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Best Online CD Rates for 2019

Last Updated: 04. June 2019

Are you looking for  the best CD rates available today?  We’ve provided them below.  CD rates and providers are updated daily on this page so they are always current. Remember that many banks offer “special offers” or “internet only” CD rates, which are often higher than the CD rates available through local bank branches where you live. To ensure you are getting the best return on your money, take the time to compare the most current rates here.

CD Calculator:

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Where to Find the Best CD Rates

CD rates will vary from bank to bank, especially when you factor in longer  maturity dates. A CD with a longer term, let’s say 3 to 5 years, will generally deliver higher CD rates than a a one year CD. We suggest you take a minute to look at the difference in rates among CDs with CDs with different maturities using the above tool. Banks will sometimes offer their best CD rates exclusively online because they know online shoppers tend to be more responsive to higher rates on Certificates of Deposit than those who walk into their local bank branches.

What Is a CD or Certificate of Deposit?

A Certificate of Deposit (CD) is an account in which you deposit money for a fixed length of time, in order to earn a fixed rate of return. A CD is considered a short-term investment. The term may range from one month to five years. Just as with savings and checking accounts, if your CD is held with a bank, you are insured for up to $250,000 by the Federal Deposit Insurance Corporation (FDIC), and if it’s held with a credit union, the National Credit Union Administration (NCUA) insures your account for the same amount. As money invested in a certificate of deposit is insured, generally CDs pay a lower rate of interest than other types of investments that are not guaranteed against loss. The rates you see on this page are among the best CD rates available at this time.

Additionally, contracts for difference are entered into with a broker and not the market in which the instrument is traded.

Certificates of Deposit vs Bank Accounts

Here’s how CDs and Savings accounts differ

  • With a savings account, you can deposit and withdraw funds whenever you’d like. A CD is a time deposit. You make a deposit and leave it untouched for the life of the term. In exchange for leaving your money until the maturity date, you are paid a higher interest rate.
  • With a CD you are locked into a rate for the life of the term, whereas the interest rate paid on a savings account may be fixed or vary with market conditions. If you do want to withdraw money from a CD, you will be charged a high penalty fee.

Here’s how CDs and Checking accounts differ

  • A checking account has all the features of a savings account. An important difference is you can make payments with checks and withdraw money with debit/credit cards at any time. In exchange for the ability to access your money at any time, checking accounts pay lower interest rates than savings accounts or CDs.
  • Whereas money in a checking account is almost immediately available, a CD locks in the money for typically six months to five years, although the term could be for a shorter or longer period.

What Are the Benefits of a CD?

To recap, the top benefits of CDs are:

  • High interest rates – The biggest benefit of CDs is a higher rate of return via higher interest rates than that paid by other short-term investments like savings accounts, treasury bills and money market accounts.
  • Fixed interest rates – Your interest rate is locked in and will not fluctuate with market interest rates. If the central bank lowers the funds rate – which is the rate banks use to set their interest rates – you will still receive the same rate for the term of the CD. If interest rates are raised, on the other hand, you will be stuck with the lower rates. If you withdrawal funds early from the CD, you will have to pay an early withdrawal penalty fee.
  • Deposit insurance – Your investment is protected up to $250,000 by the FDIC.

What Are the Risks of Investing in a CD?

A CD is a low risk-low reward savings vehicle. Because your money is guaranteed by deposit insurance, you are guaranteed your principal plus the interest accrued at the end of the investment period. You are paid a rate above savings deposits for keeping your money in the CD for a fixed term. In comparison, a high yield corporate bond is a high risk-high reward investment. SpaceX recently issued a $250 million high yield bond to raise money to support its research and development of satellite and rocket launches, and humans on Mars project. Investors have no guaranteed return on these high risk ventures and so are paid a high interest rate (about 4.25% more than the average CD rate) in return for their investments.

Who Are CDs Suitable for?

A person saving for retirement fits the risk profile of a CD whereas a millennial may spike his growth portfolio with a few high yield bonds. Both types of investors can use CDs in their investment portfolio.

Following are five popular ways to invest in CDs.

