A bank’s certificates of deposit — or a credit union’s equivalent, share certificates — generally earn more interest than regular savings accounts do. CD rates have gone up recently thanks to the rising interest rate environment, so it’s a good time to explore whether a CD is the right option for you.
Here’s what to know about earning money with the best CDs. By using our CD calculator below, you can also see how much your savings would grow with different interest rates.
» Want to see specific rates? Check our list of best CD rates this month
Compare two CDs
Calculate what interest you’d get from two different CDs. If you want to see how rates really matter, keep the deposit and term lengths the same and see how the interest rate would affect your overall savings.
Here’s an example. If you invested $10,000 in a five-year CD at the national average rate of 0.91%, you would have earned about $465 in interest at the end of five years.
Now let’s try a top rate at an online bank. If you invested that same $10,000 in a five-year CD at 2.4%, your account’s looking good with $1,275 earned in interest, a difference of more than $800. (See rates at or above 3% APY on our list of best five-year CDs.)
Average CD rates
CD rates vary widely even at the same bank or credit union, but here’s a general trend: The longer the term, the higher the rate. In other words, when you sacrifice access to your money for longer, you earn more interest on your money. Some financial institutions also reward you with higher rates in exchange for higher minimum deposits. A CD that requires $5,000 to open an account might earn more than one that requires $1,000.
Best CD rates
If you shop around, you can find CDs that have rates more than double the national average. Online banks tend to have the top rates, followed by credit unions and traditional brick-and-mortar banks.
Compare some of our top-rated choices in the table below:
NerdWallet bank rating:
» See the latest: NerdWallet’s list of best CD rates
Why should I consider CDs?
They’re safe. Like savings accounts, CDs are federally insured to protect your money, both at banks and at credit unions. This means they have minimal risk, whereas investing in the stock market — another option to grow your money — is more unpredictable and can lead to losses, especially in the short term.
But CDs have an opportunity cost. The typical CD has a fixed rate, so once you lock up your money for months or years, you close the door to higher rates that might appear. (Not ready for a long commitment? See the best one-year CDs this month.)
Bottom line: CDs might be right for you if you want to avoid risky investments and you’ve set aside money you won’t need for some time. (If, on the other hand, access is a priority, check out NerdWallet’s best savings accounts.)
» Not sure how long to invest? Read our guide on choosing the right CD term length
How to have CDs and flexibility
If you’re trying to decide between opening a CD and looking for something less restrictive, there’s a middle-of-the-road option: CD ladders. This is a savings strategy in which you open CDs of varying lengths. One common scenario involves opening five CDs, with terms of one year, two years, three years, four years and five years. The goal is to have one CD maturing each year to give you the option to reinvest or cash out each time. If that’s appealing, explore more about CD ladders.