The best CD prices over 1 year | NextAdvisor with TIME

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In today’s rising interest rate environment, a CD can be a mixed bag. Putting your money in a long-term CD could mean missing out on higher rates in the near future, but very short-term CDs don’t offer great rates over more flexible high-yield savings accounts.

Year-old CDs are a unique middle ground. One-year CDs often offer higher rates than savings or high-yield money market accounts today, without the major long-term commitment of other CD options. It is increasingly important to keep this in mind as interest rates rise.

Since March, the Federal Reserve has raised its target federal funds rate four times with more potential rate hikes to come. As the Fed continues to raise rates in its aim to balance inflation, CD rates will also rise.

“CD rates tend to mirror the federal funds rate,” says Sweta Bhargav, certified financial planner and senior financial advisor for Adviso Wealth, a financial planning and investment firm in Philadelphia. “So when the Federal Reserve raises interest rates, then [CD rates are] generally in force fairly soon after.

Compared to longer CDs, 1-year CDs can guarantee a good return and more liquidity in the event of rising rates. Here are the best prices on one-year CDs today:

Best CD prices for September 2022

Bank 1 year later Minimum deposit
Bread savings (formerly Comenity Direct) 3.00% $1,500
Sally Mae 2.75% $2500
Living Oak Bank 2.75% $2500
TIAA Bank 2.75% $1000
Sync Bank 2.75% $0
Allied bank 2.70% $0
Capital one 2.70% $0
Marcus of Goldman Sachs 2.70% $500
Discover the Bank 2.70% $2500
Barclays Bank 2.50% $0
American Express National Bank 2.25% $0
CIT Bank 0.30% $1,000

Note: APY (Annual Percentage Yield) shown is as of September 02, 2022. APY for certain products may vary by region.

How we chose these banks

This list of the best one-year CD prices follows what you’ll find on our main list of the best CD prices. Therefore, this list does not represent the entire market. We started by analyzing over 20 of the most frequently reviewed and searched banks with CDs, then used the following criteria to narrow down our top picks. These criteria are the same as those listed on our Best CD Rates page:

1. We have eliminated credit unions and institutions whose special membership requirements make them inaccessible to a large number of people. Many credit unions offer competitive terms to those who qualify; Check your area or use a credit union locator to compare rates.

2. We eliminated all institutions that do not offer three of the most popular terms: one year, three years and five years. Many experts advise using different durations to maximize your CD investment.

3. We eliminated all institutions with minimum opening deposits over $2,500. Although CDs are best for people with significant additional savings that they can afford to hold on a long-term CD, there are plenty of good options that don’t require high minimum deposits.

What is the average 1-year CD rate right now?

Currently, the average national deposit rate for 1-year CDs is 0.31%, according to data from the Federal Deposit Insurance Corporation (FDIC).

Bankrate’s average 1-year CD rate is just over 0.52%. Bankrate conducts a weekly National Deposit Account Index survey (like NextAdvisor, Bankrate is owned by Red Ventures).

Most online banks, like those among our picks for best CD rates, offer above-average rates. Currently, the 1-year CD rates on our list range from 1.90% to 2.30%.

Click here to see our most recent analysis of average CD rates.

Should I choose a one-year CD?

A one-year CD can be useful right now if you’re looking to take advantage of rising interest rates, but want to access your account within a year.

However, a certificate of deposit is not always the right choice for every savings goal, even a one-year short-term CD. For example, it’s best to keep your emergency fund in a more accessible account like a high-yield savings account or a money market account, even if they have slightly lower APYs. But if you already have an emergency fund, you can open a one-year CD to boost your savings for a wedding or a down payment on a house you plan to buy in the not-too-distant future. .

Remember, as rates continue to rise, locking your money on a CD for even a year could mean losing potentially higher rates in a few weeks or months, says Ayesha Selden, Certified Financial Planner and owner of an Ameriprise Financial Services franchise. Inc. in Philadelphia.