The Investment Portfolio

Given the low risk and guaranteed return of a CD, this stable investment vehicle has a place in almost any investment portfolio. CDs fall under Cash and Cash Equivalents in an investment portfolio. The three major asset classes of a portfolio are stocks, bonds and cash and cash equivalents. Cash and equivalents are the most liquid assets in an investment portfolio, meaning they can be converted to cash in a year or less time. They include certificates of deposit, treasury bills, money market funds and short-term government bonds. Below are sample portfolios for three investors with different risk profiles and the typical CD allocations.

👨‍💼The Conservative Investor (The Retirement Saver) – CDs have the ideal risk-return profile for a retirement portfolio. Retirement portfolios are comprised of mostly conservative investments. As much as 30 percent of a retirement portfolio is in cash and cash equivalents.

👩‍💻The Balanced Investor – The balanced investor has an allocation of income, value and growth stocks. This investor relies on a high bond allocation to diversify risk exposure to the stock market. CDs and other short-term investments make up about 10 percent of the portfolio.

🤵The Growth Investor (The Millennial) — The growth investor has a 70 percent stock allocation, with as much as half invested in high growth and foreign stocks. Only 30 percent of the portfolio is diversified into bond and short-term investments with negative correlations to stocks. An alternative asset class (e.g., real estate, hedge funds, cryptocurrencies) may also be included in the Balanced and Growth portfolio.

👨‍🚒The Emergency Saver— Rolling over a short-term CD on a regular basis allows you to earn higher interest rates than a savings account while having access to your money in the case of an emergency. CDs can be taken out for a length as short as one month. CD ladders are often used to ensure access to emergency funds. A CD ladder takes out multiple CDs with staggered maturities. If the CD is not needed when it matures, it can be rolled over into a new CD.

👩‍🎓The Goal Saver – A CD is a good way to save for a future investment goal. The saver can earn above the savings account rate while saving for college, a house, wedding and other important life events.

CD Terms and Questions to Ask

Before shopping for the best CD rates, familiarize yourself with these terms to ensure you get the best overall CD deal.

Interest rate – The interest rate plus principal, term of loan and compounding frequency will determine your total return on a CD investment. Do not assume the advertised rate is fixed. Always ask if the interest rate is negotiable.

APY – The annual percentage yield (APY) is the interest earned over a year on a CD taking into account the interest rate and the effect of compounding.

Minimum deposit – The minimum deposit can vary from $0 to $10,000. High deposit minimums should fetch higher rates.

Withdrawal penalty – The fee charged for withdrawing your funds early can be steep. An issuer, for example, could charge 12-18 months of interest. With an 18-month penalty, if you withdrawal after 12 months, your principal will be negative (principal minus 6 months of interest). The withdrawal penalty often increases with the length of the CD.

Other fees – Check for maintenance fees and broker fees, if you are not buying directly from a bank.

What Types of CDs Can I Buy?

Banks and brokers often have preferred products they would like to sell you. These CDs may not be the best option for you. Ask about the full range of CD products they offer. The following CDs provide the investor and issuer some flexibility in changing interest rate environments.

Liquid CD – Also called no penalty CDs, liquid CDs enable you to withdraw your money at any time without paying a withdrawal penalty. You may receive a lower interest rate for this withdrawal privilege.

Bump-up CD – Also called adjustable-rate CDs, this CD allows you to upgrade to a higher interest rate. If the central bank announces plans to gradually increase interest rates over the next two years, with an adjustable-rate CD, you do not have to be locked into a lower rate.

Callable CD – A callable bond gives the issuer the option to call the CD before the maturity date. In exchange, the investor is paid a higher interest rate. If the prevailing interest rate falls from 3 percent to 2 percent, the bank may exercise its right to recall the bond. The investor faces the risk of not being able to reinvest the money in another CD at 3 percent.

Brokered CD – Fidelity, Vanguard and other brokers provide CDs issued by banks to brokers. These brokers divide the CDs into smaller units and sell them to customers.

4 Steps to Bying a CD Online:

Now that you have determined the type of CD you want to buy, you are ready to shop for the best CD rates:

1. Shop around for the best rates – You can quickly compare the best CD rates using our comparison tool above.

2. Choose a deposit insured issuer – CDs can be bought from brokerages, banks and credit unions. Ensure the issuer is insured with deposit insurance by the FDIC.

