Earning up to 4.65% APY on CDs: A Comprehensive Guide

In the current financial landscape, certificates of deposit (CDs) offer a compelling way to earn higher interest rates on your savings, especially with top rates reaching up to 4.65% APY. Here’s a detailed look at how CDs work, the best rates available, and what you need to consider when choosing a CD.

What is a CD?

A certificate of deposit (CD) is a type of bank account that requires you to lock your funds for a fixed period in exchange for a guaranteed interest rate. Unlike regular savings accounts, CDs typically offer higher interest rates, but you must keep your money locked in the CD for the specified term to avoid early withdrawal penalties.

Best CD Rates for February 2025

As of February 2025, here are some of the top CD rates available:

Short-Term CDs

• Popular Direct: Offers a 6-month CD with a 4.35% APY, requiring a minimum deposit of $10,000.
• NASA Federal Credit Union: Provides a 9-month certificate with a 4.54% APY, requiring a minimum deposit of $1,000.

Medium-Term CDs

• Credit Human: Offers a 2-year CD with a 4.45% APY.
• Banesco USA: Provides a 2-year CD with a 4.35% APY.

Long-Term CDs

• Marcus by Goldman Sachs: Offers a 5-year CD with a 3.75% APY, requiring a minimum deposit of $500.
• BMO Alto: Provides a 5-year CD with a 3.80% APY, with no minimum deposit required.

Types of CDs

High-Yield CDs

These CDs offer the best interest rates and are often found at online banks. They work like standard CDs but with higher APYs.

Promotional CDs

These CDs have non-traditional term lengths or expiration dates on the rates being offered. For example:

• NASA Federal Credit Union: Offers a 9-month certificate with a 4.54% APY.
• Synchrony Bank: Provides a 13-month CD with a 4.35% APY.

No-Penalty CDs

These CDs allow you to withdraw your money at any time after the first few days without a penalty. However, they typically have lower rates:

• Ally Bank: Offers an 11-month no-penalty CD with a 3.75% APY and no minimum to open.
• CIT Bank: Provides an 11-month no-penalty CD with a 3.50% APY and a $1,000 minimum to open.

How to Choose a CD

When selecting a CD, consider the following factors:

CD Term

CD terms range from three months to five years. Choose a term that aligns with your savings goals. For example, if you need the money soon, a shorter-term CD might be more suitable.

CD Type

• High-Yield CDs: Best for those seeking the highest rates.
• No-Penalty CDs: Ideal for those who may need access to their money before the term ends.
• Bump-Up CDs: Allow for a rate increase during the term.
• IRA CDs: Used for retirement savings, offering tax benefits and a fixed rate.
• Jumbo CDs: Require high minimum deposits, typically $100,000.

CD Rate

Compare rates across different banks and credit unions to find the most competitive APY for your chosen term.

CD Deposit

The minimum deposit requirement varies by institution. Ensure you understand the minimum deposit needed and consider keeping your deposits below the FDIC insurance limit of $250,000 to protect your funds.

CD Penalty

Understand the early withdrawal penalty, which can range from several months to a year’s worth of interest, depending on the CD term length.

Calculating CD Earnings

To understand how much you can earn from a CD, consider the following example:

For instance, a $10,000 CD with a 4% APY would earn $400 in a year, while a 6-month CD with the same rate would earn approximately $198.

CD Ladder Strategy

To balance cash access with high yields, consider a CD ladder strategy:

• Open multiple CDs with different terms.
• Redeem CDs over time to take advantage of competitive short- and long-term CD rates.
• This strategy helps you avoid the risk of missing out on higher rates if they rise during your savings period.

When to Consider CDs

CDs are particularly useful in the following situations:

• Locking up savings for a big purchase within the next five years.
• Stashing away a sudden windfall to avoid immediate spending.
• Earn returns without market risk, especially closer to or during retirement.

Current Market Trends

As of February 2025, CD rates are following a downward trend due to the Federal Reserve's benchmark rate cuts in the second half of 2024. Banks and credit unions tend to adjust their CD rates in line with the Fed rate. It is advisable to lock in high CD rates while they are still available.

By carefully considering the term, type, rate, and deposit requirements of a CD, you can make an informed decision that aligns with your financial goals and maximizes your earnings. For more detailed information and to compare rates, you can visit resources like NerdWallet's CD rate guide or Bankrate's CD rate listings.