A certificate of deposit, or CD, is a time-deposit account offered by banks and credit unions. You agree to leave a fixed sum of money on deposit for a set period — the term — and in return the institution pays you a guaranteed interest rate for the life of that term. The rate, expressed as an annual percentage yield (APY), is what most people mean when they talk about "cd rates."
Understanding how that rate is quoted — and how it compares across institutions — is the single most valuable skill you can develop before opening a CD. A difference of even 0.25 percentage points on a $50,000 deposit held for two years adds up to hundreds of dollars in additional interest.
APY vs. interest rate: why the difference matters
Banks are legally required to advertise the APY, not just the raw interest rate. APY stands for annual percentage yield, and it accounts for compounding — that is, the fact that interest earned in earlier periods earns more interest in later periods. The more frequently interest compounds (daily, monthly, or quarterly), the higher the APY relative to the stated interest rate.
When comparing offers, always compare APYs, not stated interest rates. An institution advertising a "4.90% rate" compounding monthly will yield slightly less than one advertising a "4.90% rate" compounding daily. The difference is small on short terms but meaningful over a five-year CD.
What drives the highest CD rates?
CD rates are closely tied to the federal funds rate, the benchmark rate set by the Federal Reserve. When the Fed raises rates, banks typically pass higher yields on to savers — including on CDs — because they need to compete for deposits. When the Fed cuts rates, newly issued CDs tend to carry lower yields, though any CD you already hold keeps its locked-in rate until maturity.
Online banks and credit unions often advertise among the highest CD rates available because their lower overhead costs allow them to compete aggressively on yield. A local brick-and-mortar branch may offer convenience, but its rates can lag behind online competitors by a full percentage point or more — which translates directly to less money in your pocket.
That said, local credit unions sometimes run promotional CD specials — particularly on shorter terms — that rival or beat national online rates. Checking both online and local options is always worthwhile, and the compare tool at /preview/secure-returns/compare/ pulls in current rates from a broad set of institutions so you can see both side by side.
How term length affects your rate
The relationship between term length and rate is not always what newcomers expect. In a normal yield-curve environment, longer terms pay more — a 5-year CD yields more than a 1-year CD — because you are compensating the bank for the certainty of holding funds longer. In an inverted yield-curve environment (which has occurred in recent years), short-term CDs can actually yield more than long-term ones.
This means the "highest cd rates" at any given moment might be on a 6-month or 1-year CD rather than a 5-year one. Checking rates across multiple terms before deciding is essential. There is no universally best term — the right choice depends on when you need the money and your expectations about where rates are headed.
Short-term CDs (3–12 months)
Short-term CDs suit savers who anticipate needing their funds soon, or who believe rates will rise and want the flexibility to reinvest at a higher yield. The trade-off is that if rates fall, you will be rolling into lower-yielding accounts when the CD matures.
Long-term CDs (2–5 years)
Long-term CDs provide rate certainty for years at a time — a major advantage if rates decline. The trade-off is reduced liquidity. Early-withdrawal penalties on long-term CDs can be steep, sometimes equivalent to 150 to 365 days of interest, so you should be confident you will not need the funds before committing.
Deposit size and jumbo CD rates
Some institutions offer jumbo CDs — certificates requiring a minimum deposit, typically $100,000 — that carry a slightly higher APY than standard CDs. The premium is not always large, and standard CDs at a competing institution sometimes outperform jumbo rates at another. If you have a large deposit, compare jumbo rates alongside standard-tier rates from multiple institutions before assuming the jumbo label means you are getting the best deal.
FDIC and NCUA insurance: understanding the $250,000 limit
CDs held at FDIC-insured banks are protected up to $250,000 per depositor, per institution, per ownership category in the event the bank fails. CDs at NCUA-insured credit unions carry an equivalent protection. This insurance is provided by the issuing institution's regulator — not by any comparison or marketplace platform.
If you have more than $250,000 to deposit, spreading funds across multiple institutions — each within the coverage limit — is a straightforward way to maintain full protection. Our guide at /secure-returns/learn/how-to-maximize-fdic-coverage-across-multiple-cds/ explains the mechanics in detail.
How to find and compare CD rates right now
- Start with APY — ignore raw interest rates when comparing across institutions.
- Filter by term that matches when you actually need the funds.
- Check minimum deposit requirements — some of the highest CD rates require $1,000 or more to open.
- Read the early-withdrawal penalty terms before committing, not after.
- Compare online banks, credit unions, and local branches — each category may lead on different terms.
- Confirm the rate directly with the institution; rates quoted on comparison sites may be hours or days old.
- Verify FDIC or NCUA membership on the institution's website or at fdic.gov / ncua.gov.
Live rates across a wide range of banks and credit unions are available on the compare tool at /preview/secure-returns/compare/. As of Jul 24, 2026, rates are moving frequently — use the tool to see current figures and confirm any rate you plan to act on directly with the issuing institution.