Deposit account rates are decreasing. Certificates of deposit currently provide competitive returns, with the best options still paying above 4%.
Short-term CDs for six to twelve months generally offer rates around 4% to 4.5% APY. The highest available CD rate today is 4.1% APY. United Fidelity Bank offers this rate on a 2-year CD, and Sallie Mae offers it on an 11-month CD.
In the early 2000s, CD rates were relatively higher but began to fall as the economy slowed. The Federal Reserve cut its target rate to stimulate growth. By 2009, after the financial crisis, the average one-year CD paid about 1% APY, with five-year CDs below 2% APY.
Falling rates continued into the 2010s, especially after the Great Recession. The Fed kept its benchmark interest rate near zero, leading banks to offer very low CD rates. By 2013, average rates on 6-month CDs fell to approximately 0.1% APY, while 5-year CDs averaged 0.8% APY.
Between 2015 and 2018, the Fed started gradually increasing rates again. CD rates saw a slight improvement as the economy expanded. The COVID-19 pandemic in early 2020 led to emergency rate cuts by the Fed, causing CD rates to fall to new record lows.
After the pandemic, inflation began to spiral out of control. The Fed hiked rates 11 times between March 2022 and July 2023. This led to higher rates on loans and higher APYs on savings products, including CDs.
In September 2024, the Fed decided to start cutting the federal funds rate after determining inflation was essentially under control. In 2025, it announced three additional rate cuts. CD rates are now steadily declining from their peak but remain high by historical standards.
Traditionally, longer-term CDs have offered higher interest rates compared to shorter-term CDs. This compensates for the risk of locking in money for a longer period. Today, the highest average CD rate is for a 12-month term, indicating a flattening or inversion of the yield curve.
When opening a CD, choosing one with a high APY is important. Other factors include your goals for how long to lock away funds, as withdrawing early can result in penalties. Common terms range from a few months to several years.
Rates can vary significantly among financial institutions. Research CD rates from online banks, local banks, and credit unions. Online banks often offer higher interest rates due to lower overhead costs. Ensure any online bank considered is FDIC-insured, or NCUA-insured for credit unions.
Understand the terms of the CD, including the maturity date and withdrawal penalties. Check if there is a minimum deposit requirement and that it fits your budget. While CDs offer safe, fixed returns, they might not always keep pace with inflation, especially for longer terms.