The highest CD rates are currently offered by online banks and credit unions, not traditional brick-and-mortar banks

The banks paying the most for certificates of deposit (CDs) right now are primarily online-only institutions and some credit unions. Online banks like Marcus, Ally, and American Express have lower overhead costs than physical branches, so they pass higher rates to savers. Credit unions often offer competitive rates to their members as well. The exact highest rate changes daily because banks adjust their offerings based on what the Federal Reserve does and what competitors are paying.

Traditional banks — the ones with branches on your street — typically pay less. A Chase or Bank of America CD might pay 0.01% to 0.50% annual percentage yield (APY), while an online bank CD for the same term might pay 4% to 5% APY. The difference compounds: on a $10,000 CD, that gap means hundreds of dollars over a year.

The rate you see also depends on how long you lock your money away. A 3-month CD pays less than a 12-month CD, which pays less than a 5-year CD. Longer terms mean higher rates because the bank gets to use your money for longer.

Key Takeaways

  • Online banks and credit unions consistently offer higher CD rates than traditional banks because they have lower operating costs.
  • CD rates change daily and vary by term length — a 1-year CD will pay more than a 3-month CD at the same bank.
  • You can compare current rates across multiple banks on financial websites like Bankrate, DepositAccounts, or the banks' own websites.
  • The highest rates are usually found on terms between 6 months and 2 years; very short or very long terms often pay less.
  • Your money is insured up to $250,000 per bank through FDIC protection, so a higher rate at a smaller online bank carries the same safety as a big bank.

How to find the current highest rates

The fastest way to see what banks are paying right now is to visit a rate-comparison site. Bankrate, DepositAccounts, and DepositAccounts.com let you filter by term length and sort by APY. These sites update daily and show rates from dozens of banks at once. You can also go directly to a bank's website and look for their CD rates page, though you will have to check multiple banks to compare.

When you look at a rate, check the APY (annual percentage yield), not just the interest rate. APY includes compounding and tells you the true return. Also note any minimum deposit required — some banks require $500, others $25,000 or more. A higher rate might not matter if you cannot meet the minimum.

Why online banks pay more than traditional banks

Online banks have no physical locations, no tellers, and no branch staff. They save millions on rent, utilities, and salaries. Those savings let them pay you more for your deposits. They make their money on loans and other services, not by keeping the spread between what they pay you and what they charge borrowers.

Traditional banks have branches because customers expect them, but branches are expensive. A bank with 500 locations across the country has to pay for all of that real estate and all of those employees. To stay profitable, they pay less on savings products and charge more on loans. If you are willing to bank online, you benefit from their lower costs.

Credit unions as an alternative to online banks

Credit unions are member-owned cooperatives, not profit-driven corporations. Many offer CD rates that match or beat online banks. You have to be a member to open a CD, but membership is often open to anyone in a certain geographic area, profession, or employer group. Some credit unions let you join if you live or work in their service area; others are open to anyone who donates to a specific charity.

Credit union CDs are insured the same way as bank CDs — up to $250,000 per account through the National Credit Union Administration (NCUA), which is the credit union equivalent of FDIC insurance. If you already belong to a credit union, check their CD rates before opening an account elsewhere.

The relationship between CD rates and Federal Reserve decisions

When the Federal Reserve raises its benchmark interest rate, banks raise the rates they pay on CDs within days or weeks. When the Fed cuts rates, CD rates fall. This is why CD rates have moved so much over the past few years — the Fed raised rates aggressively from 2022 to 2023, and banks competed to attract deposits by offering higher and higher rates.

If you think the Fed might cut rates soon, locking in a longer-term CD at today's rate protects you. If you think rates might go higher, a shorter-term CD lets you reinvest at a better rate when it matures. Neither prediction is certain, so many savers use a "CD ladder" — opening multiple CDs with different maturity dates so that some money becomes available to reinvest every few months.

Comparing rates across different CD terms

Banks usually pay more for longer terms. A 5-year CD might pay 4.75% APY while a 6-month CD pays 4.25% APY at the same bank. But this is not always true — sometimes short-term rates are higher if the Fed is expected to cut rates soon. The shape of the rate curve changes.

The sweet spot for the highest rates is usually 1 to 2 years. Very short CDs (3 months) and very long CDs (5 years) often pay less because fewer people want them. If you are comparing rates, look at the 1-year and 2-year terms first — that is where you will usually find the best value.

What happens when your CD matures

When a CD reaches its maturity date, the bank returns your principal plus all the interest you earned. You then have a choice: open a new CD at whatever rate the bank is offering that day, move the money to a savings account, or withdraw it. Most banks have a grace period (usually 7 to 10 days) during which you can make that choice without penalty.

If you do nothing and the grace period passes, many banks automatically renew your CD at the current rate for the same term. Read your CD agreement to see what your bank does. If rates have fallen, you might not want to renew — you could move the money to a higher-paying bank instead.

Frequently Asked Questions

Can I withdraw money from a CD early without a penalty?

Most CDs charge an early withdrawal penalty if you take your money out before the maturity date. The penalty is usually a certain number of months of interest — for example, 3 months of interest on a 1-year CD. Some banks offer "no-penalty CDs" that let you withdraw without penalty, but they pay lower rates to offset that flexibility.

Is my money safe in an online bank CD?

Yes. Online bank CDs are insured by the FDIC up to $250,000 per account, the same as CDs at traditional banks. The FDIC insurance does not depend on whether the bank has branches. As long as the bank is FDIC-insured (which you can verify on the FDIC website), your money is protected.

What is the difference between APY and interest rate on a CD?

The interest rate is the percentage the bank pays, but APY (annual percentage yield) includes the effect of compounding — earning interest on your interest. If a CD compounds monthly, you earn slightly more than the stated rate. Always compare APY, not the interest rate, when choosing between CDs.

Should I open multiple CDs at different banks to get higher rates?

You can, and many savers do. Each bank's FDIC insurance covers up to $250,000 per account, so opening CDs at two banks lets you insure $500,000 total. Opening CDs at different banks also lets you compare which one offers the best rate for your preferred term.

What happens if a bank fails while I have a CD there?

The FDIC takes over the bank and pays you your principal plus accrued interest up to $250,000. You will not lose money on an FDIC-insured CD, even if the bank fails. Bank failures are rare, and the FDIC has not let a depositor lose money since the agency was created in 1933.