Certificates of deposit (CDs) offer higher interest rates than savings accounts, but they also lock your money away for an agreed period of time. You can expect higher CD rates by choosing longer term lengths, making larger deposits, and selecting online-only banks as opposed to traditional institutions. The chart below lists CD rates by term length at major banks.
Major Bank CD Rates by Term Length (months)
|Bank of America||0.03%||0.03%||0.07%||0.07%||0.10%||0.12%||0.15%|
Some banks offer multiple types of CDs with different rates. For example, both Chase and Suntrust offer higher interest rate on CDs that you link to their checking accounts. Wells Fargo offers two CDs with minimum deposit amounts of $1,000 and $2,500, with the bigger deposit earning a higher rate. Typically, most CDs require around $1,000-$2,000 to open. TD Bank and US Bank have lower minimum requirements at $250 and $500 respectively.
Interest Rates for CDs at Online Banks
If you’re looking to maximize your CD rate, consider online CDs. Online accounts often earn higher interest rates than traditional bank accounts, since online banks eliminate many operating costs that brick-and-mortar institutions cannot. Take a look at current CD rates online in the table below.
Most online CD offers rise sharply in rate starting at terms of 12 months or longer. Competitors tend to match each other closely as CD rates go up or down, which means that getting a good rate depends more on timing than on finding the right bank. If you can't decide which bank to try, narrow down your options by identifying companies that offer other financial products that you might find useful.
Like CDs at more traditional banks, some online CDs require minimum deposits of $1,000-$2,000. Marcus CDs—offered by Goldman Sachs Bank USA—have a lower minimum deposit of $500. You can avoid minimum deposit requirements altogether by choosing Capital One, Barclays or Ally Bank CDs.
Penalties for Early Withdrawal
If you need to access a CD before the end of its term, expect to pay an early withdrawal penalty. Most early withdrawal penalties will cost you 3, 6, 9, or sometimes even up to 24 months' worth of interest, with longer CD terms carrying higher penalties. On partial withdrawals, some banks may charge you a percentage of the amount withdrawn.
Special Cases For Withdrawing Your CD Early
There are some CD options that don't have any early withdrawal penalty. Ally Bank and Bank of America offer "risk-free" CDs that let you withdraw funds early without paying a penalty. However, that benefit causes banks to pay lower rates on risk-free CDs. In addition, almost every CD—risk-free or not—prohibits you from withdrawing anything in the first 7 days of the term. Finally, risk-free CDs sometimes have a maximum deposit limit.
If you don’t need to access your money right away, placing your money in a CD account rather than a traditional savings accounts can be a safe way to earn extra interest on your non-invested funds. Still, you should always consider the withdrawal penalties and restrictions on a CD account before setting one up.