September 6, 2022 – Forbes Advisor

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

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 12-month CD — one of the most popular CD terms — is 2.86%, according to data from Bankrate.com. If you find a one-year CD with a rate in that neighborhood, you’ve found a good deal. A week ago, the best rate was below 2.85%.

The average APY, or annual percentage yield, on a one-year CD is now 1.41%, down from 1.36% 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 the interest itself.

If you prefer a CD with a term of less than one year, the current best rate on a six-month CD is 2.25%. The highest rate was the same as last week. The current average APY for a six-month CD is 0.94%, down from 0.90% last week at this time.

On nine-month CDs, the highest interest rate is now 1.98%; last week at this time, it was the same. Nine-month CDs are offered today at an average APY of 0.96%, up from 0.90% 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 2.76%; you’ll do well if you can find a rate close to that. A week ago, the highest rate was also 2.76%.

The highest rate on an 18-month CD is currently 2.95%, down from 2.81% a week ago. The average APY is 2.03%, down from 1.99% 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 1.62%, up from 1.56% last week.

A CD is a type of savings account with a fixed interest rate and a time lock. You are not expected to touch your deposit until the end of the CD term, whether in six months, one year or five years. 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 1.69%, down from 1.68% 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 1.86% 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.

The beauty of a CD ladder

Want to earn a higher return, but worry about keeping your money shackled for years? A CD ladder can help you get good returns and make your investment more liquid.

You build a ladder by investing your money in multiple CDs with different duration terms. You can buy a one-year CD, a two-year CD, a three-year CD, a four-year CD, and a five-year CD. As each of the short-term CDs matures, you replace it with a new five-year CD.

Take this course and in a few years you will have a better yielding five-year CD that matures every year. If you ever have a bad year, you can take some of the money from the expiring CD and use it to pay bills instead of pouring it all into a new CD.

You need to shop around to find the best CD rates. Banks and credit unions compete by offering attractive returns to land your business, so shopping around before buying a bank CD or credit union stock certificate is a must.

Are CDs a good deal?

CDs generally pay higher interest than other savings vehicles, even the best high-yield savings accounts and money market accounts. And while they may not offer the kind of enviable returns possible with stocks, CDs trump the most eye-catching investments in one respect: they’re one of the safest places to put your money.

Investors lost millions in the crypto crash of 2022, and investing your money in the stock market, real estate, or gold and other commodities can also be risky. But when you buy a credit union certificate of deposit or stock certificate from a federally insured financial institution, you can sleep easy knowing your investment is protected.

The FDIC offers you up to $250,000 of coverage in the event your CD-issuing bank defaults. For stock certificates purchased from federal credit unions and most state-chartered credit unions, the NCUA insures your money up to the same limit.

Jack L. Goldstein