The best CD rates in June 2024 (2024)

Looking for the best CD rates this month? While CD interest rates are always changing, now is an excellent time to invest because rates are quite high.
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We’ve done the research to help you find the highest CD rates and maximize your potential earnings.

What are CD accounts and how do they work?

Certificates of deposit, or CDs, are a type of savings account designed to help grow your savings faster than savings or money market accounts. CD interest rates are generally higher than standard savings accounts, but CDs can lack flexibility.

A CD pays a fixed rate over a set period called a term, but withdrawing cash before the end of the term — the CD’s maturity date — can result in a penalty fee. A term can be anywhere from a few months to several years.

CDs offer a guaranteed return at maturity and are protected by the Federal Deposit Insurance Corp. (FDIC) as long as the bank is federally insured.

The factors influencing CD rates

Many factors can influence CD rates, including:

• CD term: The length of time that you commit your money to the bank can be one of the biggest influencers on your interest rate. Currently, shorter-term CDs tend to pay a higher APY. However, lengthier terms allow you to lock in your rate for longer, which can be beneficial if interest rates drop.

• Federal funds rate: The benchmark interest rate set by the Federal Reserve can also affect CD rates. When the Fed increases or decreases the federal funds rate, banks generally adjust their rates accordingly.

• Inflation: As seen in recent years, high inflation rates can lead to higher rates on deposit accounts, including CDs. The Fed may up the benchmark interest rate to combat inflation, which often leads to financial institutions offering higher APYs.

• Bank business models: While the federal funds rate can influence the APYs set by financial institutions on CDs, banks and credit unions ultimately get the final say on the rates they offer. Depending on their business models, institutions adjust their rates to ensure they turn a profit.

Pros and cons of CDs

Pros

• Higher returns: CDs typically offer better rates than traditional savings accounts.
• Guaranteed rates: You can lock in fixed rates that remain the same for the entire term.
• Federally insured: CDs are insured by the FDIC or NCUA for up to $250,000 per depositor, per institution, per ownership category.
• Specialized options: Some institutions have a variety of CD types, including those that offer rate bumps or no-penalty withdrawals.

Cons

• Early withdrawal penalties: For most CDs, you’ll pay a penalty for withdrawing your funds before the term ends.
• Minimum deposits: To open a CD, you’ll often be required to make a minimum deposit, typically around $500 to $1,000.
• Limited term options: Some banks and credit unions may not offer a wide range of timeframes.

Who should get a CD?

CDs can be a smart investment for the right person, providing steady and predictable returns with almost no risk. But they come with a few tradeoffs that require careful consideration before making a commitment.

A CD may be a good option for you if you:

• Are comfortable setting aside a portion of your savings for an extended period of time. Depending on the term you choose, you’ll forfeit access to the full balance of your CD for several months or years until its maturity date. Early withdrawals, except from no-penalty CDs, come with fees that could offset any interest earned.
• Already have an established emergency fund. It’s essential to have a healthy reserve of cash savings before you start to think about stashing money in CDs. Most financial experts recommend an emergency fund target of three to six months’ worth of expenses.
• Are working towards a short-term financial goal. If you’re saving up for a planned expense like a wedding or the down payment on a home, interest earnings from CDs can provide an extra bump towards your goal.

The Federal Reserve: Are CD rates going up?

Predicting changes to CD interest rates is difficult. When the Fed raises rates, as it did in 2022 and 2023 in an effort to fight inflation, banks and credit unions tend to follow suit.

Overall, CD rates went up in 2023. In the first few months of 2024, average rates on short-term CDs have gone up and rates on long-term CDs have gone down. This is because the Fed has kept rates the same, but banks anticipate rate cuts later this year.

Keep in mind that banks are responsible for setting their own CD rates, however. While the Federal Reserve’s actions heavily influence rates, the Fed isn’t directly responsible for these changes.

How to choose the best CD for you

CDs come in a wide variety of rates, terms and features. While this can be a little overwhelming, finding the best CD for you is relatively easy if you know what you’re looking for. Here are some of the most important aspects to consider:

• Type of CD: Financial institutions often offer different kinds of CDs. For example, a bump CD lets you swap your interest rate for a better one if the bank increases rates. There are also liquid CDs that don’t charge a penalty for early withdrawal.

• Initial deposit: Some CDs require a high minimum deposit to open an account or earn the top APY. It’s important to read the fine print to ensure you can meet any requirements but only deposit up to the FDIC-insured limit of $250,000.

• CD term: Consider how long you want to keep the money invested. If you’re not entirely sure, it’s best to stay on the safe side and opt for a shorter term to avoid early withdrawal penalties.

• Interest rate: Finding the best rate can help you optimize the returns you receive at the end of your term. Once you’ve determined the specific type and term of CD you want, shop around to find the institution paying the highest interest rate.

How to open a CD account

The steps to opening a CD are similar to those for opening most other savings accounts at financial institutions.

1. Go to the bank’s website or visit a branch to open the account.
2. Complete an application to open a CD.
3. Regardless of how you apply, you’ll need to gather some documents. Requirements vary, but many banks ask for a government-issued ID, such as a driver’s license; proof of address, such as a utility bill; and Social Security or tax identification number.
4. Choose how to collect interest. You may be able to receive regular payouts or all of the interest at the end of the CD’s term.
5. Fund the account. Your bank or CD type may require a minimum deposit, but many do not. Transfer your funds into the CD account according to the instructions from your bank.

