August 24, 2022 – Forbes Advisor

Editorial Note: We earn a commission on partner links on Forbes Advisor. Commissions do not affect the opinions or ratings of our editors.

Today’s best interest rates on CDs (certificates of deposit) can be as high as 3.25%, depending on the term of the CD. In addition, average yields are climbing. Take a look at the highest prices offered on CDs of different lengths.

Related: Compare the best CD prices

Highest CD rates today: 1 year, 6 month, 9 month terms

The highest interest rate currently offered on a one-year CD — one of the most popular CD terms — is 2.85%, according to data from Bankrate.com. If you land a one-year CD with a rate in that neighborhood, you’re getting a good deal. A week ago the best rate was the same.

The average APY, or annual percentage yield, on a one-year CD is now 1.37%, down from 1.33% a week ago. APY provides a more accurate picture of the annual interest you’ll earn with a CD because it takes compound interest into account. This is the interest you earn not only on your deposit (or principal) but also on account interest.

If you want a CD with a term of less than a year, the current best rate on a six-month CD is 2.25%. The average rate was the same last week. The current average APY for a six-month CD is 0.91%, down from 0.88% last week at this time.

On nine-month CDs, the highest interest rate is now 1.98%; last week at the same date, it was higher, at 2.57%. Nine-month CDs are offered today at an average APY of 0.90%, up from 0.78% a week ago.

Highest CD rates today: 15 month, 18 month and 2 year terms

On a 15-month CD, today’s best interest rate is 2.66%; you’ll do well if you can find a rate close to that. A week ago, the highest rate was also 2.66%.

The highest rate on an 18-month CD is currently 2.76%, the same as a week ago. The average APY is 2.02%, down from 1.96% a week ago.

If you can hold out for two years, 24-month CDs are offered today at interest rates as high as 2.96% APY. The highest rate last week at this time was similar at 2.96%. Two-year CDs now have an average APY of 1.58%, up from 1.56% last week.

A CD is a type of savings account with a fixed interest rate and a time lock. Investors are discouraged from withdrawing their deposit until the term of a CD has expired. Your patience is rewarded with interest that is usually better than what you would earn with a regular savings account.

If you withdraw money from a CD before ‘maturity’ – when it reaches the end of its term – and you can be slapped with hefty penalties. For example, you can lose up to six months’ interest if you pre-withdraw a one-year CD.

Highest CD rates today: 3-year and 5-year terms

CDs with longer terms tend to have some of the most attractive interest rates and APYs, if you’re willing to keep your money locked away for years.

The average APY on a three-year CD is now 1.70%, down from 1.64% a week ago.

On a five-year CD, the highest rate today is 3.25%, the same as a week ago. APYs are averaging 1.88%, down from 1.83% in the same period last week.

The longer the duration, the more severe the early withdrawal penalty. It’s not uncommon to lose a full year of interest or more if you open a five-year-old CD too soon. Be absolutely certain that you understand the penalty before making your investment.

How CDs Work

CDs might sound a little exotic when it comes to bank accounts, but how they work is actually quite simple. You open the account with a sum of money, leave your deposit alone for months or years, and let compound interest work its magic.

Many CDs and their cousins, stock certificates offered by credit unions, require you to deposit hundreds, thousands or even tens of thousands of dollars to open your account. Other financial institutions have no minimum deposit requirement which means you can open the account with as little as a penny.

But banks and credit unions generally don’t allow you to add to your deposit once the term begins and the clock starts ticking. And they’re serious about not letting you open your CD or share your certificate too soon. Early withdrawal penalties can be so severe that they will eat away at your capital, not just take back some of your interest.

Do CDs cost anything?

CDs generally come free of charge, which means your money won’t be eaten away by the monthly maintenance fees typical of many savings, checking, and money market accounts.

The big cost is – obviously – the deposit, especially if there is a minimum deposit you need to meet. But as long as you don’t withdraw money from your CD before it matures, you’ll keep any interest you earn. This makes CDs a great free way to grow your money.

Jack L. Goldstein