Several banks are currently providing attractive rates on certificates of deposit. These accounts often yield higher interest than standard checking or savings options, though rates can differ significantly between institutions.
Compared to historical averages, CD rates are relatively high. However, they have been decreasing since last year when the Federal Reserve started lowering its target rate. Online banks in particular are offering competitive annual percentage yields of 4% and above.
The highest available CD rate today is 4% APY, offered by Marcus by Goldman Sachs on its one-year certificate of deposit.
The Federal Reserve reduced the federal funds rate three times in late 2024, cutting it by a total of one percentage point. This decision was made in response to slowing inflation and an improved economic outlook.
In December, the Fed announced its third rate cut of 2025, with additional reductions possible in 2026. The timing and number of future cuts remain uncertain.
While the federal funds rate does not directly control deposit interest rates, the two are correlated. Financial institutions typically lower their rates following Fed reductions. As a result, CD rates are beginning to fall again.
Opening a CD account varies by bank, but generally involves researching rates, selecting an appropriate account, preparing necessary documents, completing an application, and funding the account. Key considerations include the interest rate, term length, minimum deposit, and potential fees.