During the week starting on February 6th and ending on February 12th, there were multiple changes to CD rates compared to the week prior.
Though the beginning of the pandemic saw emergency rate cuts, the Federal Reserve has been gradually increasing rates since March 2022. Certificate of deposit (CD) rates for various terms this week changed, with both minor increases and decreases seen across several terms. That said, since mid-December, rates have remained relatively stable.
Keep reading to learn more about this week’s highest-paying CD accounts, how they compare to the national average, and where you can open a CD account today.
CD rates by term length
|Term length||Last week’s top national rate (APY)||This week’s top national rate (APY)||Change (percentage points)|
|3 months||4.10%||4.25%||+0.15 pp|
|6 months||5.00%||5.00%||No change|
|1 year||4.90%||5.00%||+0.10 pp|
|1.5 years||5.00%||5.00%||No change|
|2 years||4.86%||4.80%||-0.06 pp|
|3 years||4.86%||4.84%||-0.02 pp|
|4 years||4.75%||4.75%||No change|
|5 years||4.63%||4.70%||+0.07 pp|
|10 years||4.40%||4.30%||-0.10 pp|
The Federal Reserve raised the federal funds rate in mid-December 2022, marking its seventh increase of that year. After four consecutive hikes of 0.75%, the latest increase was smaller at 0.50%, due to signs of decreasing inflation.
This increase has led to significant growth in deposit interest rates. For example, 3-year CD yields have quadrupled since the start of 2021. Compared to the 1.11% national average in December 2021, the current top rate of 4.86% seems incredibly high.
The FDIC recently released its latest monthly average for major CD terms, showing a notable rise over the previous month. Although December 2022 saw 20% to 40% jumps, there were still significant increases ranging from 11% to 27%.
To take advantage of these rising CD rates, consider opening one of the CD accounts below.
Highest CD rates this week
Compare the national average with the highest available
Different kinds of CDs
Deciding on a CD term is just one choice you’ll make if you open a CD account. In addition to when the CD matures and the current APY, you’ll also want to compare the different kinds of CDs available to you.
|Traditional||Traditional CDs are the most common type. An investor deposits funds at the beginning, then the CD pays a fixed interest rate over a defined period, after which they can receive the principal or roll it into another CD.||You deposit $1,000 into a six-month CD paying 3% annually. Six months later, you receive your $1,000 plus interest earned.|
|Bump-up||A "bump-up" is a traditional CD that allows you to "bump up" to a higher interest rate if the institution holding the CD raises the rate of a similar term CD. Bumping up to a new rate is typically only allowed once per term. The rates on bump-up CDs are less than that of a similar-length traditional CD.||You buy a three-year $1,000 bump-up CD with an annual rate of 2%. Six months later, the bank raises the three-year rate to 2.75%. You can ask the bank to increase your rate for the next 30 months.|
|Step-up||Like a bump-up, the CD moves to a higher rate over time. However, step-up CDs automatically raise the rate by a predetermined amount at specified times during the term.||You purchase a three-year CD at 1.75%, where the rate goes up by 0.25% every year.|
|Liquid (no-penalty)||A liquid, or no-penalty CD, does not charge early withdrawal fees, allowing you to withdraw your money if needed. These CDs typically earn a lower rate than a traditional CD of the same term.||Compared to the traditional CD example above, a similar $1,000 two-year no-penalty CD will have a rate of less than 3%.|
|Zero-coupon||Similar to a zero-coupon bond, a zero-coupon CD does not pay periodic interest payments. Instead, an investor purchases the CD at a discount to its par value, and upon the end of the term, you will receive the par value.||You purchase a two-year zero-coupon CD with a par value of $1,000, for $985. Upon maturity in two years, you will receive $1,000, earning $15 in interest.|
|Callable||Similar to a traditional CD, this CD pays a fixed interest rate for a set period. However, the financial institution has an option to "call" or buy back the CD before the term ends. An institution would do this if the interest rates have fallen below the level they are paying this callable CD.||You buy a two-year CD paying 3% annually that is callable after one year. The prevailing interest rate drops during the first year so similar CDs pay 1.5%. The institution exercises its call provision, repurchasing your CD. You receive the original principal plus any interest earned.|
|Brokered||A brokered CD is sold through a brokerage firm. This means you don't have to open an account at multiple banks to shop for the best rates. Instead, you can have one account hold CDs of different types, maturities, and financial institutions. A brokerage firm can also buy or sell CDs on the secondary market.||You open a brokerage account with a firm and buy a CD offered through the brokerage platform. The CDs can take the form of any CD on this list.|
|High-yield||As the name implies, these are typically traditional CDs with a relatively high yield.||You purchase a two-year high-yield CD that pays 3.5%, whereas other CDs are paying 2.75%.|
|Jumbo||Jumbo CDs require a large upfront deposit, typically $100,000 or more. An institution could reward an investor for a large deposit with a higher rate, though that may not be the case.||You buy a $250,000, two-year jumbo CD paying 2.5%. By comparison, a traditional non-jumbo two-year CD pays 2.4% and requires only $1,000.|
|Add-on||Most CDs require you to deposit all of the CD funds upfront and don't allow further contributions. An add-on CD lets you add more money during the term, though there may be limits on the number of times you can "add on."||You purchase a two-year add-on CD paying 2% for $1,000. Then, every six months, you deposit an additional $500. At the end of the term, you receive the deposited funds plus any interest earned.|
|Foreign currency||A foreign currency CD allows you to use U.S. dollars to initially purchase a CD. Those funds are then converted to a foreign currency (pound, euro, etc.) and then back to U.S. dollars at maturity. This CD introduces additional risks to your money, such as the risk of a dropping foreign exchange rate.||You buy a two-year euro-denominated CD paying 3% for $10,000. Your money is converted into euros at the current exchange rate and earns interest. Upon expiration, the principal and any interest are converted back to the U.S. dollar at the exchange rate at that time.|
How does the Federal Reserve change CD rates?
