Take Advantage of Today’s Highest CD Interest Rates
The Federal Reserve’s recent rate hikes have led to some of the highest certificate of deposit (CD) interest rates in over a decade. With the Fed’s target rate cut in September, now may be your last chance to secure a competitive rate. But with CD rates varying widely across financial institutions, it’s crucial to find the best offer for your needs.
Understanding CD Rates
Historically, longer-term CDs offered higher interest rates than shorter-term CDs. However, in today’s economic climate, the opposite is true. The highest CD rate currently stands at 4.27% APY, offered by NexBank on its 1-year CD term, although it requires a minimum opening deposit of $25,000. Marcus by Goldman Sachs offers the next-highest rate of 4.25% APY on its 1-year CD, with a minimum deposit of $500.
How CD Rates Work
The annual percentage rate (APY) determines the interest you can earn from a CD. This measure takes into account the base interest rate and how often interest compounds (typically daily or monthly). For example, a $1,000 investment in a 1-year CD with 1.81% APY would grow to $1,018.25 after one year, earning $18.25 in interest. In contrast, a 1-year CD with 4% APY would yield $40.74 in interest, bringing the total balance to $1,040.74.
Types of CDs
While interest rate is a key consideration, it’s not the only factor to think about when choosing a CD. Different types of CDs offer varying benefits, often at the cost of a slightly lower interest rate.
- Bump-up CD: Allows you to request a higher interest rate if the bank’s rates increase during the term, usually limited to one rate adjustment.
- No-penalty CD: Enables you to withdraw funds before maturity without incurring a penalty.
- Jumbo CD: Requires a higher minimum deposit (typically $100,000 or more) and often offers a higher interest rate in return.
- Brokered CD: Purchased through a brokerage, these CDs may offer higher rates or more flexible terms, but carry more risk and might not be FDIC-insured.
Finding the Best CD Rates
With so many options available, it’s essential to shop around and compare rates from different financial institutions. Our expert picks for the best CD accounts can help you get started. Remember to consider your individual needs and goals when selecting a CD, and don’t hesitate to explore other savings options, such as high-yield savings accounts and money market accounts, to find the best fit for your financial situation.
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