Maximizing your CD earnings

Here are some ways to maximize your CD earnings:

• Shop around for the highest rate and low or no fees.
• Search for an online CD account, which may offer the most competitive rates. Online banks don’t have the overhead costs of maintaining branches and can pass on the savings as higher interest rates.
• Build a CD ladder. This strategy involves spreading out your investments across CDs with different maturities, helping to offset the risk of falling rates.

Building a CD ladder

There are many ways to build a CD ladder. Ladders can be created from short-term or long-term CDs and can consist of as many different accounts as you’d like.

An example of a simple short-term CD ladder might be opening two six-month CD accounts, one maturing three months after the other. At maturity, you can decide to reinvest your funds or repurpose them for spending or other investing.

A more complicated CD ladder would involve opening 10 different CDs with one maturing each year over a 10-year period. So, for example, you’d buy a one-year CD, a two-year CD, a three-year CD and so on, all the way up to a 10-year CD. As each CD matured every year, you’d roll the proceeds over into a new CD with a maturity date of 10 years away.

One of the advantages of this type of CD ladder is that if rates move lower, you’ll still be earning higher rates, but if rates go higher, you’ll have new money maturing every year to capture those higher yields.

The main advantage of a long-term CD ladder is that in most cases, you’ll earn a higher rate of interest than you would with a short-term CD ladder. However, you also won’t be able to access a significant portion of your investment for a number of years without paying an early withdrawal penalty.

CD rates by term and type:

• Best 6-month CD rates
• Best 1-year CD rates
• Best 5-year CD rates
• Best no-penalty CD rates
• Best IRA CD rates

Four alternatives to CDs for savings

1. High-yield savings accounts

If you’re attracted to the interest-earning potential of CDs but are hesitant to leave cash inaccessible for an extended period of time, a high-yield savings account may be a smarter alternative.

High-yield savings accounts, particularly those offered by online banks, sometimes advertise rates that rival those of CDs. The main benefit is that funds can generally be withdrawn at any time with relatively few restrictions.

However, it’s important to realize that high-yield savings rates are variable and can therefore change at any time. CDs, on the other hand, pay interest at fixed rates, meaning the rate is guaranteed to remain the same for its entire term.

2. Money market accounts (MMAs)

Like high-yield savings accounts, money market accounts are a more liquid alternative to CDs that grant rapid access to funds as needed. But many money market accounts take accessibility one step further by allowing cash withdrawals from ATMs through the account’s linked debit card. Account holders may also have the ability to withdraw funds by writing checks.

Money market accounts pay interest at a variable rate and may be subject to restrictions such as minimum balance requirements and monthly withdrawal limits. Keep an eye on potential fees to avoid losing out on valuable interest earnings.

Since money market accounts are also considered deposit accounts, they’re covered by the same FDIC insurance as CDs: up to $250,000 per individual at eligible banks. This makes them a very safe investment.

3. Bonds

Bonds behave very similarly to CDs, offering fixed-rate interest over a specified term. They can also be sold on the secondary market by investors who wish to cash in before the bond reaches maturity. This provides an additional layer of flexibility for those concerned about maintaining access to liquid assets.

Unlike CDs, bonds are not eligible for FDIC insurance. Instead, they rely on the issuer’s creditworthiness. For this reason, government bonds are considered the safest type of bond to invest in.

4. Paying down high-interest debt

If you’ve accumulated debt, such as credit card balances or student loans, paying down that debt could be the wisest use of your excess savings.

A good rule of thumb: If the rate you expect to earn from CDs exceeds the interest rate at which you’re borrowing, invest in CDs and continue to pay down debt in installments. But if you’re paying a higher rate on loans than the returns a CD can offer, consider putting larger sums towards those debts with the goal of paying them off as early as possible.

Methodology

Our team of experts at CNN Underscored Money analyzed dozens of CD accounts from more than 40 financial institutions to determine the rankings for the best CD rates. This included accounts from a mix of traditional banks, online banks and credit unions available nationally. We ranked each account on 25 data points across six categories.

Here are the categories we analyzed and how we weighted each:

APY (65%)

APY is a critical factor for CD accounts because this determines how quickly your deposit will grow.

Minimum opening deposit (15%)

Minimum opening deposits determine how accessible a CD is and how easily you can employ strategies like CD laddering that require multiple CDs.

Available terms (5%)

Since CDs require you to lock in your deposit for the term, having more term options is better because it gives you more flexibility.

Customer experience (5%)

It’s important to have a bank that’s trustworthy and easy to reach when you need help. We considered customer service availability and Trustpilot ratings in this category.

Digital experience (5%)

You’ll want a bank with a usable app and plenty of online features so that it’s easy to bank from anywhere. We analyzed app reviews and the ability to bank online.

Compound interest schedule (5%)

This is an important factor to consider because the more frequently your interest compounds, the faster your deposit grows and the more frequently you will potentially have access to your interest earnings.

We also considered other factors like renewal and early withdrawal policies.

Frequently asked questions (FAQs)

Additional reporting by John Csiszar and Carley Clark