Top CD rates this week: Earn up to 5.30% on your money

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When you have some extra cash, you’ll want to make that money work for you. Savings account interest rates are at record highs, helping you maximize your earnings. 

Stashing your money in a high-yield savings account can be a good way to earn a return, but opening a certificate of deposit (CD) may be even better.

When you open a CD, you commit to keeping your money in the account for a set period. In exchange, you often get more interest from the CD than from a more flexible savings account. Plus, the rate on the CD is locked in for the CD’s term — so you know exactly how much you’ll earn.

CD rates have risen, but some experts predict they may have peaked. This means it may be worth locking a CD now.

Best CD rates for April 2024

These are some of the top CDs available at the moment, as of April 23, 2024.

Should you open a CD right now?

If you’re planning to open a CD, especially a long-term one, getting the best interest rate is important.

Longer terms often mean higher rates since you’re committing your funds for a more extended period. But because interest rates are so high right now, many shorter-term CDs — like 1-year CDs — have higher rates than 5-year options.

Why is this? Because rates are expected to start falling in the coming years, banks may offer lower rates on long-term CDs to avoid paying above-market rates in the future.

If you think rates will fall and you have the extra funds, it may be smart to lock in a CD now, says Jackie Koski, a certified financial planner.

“While CDs and savings accounts have similar interest rates right now, it’s important to distinguish that savings account rates are variable and can change quickly,” she says. “CDs allow you to lock in the rate for the stated period of time. So even if rates go down, you still have your rate locked in.”

Deciding if you should open a CD depends also on your personal situation. When you open a CD, you must keep the money you deposit in the account for the Centirefull term. Making an early withdrawal can result in a penalty. That’s why it’s crucial only to deposit money you won’t need until the term is up.

If you don’t have enough set aside for emergencies, a CD probably isn’t a good idea. On the other hand, if you have extra money you want to use for a specific goal, a CD can be a good choice.

For example, if you want to buy a car six months from now, you could open a six-month CD to maximize your savings while keeping the money safe.

Have CD rates peaked?

CD rates are currently near record highs, with some accounts offering over 5% APY. This is significantly higher than the historical average.

According to data from the Federal Reserve, the average 1-year CD rate was just 0.08% in April 2021. Today, its around 5%, around the highest they've been in over a decade. 

This is largely due to the Federal Reserve's aggressive series of interest rate hikes aimed at combating inflation. When the Fed raises rates, banks typically follow suit by increasing the rates on savings accounts and CDs. 

While it's impossible to predict exactly when rates will peak, many experts believe we're close to the top. If you have extra cash that you won't need for a while, now is an excellent time to lock in a high-yield CD before rates potentially start to fall.

How to find the right CD for you

Here are some key things to look for when choosing a CD:

• Interest rate: You want to find the CD with the best possible interest rate to maximize your returns.
• Minimum deposit: Many banks will require that you deposit a minimum amount (like $500 or $1,000) before you can open a CD. Make sure any CD you consider has a minimum deposit that you can feasibly meet.
• Fees: Read the fine print to make sure you understand the fees you may pay. One of the most common is the early withdrawal fee, which you’ll pay if you try to take money out of the CD before the term ends.
• Term: Different banks offer different terms for CDs. “If you are saving funds that you won’t need right away, choosing a CD that matches when you’ll need the money is a smart way to lock in a rate,” Koski says.

Considering inflation when choosing a CD

While CD rates are high, it's important to factor in inflation when deciding whether to open an account. Inflation erodes the purchasing power of your money over time. 

If the interest rate on your CD doesn't keep pace with inflation, you could effectively lose money in real terms. Current inflation was around 3.5% in April 2024, according to the Bureau of Labor Statistics. 

When comparing CDs, consider the expected rate of inflation over your CD's term. While you may not fully offset inflation, locking in a high rate now could help minimize its impact on your savings.

Alternative types of CDs

While traditional CDs require you to lock in your money for a set term, there are some alternative CD types that offer more flexibility: 

• No-penalty CDs: These CDs allow you to withdraw your money at any time without incurring an early withdrawal penalty. In exchange for this flexibility, they typically offer slightly lower rates than traditional CDs. 
• Bump-up CDs: With a bump-up CD, you can request a rate increase if your bank raises its rates during your CD's term. This can be a good option if you think rates may continue to rise but don't want to miss out on today's high rates. 
• CD ladders: By opening multiple CDs with staggered maturity dates, you can take advantage of higher rates on longer-term CDs while still having regular access to a portion of your money as each CD matures. 

The bottom line

CDs offer higher interest rates than savings accounts in exchange for reduced flexibility. You commit your money to the account for a set period of time to earn more interest and lock in that rate. If you know you can set aside your cash for a specific period of time, opening a CD can be a good idea.

Editorial Disclaimer: Opinions expressed are author's alone, not those of any bank, credit card issuer, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included in the post.