Every six to eight weeks, the Federal Reserve’s rate-setting committee holds a two-day meeting to determine the future of the federal funds rate, which can be increased, decreased, or kept unchanged.
The federal funds rate does not directly impact the interest rates offered by financial institutions for CD deposits. Rather, it is the rate at which institutions lend or borrow their excess reserves to each other overnight. However, a higher federal funds rate creates an incentive for institutions to seek deposits from consumers as a cheaper alternative, leading them to increase savings, money market, and CD rates.
In response to the pandemic, the Fed announced a 0% emergency rate cut in 2020, and the rate remained at that level for two years. In March 2022, the Fed began increasing the rate by 0.25%, with a second increase of 0.50% in May. This was followed by four larger hikes of 0.75% in June, July, September, and November.
The recent easing of inflation led to a more modest 0.50% increase at the December meeting. The Fed has indicated that there will be additional increases in 2023, though it is expected that these will be smaller quarter-point increases.
National average CD rates
How are CD rates expected to change?
The Fed’s five rate hikes in 2022 were just the start. The Fed may raise rates further to combat inflation, so we may see more hikes throughout 2023. Although the Fed rate doesn’t affect fixed interest rates for long-term debt like mortgages, it does impact short-term consumer debt and deposit rates. This means that CD rates may continue to rise this year and next.
That said, you may still want to consider investing in a CD now, though you might want to stick with a shorter-term certificate. By doing so, you can take advantage of higher rates in the future. Another option is to choose a “raise your rate” or “step-up” CD, which allows you to increase your existing CD’s rate if rates go up significantly.
- For the week of February 6, 2023, CD rates fluctuated compared to the week prior, with minor changes in several CD terms.
- Since mid-December 2022, CD rates have remained relatively stable, with a gradual increase in rates from the Federal Reserve.
- The Federal Reserve plans to raise CD rates further to combat inflation, with more hikes expected in 2023.
View Article Sources
- National Rates and Rate Caps – Previous Rates — Federal Deposit Insurance Corporation
- Credit Union and Bank Rates 2022 Q1 — National Credit Union Administration
- What is a Certificate of Deposit (CD)? — SuperMoney
- How Do CDs Work? Facts You Need To Know — SuperMoney
- How To Open a Certificate of Deposit (CD) — SuperMoney
- How To Renew a Certificate of Deposit (CD) & 3 Alternatives To Consider — SuperMoney
- 5 Tips on How to Invest with CDs — SuperMoney
- CDs vs. Bonds: Differences And Pros & Cons of Each — SuperMoney
- The Pros and Cons of CD Investing in 2023 — SuperMoney
- CDs vs. High-Yield Savings: Which One Is a Better Option? — SuperMoney
- How are CDs Taxed? Interest, Maturity, and Withdrawals — SuperMoney
- Short-Term CD vs. Long-Term CD: Comparison & Which To Choose — SuperMoney
- CD Ladder Strategy: Explanation, Pros & Cons — SuperMoney
- Money Market Account Vs. CD: Which is Better for Investing? — SuperMoney
- Saving For Retirement With CDs: Is It Worth It? — SuperMoney
- What Is An IRA CD? Explanation, Pros & Cons — SuperMoney
- Are CDs a Safe Investment? — SuperMoney