Average CD interest rate?
Average CD interest rate?
National Average CD Rates: Unlocking the Secrets to Higher Returns
Are you tired of your money just sitting in a traditional savings account, not earning much interest? Well, there’s a solution that can help you grow your savings at a faster rate. It’s called a Certificate of Deposit, or CD, and it offers higher interest rates than your average savings or money market account. Let’s dive into the world of CDs and explore how you can make the most out of them.
Getting to Know CDs
A CD is an excellent savings option if you’re willing to tuck away your money for a few months or years. While it does come with an early withdrawal penalty, the higher interest rates it offers can make it worth considering. But what exactly are the rates you can expect from a CD?
According to the Federal Deposit Insurance Corporation (FDIC), the average CD pays between 0.20% to 1.72% APY, depending on the term length. However, many financial institutions pay higher CD rates than the national average. In fact, the best CDs can offer more than 10 times the national average!
Exploring National Average CD Rates
To give you a better idea of what current rates look like, let’s take a closer look at the national average CD rates. The FDIC, which oversees banks, keeps track of the average interest rates paid on CDs. This data includes both banks and credit unions. Here’s the average interest rate for a CD with a minimum deposit of $10,000, according to the FDIC:
Term Length | Average APY |
---|---|
3 months | 0.20% |
6 months | 0.29% |
1 year | 0.32% |
2 years | 0.52% |
3 years | 0.72% |
4 years | 0.90% |
5 years | 1.39% |
CD Interest Rates at National Banks
When it comes to national banks, it’s essential to understand the difference between standard rates and relationship rates. Relationship rates are generally offered to customers who have a specific checking account. If you don’t qualify for a relationship rate, you’ll earn the standard CD rate.
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At some banks, the difference between standard rates and relationship rates is significant. For example, at Chase, the standard CD rate is a measly 0.01% on all terms. However, Chase CD relationship rates can vary from 0.02% to an impressive 4.50% APY. That’s quite a difference! Additionally, brick-and-mortar banks often offer promotional CDs with higher interest rates than their standard ones. U.S. Bank, for instance, has promotional CDs that pay up to 4.85% APY.
Here are the CD rates for standard and promotional CDs at some of the biggest national banks:
Bank | Standard CD Rates (APY) | Promotional CD Rates (APY) |
---|---|---|
Chase | 0.01% | Varies from 0.02% to 4.50% |
U.S. Bank | 0.05% to 0.25% | Up to 4.85% |
Wells Fargo | 0.01% to 0.10% | Varies |
CD Interest Rates at Online Banks
Unlike national banks, online banks offer more straightforward CD options. These banks typically provide competitive CD rates on a variety of terms, without any relationship rates to confuse you.
Here are the interest rates for CDs at some of the biggest online banks:
Bank | CD Rates |
---|---|
Ally Bank | 0.25% to 0.60% |
Marcus by Goldman Sachs | 0.25% to 0.85% |
Discover Bank | 0.25% to 0.90% |
CD Interest Rates at Credit Unions
Credit unions are another great option for finding high-interest CDs. Just keep in mind that the interest rate may vary depending on the deposit amount. For example, at Alliant Credit Union, you could earn a higher interest rate on select CDs with a minimum opening deposit of $75,000.
Here are the CD rates for standard CDs at some of the biggest credit unions:
Credit Union | CD Rates |
---|---|
Navy Federal Credit Union | 0.25% to 1.70% |
Pentagon Federal Credit Union | 0.50% to 1.75% |
Alliant Credit Union | 0.50% to 1.75% |
Average CD Rates FAQs
How CD Rates Can Change
CDs offer a fixed interest rate that stays the same for the entire term. However, bank interest rates, in general, can fluctuate. This means that once a CD term ends, the rate offered for renewing the account may not be the same.
Scott Stanley, CFP and founder of Pharos Wealth, explains that CD rates are influenced by what the Federal Reserve does. If the Federal Reserve raises interest rates, it can lead to an increase in CD rates across the market. In 2023, the Federal Reserve has already raised interest rates three times to combat inflation. Interestingly, short-term CDs are currently more competitive than long-term ones.
How to Find Good CD Interest Rates
Most of the best CD rates are available at online financial institutions. When searching for rates, it’s essential to research a variety of banks and compare different options. Patrina Dixon, CFEI, RFC, and owner of P. Dixon Consulting, LLC, suggests that federal insurance should be a requirement.
Up to $250,000 per depositor, per category, is safe in a CD at an FDIC-insured bank or NCUA-insured credit union. So, make sure your money is FDIC-insured, ensuring that you’re protected even if anything happens to the bank.
With this wealth of information, you can now unlock the secrets to higher returns on your savings. Don’t let your money stagnate in low-interest accounts. Take advantage of attractive CD rates and watch your savings grow faster than ever. Compare rates, consider online banks, and make an informed decision that suits your financial goals.