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. While some people prefer to avoid the inconvenience of transferring money in and out of online-only savings or checking accounts, the hands-off nature of CDs makes them ideal for online-only use.
Online Bank CD Rates by Term Length (months)
|First Internet Bank||1.26%||1.63%||-||2.07%||2.12%||2.22%||2.38%||2.63%|
If you're looking for a term of less than 12 months, CD rates at Ally Bank and Everbank lead the pack. However, most banks offer much better rates for CD terms that go 12 months or longer. These online banks generally offer very similar CD rates, and you'll likely find the same deal at multiple banks. If you can't decide which online bank to try, you may want to consider the other products available at each company or read our reviews for different banks.
Like CDs at more traditional institutions, online CDs also require initial minimum deposits of typically $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.