:max_bytes(150000):strip_icc()/Wedfeature-MariiaVitkovska-69b96f896e1e4f22a1c15228b8e2f7c6.jpg "Don’t wait until you’re guaranteed a 5% CD interest rate – APYs could drop quickly")
Don’t wait until you’re guaranteed a 5% CD interest rate – APYs could drop quickly
Key findings
- With dozens of CDs available nationwide, you can lock in an interest rate of 5% or more—up to a high of 5.40%.
- But the Fed is almost certain to cut interest rates next month, and that is already leading to lower CD rates.
- This means that now is the best time to lock in the interest rate on a CD – before APYs fall further.
- The best CD rates currently range from 5.25% to 5.40% for terms up to 12 months. Or you can guarantee a rate of 5.00% to 5.15% for 18-24 months, locking in your rate through 2026.
- The sooner you open a CD balance the better, because the Fed’s September rate cut is likely to be the first of several this year – which will push CD rates further down.
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With dozens of CDs, you can lock in a 5% interest rate through 2025 – or even 2026
When interest rates are high but falling, certificates of deposit (CDs) are one of the smartest ways to invest your cash savings. That’s because the annual percentage yield (APY) you sign is the interest rate you keep – even when rates on new CDs and savings accounts fall.
This is the situation U.S. savers currently find themselves in. Triggered by an aggressive Federal Reserve interest rate hike campaign for 2022-2023, CD rates rose to their highest levels in more than 20 years last fall—and they still pay historically high rates. But the days of 5% CDs are likely numbered.
That’s because the Fed is ready to start cutting rates now that inflation has fallen significantly. The central bank is expected to announce its first rate cut on September 18, but banks and credit unions have already cut their CDS rates in advance.
Fortunately, there are still dozens of CD options available nationwide that can earn you 5.00% or more. The highest-paying of these offers 5.40% APY and is available with a 5-month term. Or you can score a top rate of 5.25% locked in for one year. Both of these terms keep your CD rate guaranteed through 2025.
However, if you choose a slightly lower APY, you can stretch one of today’s top rates even longer. You can get a top rate of 5.15% for 15 months, while the leading 2-year CD pays 5.00%. With that 24-month lock-in, you can get a guaranteed 5% return until around Labor Day in 2026.
Several Fed rate cuts could drive CD rates down quickly
If you think you have time to think, or even think that CD rates could rise if you wait, let us prove you wrong. A Fed rate cut on September 18 is all but certain, and Fed Chair Jerome Powell publicly stated last week that the committee was ready to start cutting its benchmark interest rate.
For this reason, 100% of rate traders expect the Fed to cut rates in September. The only point of contention is whether the Fed will cut rates by a quarter of a percentage point or a half of a percentage point at that meeting.
Moreover, the Fed’s September rate cut is likely to be the first of several. As you can see below, a majority of traders are forecasting that the Fed will have cut rates by more than one percentage point by the December 18 meeting. At best, a minority are forecasting a smaller cut of 0.75 points.
Since some rate cut is almost certain within the next three weeks, banks and credit unions will not wait until the official announcement to cut their deposit rates. In fact, key deposit rates have been slowly declining for months.
Since CD interest rates continue drops, the sooner you act, the better. While you can still get dozens of CDs with at least 5%, the options at that APY level will diminish – you’ll have fewer choices, potentially shorter rate guarantees, and eventually top rates in the 4% range instead of 5%.
Daily rankings of the best CDs and savings accounts
Note that the “peak rates” mentioned here are the highest rates available nationwide, as found by Investopedia in its daily rate research at hundreds of banks and credit unions. This is very different from the national average, which includes all banks that offer a CD with that term, including many large banks that pay a low interest rate. As a result, national averages are always quite low, while the peak rates you can find by comparing prices are often 5, 10, or even 15 times higher.
How we find the best savings and CD interest rates
Each business day, Investopedia tracks interest rate data from more than 200 banks and credit unions that offer CDs and savings accounts to their customers nationwide and ranks the accounts with the highest interest rates daily. To be eligible for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions) and the account’s minimum deposit cannot exceed $25,000. There also cannot be maximum Deposit amount under $5,000.
Banks must be available in at least 40 states to be considered nationwide. And while some credit unions require you to donate to a specific charity or association to become a member, if you don’t meet other eligibility criteria (for example, if you don’t live in a certain area or work in a certain type of job), we exclude credit unions whose donation requirement is $40 or more. For more information on how we choose the best rates, see our full methodology.