Pro tip

To get more flexibility from your Certificate of Deposit, consider a penalty-free CD. These types of CDs sometimes offer slightly lower rates, but you can withdraw your deposit at any time without penalty, unlike the fees you’ll pay for an early withdrawal from a traditional CD.

Comparison of 1 year, 3 year and 5 year CDs

If you’re considering opening a certificate of deposit, some of the most popular terms you’ll find are one-year, three-year, and five-year CDs. Here are some details about each and how to choose the right term for your goals:

one year cd

Because they are shorter term, one-year CDs tend to have the lowest APYs of these three CD options. The highest rates you can find from these CDs are around 2.50% today. That’s still higher than high-yield savings accounts, but the gap narrows as savings account rates go up. If you want a solid return without tying up your money for a long time, a one-year CD is a safe option, although you may still miss higher interest rates in the near future.

In today’s rising rate environment, some experts recommend using one-year CDs to build a CD ladder. For example, if you spread your savings balance over four one-year CDs, opening one each quarter for the following year, you can take advantage of rising rates and still have cash when you need your money. . When your CDs mature, you can transfer the funds to a new CD or choose another savings option that suits that future rate environment.

3 year CD

Three-year CDs are like a compromise between rate differences and the flexibility of 1-year and 5-year terms. You’ll have a slightly better APY than 1-year CDs, with rates between 2.40% and 3.25% right now, but you can avoid the long-term commitment of waiting for a five-year CD mature.

Still, with rates steadily rising, some experts don’t recommend opening CDs that are longer than a year or two. However, when rates start to fall, locking in a three-year CD can help you maintain a higher rate as APYs decline.

Like any new account, consider your savings goal before opening a 3-year CD. You have to decide if not having access to your money is worth locking in with a 1% to 2% higher APY than variable APY high yield savings accounts which can exceed current rates in a few months. And if you’re aiming for the long term, consider whether riskier but potentially more lucrative options like investing in an index fund might be better.

5 year CD

Five-year CDs have the highest rate because they require you to lock in your money at current rates for the longest time. Right now, the best five-year CD rates are over 3% APY.

Many experts we spoke to say they don’t recommend CDs with such long terms for today’s savers, as rates are expected to continue to rise over the next few months. It may be a good idea to choose a 5-year CD if rates drop, however, to make sure you get a good rate before interest rates become less attractive. They are also commonly used to secure feedback with CD ladders.

If you’re looking for very safe, long-term savings options, five-year CDs can be helpful. Alternatively, a diversified investment portfolio made up of retirement accounts and other brokerage accounts can help you earn more in the long run, if you’re willing to take on more risk.

How to open a year old CD

Before opening a CD, compare rates and other account details, including minimum deposit requirements, penalties, etc., to ensure you choose the bank that best suits your goals.

You can usually open the CD online or at a bank branch. Many of the best CD rates come from online-only banks, which means you may need to prepare to open your account online. You will be required to provide personal and contact information, as well as account information of the bank account from which you will be transferring your deposit.

1 Year CD FAQ

Will 1-year CD prices increase?

As the Federal Reserve continues to raise the target federal funds rate (to lower the current rate very high inflation rates), experts predict that CD rates will follow.

What if rates go up while I have money deposited?

If the rate offered on your Certificate of Deposit increases after you open your CD, you will not benefit from the rate increase. When you agree to open a CD, you lock in your money at the rate you agreed to when creating your account. Certain types of CDs are an exception to this rule. For example, premium CDs may allow you to claim a rate increase per CD term. And if you choose a penalty-free CD, you can withdraw your deposit at any time and deposit it in another account with a higher rate.

What if I want to withdraw my money before 12 months?

If you withdraw your money before your CD matures, you will pay a penalty on your balance (unless you choose a penalty-free CD). Typically, the penalty requires three months of interest paid.

Jack L. Goldstein