We believe everyone should be able to make financial decisions with confidence. And while our site doesn’t feature every company or financial product available on the market, we’re proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward — and free.
So how do we make money? Our partners compensate us. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services. Here is a list of our partners.
Short-Term vs. Long-Term CD: Which Do I Choose?
Shorter terms have more flexibility but traditionally lower rates, while longer terms tend to have the opposite. CD ladders use both.
Many, or all, of the products featured on this page are from our advertising partners who compensate us when you take certain actions on our website or click to take an action on their website. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.
Updated · 3 min read
How is this page expert verified?
NerdWallet's content is fact-checked for accuracy, timeliness and relevance. It undergoes a thorough review process involving writers and editors to ensure the information is as clear and complete as possible.
Spencer Tierney is a consumer banking writer at NerdWallet. He has covered personal finance since 2013, with a focus on certificates of deposit and other banking-related topics. His work has been featured by The Washington Post, USA Today, The Associated Press and the Los Angeles Times, among others. He is based in Oakland, California.
Sara Clarke is a former Banking editor at NerdWallet. She has been an editor and project manager in newsrooms for two decades, most recently at U.S. News & World Report. She managed projects such as the U.S. News education rankings and the Best States rankings. Sara has appeared on SiriusXM Business Radio and iHeartMedia’s WHO Newsradio and has been quoted in The Salt Lake Tribune, The St. Paul (Minnesota) Pioneer Press and other outlets. She is based near Washington, D.C.
Assistant Assigning Editor
The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.
Certificates of deposit can help with your savings goals as long as you know how long you’ll need them. When getting one, do you want a short- or long-term CD? Or one in the middle?
Short-term CDs tend to refer to CDs for one year or less, mid-term CDs usually mean two- to three-year CDs, and long-term CDs usually describe four-year CDs and longer.
CDs, called share certificates at credit unions, tend to offer higher interest rates than savings accounts and require you to lock in your money for a set period, or term. CD terms typically range from three months to five years.
The trick is to find a CD with the right maturity date for you. If your term’s too short, you might miss out on a higher rate available for another term. If your term’s too long, you may need the money prematurely and pay an early withdrawal penalty to get it. CDs can be great savings tools if the term works for you and you scout out the best rates. Here’s what to keep in mind when choosing a CD term length.
What is a CD term?
A CD term is the period of time a CD is opened, and chosen by a customer in advance. Standard CD terms start at three months and go up to five years, though there are some banks with CD terms as short as one month and as long as 10 years.
🤓Nerdy Tip
Many CD terms tend to be measured in years, but sometimes CDs are described in months. Here’s a quick reference for some terms: 12 months = 1 year; 18 months = 1.5 years; 30 months = 2.5 years; 48 months = 4 years; 60 months = 5 years; 84 months = 7 years; 120 months = 10 years.
The shortest CD terms give you the most flexibility in accessing your funds. When a CD expires and you don’t need the money yet, you might decide to renew it once or multiple times within one or two years. And if you do withdraw early, the penalty tends to equate to a lower dollar amount than you would pay for breaking the seal on a long-term CD. (See more about CD early withdrawal penalties at a variety of banks.)
The main historical disadvantage to short-term CDs has been settling for lower ratescompared with midrange and long-term CDs. The national average rates are 1.39% annual percentage yield for a three-month CD and 1.63% APY for a one-year CD. You can find at least double those rates at online banks, but regardless, your money grows for a short while only and you’ll need to have a plan for what to do with those funds more quickly than for longer-term CDs.
Consider a no-penalty CD if you want a fixed rate and more flexibility. True to its name, there’s no cost if you withdraw before the term ends, typically in exchange for slightly lower rates than regular CDs offer. Common term lengths for competitive no-penalty CDs tend to be 11 months and 13 months. (If you’re curious, see our list of the best no-penalty CD rates.) Or, if you decide flexibility is more important than a fixed rate, check out the best high-yield savings accounts.
4.25%Annual Percentage Yield (APY) is accurate as of 01/09/2025. APY may change at any time before or after the account is opened. Available only online.
5.00%Annual Percentage Yield (APY) is accurate as of June 17th, 2025. Start earning 2.50% APY, then qualify to earn 5.00% APY on your balance up to $5,000.00 and 2.50% APY on balances over $5,000 next month by 1) Receiving direct deposit(s) totaling $1,000 or more; and 2) Ending the month with a positive balance in all your Varo Accounts. No fees, no minimums required. Rates subject to change at any time.
4.00%Annual Percentage Yield (APY) may change at any time and fees may reduce earnings. Please visit etrade.com/ratesheet for more information.
Min. balance for APY
$0
These cash accounts combine services and features similar to checking, savings and/or investment accounts in one product. Cash management accounts are typically offered by non-bank financial institutions.
These cash accounts combine services and features similar to checking, savings and/or investment accounts in one product. Cash management accounts are typically offered by non-bank financial institutions.
Up to 4.50%The Base Annual Percentage Yield (APY) is 4.00% as of 06/30/25, but is variable and is subject to change. If you are eligible for the overall boosted rate of 4.50% offered in connection with this promo, your boosted rate is also subject to change if the base rate decreases during the three-month promotional period. This limited-time promo offers eligible new Wealthfront clients a 0.50% APY increase over the standard variable base APY for 3 months on up to $250K in their personal Cash Accounts. Cash Account offered by Wealthfront Brokerage LLC, Member FINRA/SIPC, and is not a bank. APY (is representative, requires no minimum) is paid from our Program Banks.
