.5%. Our tool, in partnership with Bankrate, will let you search for a good rate on an account that's right for you.
Why open a CD account?
One of the best reasons to open a CD account is that it’s one of the safest places you can save your cash. This is because most CD accounts are FDIC- or NCUA -insured. The difference depends on whether you open an account with a bank (overseen by the FDIC) or credit union (regulated by NCUA). If your bank or credit union is faced with any financial trouble or closes, your deposits will be insured up to $250,000 per account (and up to $250,000 per person in a joint account). You can even use the FDIC BankFind tool to check whether a bank is federally insured.
Opening a CD is also a great option if you’re looking for a guaranteed rate of return on your savings. While CDs offer comparatively lower returns compared to higher-risk investment options, like stocks or ETFs, they’re a good choice if you value a fixed, predictable and safe return on your money.
Here are some 1-year CDs with rates 5% and higher
These 1-year CD accounts currently offer some of the best rates on the market.
TotalDirectBank
APY: 5.50%
Minimum Deposit: $25,000
Financial Resources Federal Credit Union
APY: 5.43% (13 months)
Minimum Deposit: $500
ConnectOne Bank
APY: 5.40% (11 months)
Minimum Deposit: $500
USAlliance Financial
APY: 5.40%
Minimum Deposit: $500
Bask Bank
APY: 5.40%
Minimum Deposit: $1,000
First Internet Bank
APY: 5.36
Minimum Deposit: $1,000
Bread Financial
APY: 5.35%
Minimum Deposit: $1,500
BrioDirect
APY: 5.35%
Minimum Deposit: $500
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