If you want to grow your savings faster, one of your New Year’s resolutions should be to consider opening a CD account. After more than two years of increases, CD rates have risen in the last months of 2023, with many banks lowering their rates across various CD terms. While annual percentage yields, or APYs, remain high as we enter 2024, experts anticipate that we will see further declines as the year progresses.
Best Credit Cards
Here are some of the best CD rates available right now and how much you could earn if you deposit $5,000 today:
– 6-month term: Highest APY 5.50%, BMO Alto; CommunityWide Federal Credit Union, estimated earnings $135.66.
– 1-year term: Highest APY 5.55%, BMO Alto; LendingClub, estimated earnings $277.50.
– 3-year term: Highest APY 4.85%, First National Bank of America, estimated earnings $763.35.
– 5-year term: Highest APY 4.75%, BMO Alto; First National Bank of America, estimated earnings $1305.80.
CD Rate Trends: 2023 vs. 2024
CD rates steadily increased from March 2022 until the end of 2023 in response to regular federal cash rate hikes. Federal cash rates affect the cost of borrowing for banks and their lending to each other. Thus, when the Federal Reserve raises the federal cash rate, banks often follow suit, increasing rates on consumer products like credit cards, loans, and savings products to attract more customers and boost their cash reserves.
As inflation approaches the Federal Reserve’s target of 2%, the last three Federal Open Market Committee meetings have resulted in a halt to interest rate increases. In response, banks have gradually reduced their rates across CD terms. Here’s how APYs compare to last month:
– 6-month term: Average APY 4.92%, monthly change -0.20%, average FDIC rate 1.49%.
– 1-year term: Average APY 5.21%, monthly change -0.95%, average FDIC rate 1.86%.
– 3-year term: Average APY 4.26%, monthly change -2.07%, average FDIC rate 1.41%.
– 5-year term: Average APY 4.03%, monthly change -1.71%, average FDIC rate 1.40%.
Reasons to Open a CD Account Now
The best way to protect yourself from future interest rate decline predictions is to lock in a great APY now. But the fixed return isn’t the only benefit of opening a CD account today.
CDs held by FDIC-insured banks or NCUA-insured credit unions are protected by federal deposit insurance up to $250,000 per individual, per institution in the event of bank failure. This makes them a low-risk way to grow your savings. Additionally, early withdrawal penalties can deter you from taking your money out before the CD matures. Most banks impose a penalty if you withdraw funds before the CD term ends.
What to Consider When Choosing a CD
In addition to competitive APY, you should also consider the following when comparing CD accounts:
– When you will need the money: Early withdrawal penalties can affect your interest earnings. So, make sure to choose a term that fits your savings timeline.
– Minimum deposit: Some CDs require a certain amount to open an account – usually between $500 and $1,000. There are other accounts that have no minimum deposit. The amount of money you have can help determine your account options.
– Fees: Fees can affect your balance. Many online banks do not charge maintenance fees. They have lower operating costs than banks with physical branches, and they pass those savings on to consumers through higher rates and lower fees. However, make sure to read the terms and conditions carefully for any account you are considering.
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Federal Deposit Insurance: Ensure that any institution you consider is a member of the FDIC or NCUA to guarantee the protection of your money in the event of a bank failure.
– Customer reviews: Read customer reviews and ratings on sites like Trustpilot to ensure that the bank is responsive, professional, and easy to work with.
Methodology
CNET reviews CD rates based on the latest APY information from issue sites. We evaluated CD rates from over 50 banks, credit unions, and financial companies. We assess CDs based on APYs, product offerings, accessibility, and customer service.
The current banks listed in CNET’s weekly CD averages are: Alliant Credit Union, Ally Bank, American Express National Bank, Barclays, Bask Bank, Bread Savings, Capital One, CFG Bank, CIT, Fulbright, Marcus by Goldman Sachs, MYSB Direct, Quontic, Rising Bank, Synchrony, EverBank, Popular Bank, First Internet Bank of Indiana, America First Federal Credit Union, CommunityWide Federal Credit Union, Discover, Bethpage, BMO Alto, Limelight Bank, First National Bank of America, Connexus Credit Union.
Source: https://www.cnet.com/personal-finance/banking/cds/todays-best-cd-rates-jan-3-2024/
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