3. Choose the CD term length – The term will be determined by your investment goal. If the CD is part of a retirement fund, the term my be 5–10 years while a CD allocated to an emergency fund may be rolled over every six months.

4. Choose the payout frequency – Some issuers will give you an option on how frequently to receive your interest rate payments – monthly or annually, for example.

Pros and Cons

Pros

  • Higher interest rates than bank accounts
  • Higher interest rates with longer terms and deposit amounts
  • Adjustable rate and other flexible terms available
  • Regular income stream

Cons

  • Lower return than stocks
  • Fixed locked-in investment term
  • Interest rates could rise during the locked in term
  • Funds may not be accessible for emergencies
  • High penalty for early withdrawal

CDs are one of the best money management tools you can use. If you are an impulsive spender, best to move the temptation out of your savings account and into a CD for a fixed period. The withdrawal penalty will discourage you from engaging in reckless spending. Meanwhile, your money will be earning higher returns than other short-term investments.

FAQS

What is the minimum investment amount in a CD?

The minimum investment set by banks varies from no minimum investment to $10,000. Most minimums fall in the range of $500–$5,000. Higher minimums tend to pay higher CD rates.

What is a CD ladder?

A CD ladder is an investment approach designed to provide you with regular income year after year. For example, you could buy five CDs each with a different maturity: one, two, three, four, and five years. The longer the term, the higher the interest rate paid, as in the below example.

1-year CD – 2%

2-year CD – 2.25%

3-year CD – 2.50%

4-year CD – 2.75%

5-year CD – 3.00%

Each year, you can move the money into a checking account to live off or reinvest it in another one-year CD. If you choose to reinvest, after five years, each CD will be earning the highest interest rate. If you choose to reinvest the principal and create a recurring income stream, the interest earned may be used to pay for expenses, such as car payments, condo fees or vacations.

How is interest calculated on a CD?

The interest on a CD is compounded. This means the monthly interest earned is added to the principal and the next month’s interest is calculated from this new balance. Interest on a a CD can be compounded daily, monthly or quarterly. On a five-year CD, a $10,000 deposit at 3 percent interest compounded over the first year would equal a balance of $10,300. Adding the 3 percent interest to the new balance would create a balance of $10,609 in the second year. At maturity in the fifth year, the balance would be $11,592.74.

How much is my CD insured for if my bank goes bankrupt?

The FDIC insures CDs for up to $250,000 for each depositor.

How do I cash out of a CD before its maturity date?

To cash out of a CD early, contract your bank or broker. Also check to see if your CD is set up to automatically renew. If it is not your intended wish to renew, you could end up paying a withdrawal fee to cancel the CD.

Can a certificate of deposit be used as collateral?

Yes, a certificate of deposit is a low risk financial asset. Loans can be taken out against CDs. Because CDs are a secure financial asset with low credit risk, you may be able to obtain a lower loan rate with CD backing. Ask your banker about CD loans.

How can I get the highest interest rate?

Higher interest rates are offered for longer term and higher deposit amounts on CDs. The rates paid by CD issuers vary. Shop around for the best CD rates. Remember to ask about the early withdrawal penalty. A high penalty could leave you with lower principal than your initial investment. Compare rates on our best CD rates comparison tool, which is updated daily.

Is tax payable on a CD?

The interest earned on CDs is taxed, in the same way the interest on a savings account is taxable. However, if you hold a CD within an IRA retirement account, interest earnings may not be taxed and contributions may be tax deductible. If you have withdrawn money before maturity from a CD, you can deduct the withdrawal penalty from your taxes.

All trading carries risk. Views expressed are those of the writers only. Past performance is no guarantee of future results. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. This website is free for you to use but we may receive commission from the companies we feature on this site.
David Waring

David Waring was the founder of LearnBonds.com and has been a major contributor to the extensive library of investing news and information available on the site. Until the launch of Learnbonds.com in late 2011 there was no single site on the internet catering exclusively to the individual bond investor. This was true even though more individuals own stocks than bonds. Learn Bonds was launched to fill that gap.

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