CD rates are not rising across the board, but they remain historically high compared to the past decade

Certificate of Deposit rates have stopped climbing and have actually begun to drift downward in recent months. The Federal Reserve held its benchmark interest rate steady through 2024 after raising it aggressively in 2022 and 2023. Banks set CD rates based partly on what the Fed does, so when the Fed paused its rate increases, banks stopped raising CD rates too. Some banks have already started lowering their rates on new CDs.

That said, current CD rates remain much higher than they were five years ago. A five-year CD that paid 0.05% in 2021 might pay 4% to 5% today, depending on the bank. The question for you is not whether rates are going up—they are not—but whether the rates available right now are worth locking in your money for the term you choose.

Key Takeaways

  • CD rates peaked in late 2023 and early 2024 and have been declining slowly since then as banks respond to the Federal Reserve holding rates steady.
  • Rates vary significantly by bank and by CD term length, so a one-year CD at one bank may pay 4.5% while another pays 3.8%.
  • Locking in a rate today means you cannot access that money without a penalty until the CD matures, so compare the rate against what you might earn if rates fall further.
  • Online banks and credit unions typically offer higher rates than large national banks on the same CD terms.

Why CD rates stopped going up

The Federal Reserve controls the federal funds rate—the interest rate banks charge each other for overnight loans. In March 2022, the Fed began raising this rate to fight inflation, and it kept raising it for 11 consecutive meetings. Banks responded by raising CD rates to attract deposits. By July 2023, the Fed had raised its rate to a range of 5.25% to 5.50%, the highest level in 22 years.

In September 2023, the Fed stopped raising rates. It held the federal funds rate steady through the end of 2024. When the Fed signals it will not raise rates further, banks have less reason to raise CD rates—they already have the deposits they need at current rates. Some banks began lowering CD rates in the second half of 2024 because they expected the Fed might eventually lower its own rate, and they wanted to reduce what they would owe depositors when that happened.

The Fed did begin lowering its rate in September 2024, cutting it by 0.25 percentage points. Banks typically respond to Fed rate cuts by lowering CD rates within weeks or months. If the Fed continues cutting, CD rates will likely continue falling.

How to find the highest rates available right now

CD rates vary widely by bank and by term. A one-year CD at Bank of America might pay 4.35%, while the same term at Ally Bank pays 4.75%, and at a local credit union pays 4.80%. The difference adds up: on a $10,000 CD, the 0.45 percentage point gap between Bank of America and Ally means $45 more in interest over one year.

Online banks and credit unions almost always offer higher rates than large national banks. Online banks have lower overhead costs and compete aggressively for deposits. Credit unions are member-owned and often prioritize competitive rates. If you have an account at a big national bank, you are likely earning less than you could elsewhere.

To compare rates, visit websites that track CD rates across multiple banks—sites like Bankrate, DepositAccounts, or your credit union's own rate page. These sites update daily and let you filter by term length and bank type. Write down the top three rates for the term you want, then visit each bank's website to confirm the rate is still current and check the minimum deposit required.

The trade-off between locking in now and waiting for rates to fall further

When you buy a CD, you agree to leave your money untouched until the maturity date. If you need the money before then, you pay an early withdrawal penalty—usually three to six months of interest, though it varies by bank and term. That penalty exists because the bank is counting on keeping your money for the full term.

If you lock in a 4.75% rate on a one-year CD today and rates fall to 4.25% by next month, you made the right call—you are earning more than new CDs would pay. But if rates rise to 5.25%, you are stuck earning 4.75% unless you pay the penalty and move your money. The longer the CD term, the bigger this risk becomes. A five-year CD locks you in for 60 months; if rates rise significantly, you will feel that opportunity cost.

One strategy is to use a CD ladder: buy multiple CDs with different maturity dates instead of one large CD. For example, put $2,000 each into one-year, two-year, three-year, four-year, and five-year CDs. When the one-year CD matures in 12 months, you can reinvest it at whatever rate is available then. This spreads your risk and gives you flexibility without locking all your money away at one rate.

What happens when your CD matures

When a CD reaches its maturity date, the bank returns your principal plus the interest you earned. Most banks then automatically renew the CD for another term at the current rate unless you tell them not to. That renewal happens at whatever rate the bank is offering on that term at that moment—not the rate you originally locked in.

If rates have fallen, the renewal rate will be lower, and you will earn less interest on the next term. If rates have risen, the renewal rate will be higher. You do not have to renew with the same bank. You can withdraw your money and move it to a different bank offering a better rate. There is no penalty for withdrawing after maturity—the penalty only applies if you withdraw before the maturity date.

Set a calendar reminder for about two weeks before your CD matures. That gives you time to shop around and decide whether to renew with your current bank or move your money elsewhere.

How current rates compare to historical averages

CD rates today are high by recent standards but not historically high. In the early 2000s, five-year CDs regularly paid 5% or more. In 2007, before the financial crisis, some banks offered five-year CDs at 5.5%. After the crisis, rates collapsed. From 2010 through 2021, five-year CDs typically paid between 0.5% and 2%. The jump to 4% and above in 2023 felt dramatic because it was dramatic compared to what savers had experienced for over a decade.

But compared to the 1980s and 1990s, when CD rates sometimes exceeded 10%, today's rates are modest. The point is not whether rates are "good" in absolute terms—it is whether they are good for your situation. If you have money you will not need for five years and you can lock in 4.5%, that is a concrete return you can count on. You do not have to guess whether the stock market will go up or down.

What to watch if you are deciding whether to buy a CD now

Pay attention to what the Federal Reserve signals about future rate cuts. The Fed holds eight meetings per year and announces its decision on the federal funds rate after each one. If the Fed says it expects to cut rates further, CD rates will likely fall, and you might want to lock in a rate now before they drop. If the Fed signals it will hold rates steady, CD rates may stabilize where they are.

Also watch the term you choose carefully. One-year and two-year CDs are less risky because you will have access to your money sooner and can reinvest at a new rate if conditions change. Five-year and longer CDs lock you in for much longer, so the rate needs to be significantly higher to justify that commitment. Right now, the difference between a one-year rate and a five-year rate is often less than 0.5 percentage points, which may not be enough to justify locking your money away for five years.

Frequently Asked Questions

Will CD rates go back up if the Fed raises rates again?

Yes. If the Fed raises its benchmark rate, banks will raise CD rates in response. However, the Fed typically only raises rates when inflation is rising, which usually means the cost of living is going up. Higher CD rates would be good for savers but would come during a time when your money is worth less overall.

Should I buy a CD now or wait to see if rates fall further?

That depends on how long you can lock your money away and what you think will happen next. If you need the money within a year or two, a short-term CD at today's rate is low-risk. If you are willing to lock money away for five years, you are betting rates will not rise much higher—a reasonable bet given the Fed's current stance, but not certain.

Is there a penalty for withdrawing from a CD before it matures?

Yes. Most banks charge an early withdrawal penalty equal to three to six months of interest, though some charge more or less. The penalty is spelled out in the CD's terms before you buy it. You do not pay a penalty if you wait until the maturity date to withdraw.

Can I move money from one CD to another if rates go up?

Only after the CD matures without paying a penalty. If rates rise while your CD is still active, you can withdraw early and move the money, but you will lose some of the interest you earned. It is usually not worth it unless rates rise by more than the penalty amount.

Do all banks offer the same CD rates?

No. Rates vary significantly by bank, and online banks almost always offer higher rates than large national banks. Credit unions also tend to offer competitive rates. Always compare rates across at least three banks before buying a CD.