4.65%Cash Reserve offered by Betterment LLC and requires a Betterment Securities brokerage account. Betterment is not a bank. Learn More (https://www.betterment.com/cash-portfolio). Annual percentage yield (variable) is 4.00% as of 12/27/24, plus a 0.65% boost (“APY Boost”) for new clients with a qualifying deposit. $10 min deposit for base APY. Terms apply (betterment.com/boost); if the base APY changes, the Boosted APY will change. FDIC insurance provided by Program Banks (https://www.betterment.com/cash-portfolio), subject to certain conditions.
CD terms tend to range from three months to five years, but you ultimately choose the term length when you open a CD. Once a CD’s term ends, there’s a grace period typically around a week long when you can withdraw for no penalty. After that period, though, many banks automatically renew CDs for the same CD length.
How long do CDs last?
CD terms tend to range from three months to five years, but you ultimately choose the term length when you open a CD. Once a CD’s term ends, there’s a
typically around a week long when you can withdraw for no penalty. After that period, though, many banks automatically renew CDs for the same CD length.
Midrange CDs (2-3 years)
Traditionally better rates, more discipline required
Typically the longer the term, the higher the CD rate is. You can earn more interest than short-term CDs with terms longer than a year and up to three years. The national average rate for a three-year term is 1.34% APY, and you can find higher yields at some banks.
🤓Nerdy Tip
Flipping the traditional trend, rates on one-year CDs have been higher than on five-year CDs for several years. Learn more on our CD rate forecast.
Midrange CDs can be handy for setting aside funds for a few years, whether that’s in a standard term such as two or three years or in a more unusual term such as 18 or 30 months (1.5 and 2.5 years, respectively). At some banks, you may run across promotional CD rates with short- to midrange terms and comparable or higher rates than what a bank offers for its long-term CDs.
Just be sure you won’t need to withdraw early. Penalties tend to cost several months’ worth of interest earned, which can be a blow to your savings. Having a separate emergency fund to cover three to six months of living expenses can help prevent the need to dip into a CD early.
A savings account is a place where you can store money securely while earning interest.
A savings account is a place where you can store money securely while earning interest.
4.25%Annual Percentage Yield (APY) is accurate as of 01/09/2025. APY may change at any time before or after the account is opened. Available only online.
5.00%Annual Percentage Yield (APY) is accurate as of June 17th, 2025. Start earning 2.50% APY, then qualify to earn 5.00% APY on your balance up to $5,000.00 and 2.50% APY on balances over $5,000 next month by 1) Receiving direct deposit(s) totaling $1,000 or more; and 2) Ending the month with a positive balance in all your Varo Accounts. No fees, no minimums required. Rates subject to change at any time.
4.00%Annual Percentage Yield (APY) may change at any time and fees may reduce earnings. Please visit etrade.com/ratesheet for more information.
Min. balance for APY
$0
These cash accounts combine services and features similar to checking, savings and/or investment accounts in one product. Cash management accounts are typically offered by non-bank financial institutions.
These cash accounts combine services and features similar to checking, savings and/or investment accounts in one product. Cash management accounts are typically offered by non-bank financial institutions.
Up to 4.50%The Base Annual Percentage Yield (APY) is 4.00% as of 06/30/25, but is variable and is subject to change. If you are eligible for the overall boosted rate of 4.50% offered in connection with this promo, your boosted rate is also subject to change if the base rate decreases during the three-month promotional period. This limited-time promo offers eligible new Wealthfront clients a 0.50% APY increase over the standard variable base APY for 3 months on up to $250K in their personal Cash Accounts. Cash Account offered by Wealthfront Brokerage LLC, Member FINRA/SIPC, and is not a bank. APY (is representative, requires no minimum) is paid from our Program Banks.
4.65%Cash Reserve offered by Betterment LLC and requires a Betterment Securities brokerage account. Betterment is not a bank. Learn More (https://www.betterment.com/cash-portfolio). Annual percentage yield (variable) is 4.00% as of 12/27/24, plus a 0.65% boost (“APY Boost”) for new clients with a qualifying deposit. $10 min deposit for base APY. Terms apply (betterment.com/boost); if the base APY changes, the Boosted APY will change. FDIC insurance provided by Program Banks (https://www.betterment.com/cash-portfolio), subject to certain conditions.
Four- to five-year CDs, and longer, tend to have the best rates you can find. Pledging to leave your money inaccessible for that long can be worth the commitment, especially if you can lock into a high APY before a falling-rate environment. The national average rate for a five-year term is 1.33% APY and you can find higher rates at some banks and credit unions.
Banks and credit unions may offer special options called bump-up or step-up CDs. These CDs can allow for the rate to increase once or twice during the term, which might be appealing if you think rates will rise during that time.
If you want guaranteed returns on retirement money and you don’t need a long time horizon to weather volatility, consider placing some funds into IRA CDs instead of standard ones. (See more about nine types of CDs.)
Penalties tend to be steepest for the longest terms, so be firm about your savings plan before committing.
There’s a way to take advantage of the best parts of short-term and long-term CDs. If you want access to money frequently and the highest returns, consider a CD ladder. The strategy involves dividing up cash into multiple CDs of different terms.
Here’s how it works: Instead of putting, say, $10,000 into a five-year CD, put $2,000 each into a one-, two-, three-, four- and five-year CD. As each CD matures, reinvest the money in a new five-year CD, and before long you’ll have one five-year CD maturing each year. Or, if CD rates are dropping, you can choose to withdraw at the end of a term and invest elsewhere. Here are some other short-term investment options.
CDs have some of the highest guaranteed returns among bank accounts, but you also don’t want to lose out on higher-growth investment opportunities. If you have plenty of cash for daily needs plus a robust emergency fund, consider an online brokerage account. These financial products come with more risk; unlike CDs, they’re not insured by the Federal Deposit Insurance Corp., but they can lead to better returns. For guidance, check out NerdWallet’s online stock brokers for beginners.
