5 CDs To Consider Before Another Rate Cut

The Federal Reserve’s decisions to raise or lower its benchmark rate can have significant effects on savings products, including certificates of deposit (CDs). When the Fed signals potential rate changes, many savers look to CDs as a way to lock in current yields.

Fixed-rate CDs can be particularly valuable in a falling-rate environment. By locking in a high yield now, you’ll continue to earn that APY throughout the CD’s term, even if your bank starts to lower the APYs on new CDs it issues.

Here are five competitive CDs of various term lengths, all available from well-rated, federally insured banks and credit unions.

Bread Savings: 6-month CD

• APY: 4.45%
• Minimum deposit requirement: $1,500
• Interest you’d earn with a $10,000 deposit: $220
• Bankrate’s rating of Bread Savings’ CDs: 3.8 stars out of 5
• Bankrate’s overall rating of Bread Savings: 3.8 stars out of 5

Additional details: Bread Savings is an online-only bank that offers nine terms of standard CDs that range from three months to five years. The bank’s CDs and savings account all earn APYs that are well above national averages.

See more top six-month CD rates.

Marcus by Goldman Sachs: 1-year CD

• APY: 4.20%
• Minimum deposit requirement: $500
• Interest you’d earn with a $10,000 deposit: $420
• Bankrate’s rating of Marcus by Goldman Sachs CDs: 4.6 stars out of 5
• Bankrate’s overall rating of Marcus by Goldman Sachs: 3.9 stars out of 5

Additional details: Marcus by Goldman Sachs offers one of the highest yields among one-year CDs Bankrate monitors. Its minimum deposit requirement falls in line with what various other banks require. In total, the bank offers plenty of different CD terms, including no-penalty CDs and bump-up CDs.

See more top one-year CD rates.

Connexus Credit Union: 2-year CD

• APY: 4.06%
• Minimum deposit requirement: $1,500
• Interest you’d earn with a $10,000 deposit: $829
• Bankrate’s rating of Connexus Credit Union‘s CDs: 3.3 stars out of 5
• Bankrate’s overall rating of Connexus Credit Union: 4.0 stars out of 5

Additional details: Connexus Credit Union offers five share certificates (the credit union term for certificates of deposit) in standard terms from one to five years. The yield on its two-year CD is strong, while yields on the other terms are middling to low. And the minimum deposit is a bit steep at $5,000, compared to other CDs.

See more top two-year CD rates.

First Internet Bank of Indiana: 3-year CD

• APY: 3.97%
• Minimum deposit requirement: $1,000
• Interest you’d earn with a $10,000 deposit: $1,239
• Bankrate’s rating of First Internet Bank of Indiana‘s CDs: 4.1 stars out of 5
• Bankrate’s overall rating of First Internet Bank of Indiana: 4.2 stars out of 5

Additional details: First Internet Bank of Indiana offers a wide range of CD terms, all of which currently earn competitive APYs. However, the minimum deposit is slightly higher than what you could find elsewhere.

See more top three-year CD rates.

Popular Direct: 5-year CD

• APY: 4.15%
• Minimum deposit requirement: $10,000
• Interest you’d earn with a $10,000 deposit: $2,254
• Bankrate’s rating of Popular Direct‘s CDs: 3.5 stars out of 5
• Bankrate’s overall rating of Popular Direct: 3.7 stars out of 5

Additional details: Popular Direct is an online bank and a subsidiary of Popular Inc., a more than 130-year-old financial services company. Popular Direct offers CDs in eight terms ranging from three months to five years. With a $10,000 minimum deposit to open, these CDs are geared toward serious savers.

See more top five-year CD rates.

Note: The above CD rates are accurate as of Sept. 15 and are subject to change at any time.

Factors to consider when selecting a CD

Three important factors to keep in mind when shopping around for a CD include APY, term length and minimum deposit requirement.

APY

APY is a percentage that indicates how much interest your account will earn in a year, including compound interest — which is the interest you’ll earn on interest.

It pays to shop around for a CD that earns a high APY, considering competitive banks are offering rates several times greater than average CD rates. For instance, the average APY on a one-year CD is currently 1.76 percent, while you can find APYs of up to 4.40 percent from competitive online banks.

What does this translate to in dollars? Sometimes, a lot. For example, putting $10,000 into a top-earning one-year CD at 4.50 percent APY will earn you $450 in interest; depositing that amount into a one-year CD that pays a rock-bottom APY of 0.01 percent will earn you one dollar.

Term length

In addition to looking for a CD that earns a high yield, it’s important to choose a term length with which you’re comfortable. Only lock money into a CD that you’re sure you won’t need access to before the CD’s maturity date. Otherwise, you’ll likely be subjected to an early withdrawal penalty that could eat away at your interest and possibly even some principal.

When choosing a term length, consider when you’ll want to access the funds again. For instance, if you plan to purchase a home in two years, an 18-month CD could be a way to earn some interest on money for your down payment.

A no-penalty CD is an option that provides a fixed APY and doesn’t charge a penalty for early withdrawals. However, note you’ll likely be earning a lower yield than you would from a standard CD.

Minimum deposit requirement

Many CDs require a set minimum deposit amount, and this varies from bank to bank. Synchrony Bank, which we listed above, doesn’t require any set minimum deposit amount. Other banks require minimum amounts of $500, $1,000 or $2,500, and some even require you to deposit at least $10,000.

One perk of a fixed-rate CD is you can determine up front exactly how much money the CD will be worth when it matures. Bankrate’s CD calculator can come in handy in figuring out this amount.

Similar to considering a CD’s term length, determine up front how much you’re comfortable locking away in a CD. If you’ll need the money sooner for emergencies or to pay for living expenses, the money is better off in a liquid account, like a savings account.

Bottom line

Locking in a fixed-rate CD now that earns a high yield, on a term you’re comfortable with, allows you to benefit from that APY until the CD matures — even if banks continue to lower their rates on new CDs.

Look for FDIC- or NCUA-insured institutions that consistently offer competitive rates, and consider creating a CD ladder to maintain flexibility while maximizing your returns.

Always look at the full picture – including minimum deposits and any early withdrawal penalties – rather than focusing solely on the APY.