Best CD Rates for October 2024 – Earn Up to 4.50%

What To Know About CDs

When opening a CD, you’ll determine the length of the fixed “term” that will be established — usually from three months to a number of years — and the money will be locked in for that period of time. In return, CDs offer a fixed, higher interest rate than a typical savings account, allowing a higher yield on your money.

How CD Accounts Work

A certificate of deposit, or CD, is one kind of savings account offered by banks and credit unions that offers a safe and easy way to invest and make a return on your money. Unlike traditional savings, however, it’s not a liquid account that you can easily withdraw money from when you might need it. To earn the higher interest rate, you need to leave your CD account untouched for the entirety of the term length, until it reaches maturity.

Fees and Minimums

Though fees and minimums will vary by financial institution, for the most part, CDs don’t come with monthly service fees. However, you need to wait for the account to mature. If you try to take money out before the account’s term length has been reached, you could incur an early withdrawal penalty. Most CDs do have a minimum deposit requirement to open an account.

Why You Should Open a CD Account

Not only is a CD a low-risk savings tool and investment strategy, but it is also best for those who want to increase the amount they earn in interest while keeping their money stored away without touching it. It’s a good way to get a bit more bang for your buck if you are comfortable not having access to those funds until the CD has matured.

How To Open a CD Account

Once you have decided on the right account for you based on the CD rates, you can open an account quite easily. Here is what you’ll need to do:

1. Make sure you have two forms of identification, such as your driver’s license or passport.
2. Present personal information and required documents, such as your name, address, birthday and Social Security number.
3. Decide if you want the interest disbursed at the end of the term or regularly.
4. Fund the account with your opening deposit.

Pros and Cons of CDs

Though CDs do have many benefits, there are some drawbacks to opening this type of savings account. Here are some key takeaways.

Pros

• Higher interest rates: One of the big benefits of a CD is that it allows a higher interest rate than a traditional savings account, as a payoff for locking your money in for the specific term. Depending on the length of CD you choose, this APY could be 4% or higher.
• Better saving capability: Because the money initially deposited into a CD cannot be touched during the remainder of its term, it prevents you from being able to make withdrawals, which would otherwise cut into your ability to save the money. When you don’t have access to the funds, they can continue to grow. This is also a great option when you have a specific financial goal or a future expense you want to prepare for.
• Guaranteed rates: Timing is everything with CDs. If you choose to open this type of account during times of inflation, when interest rates are high, you’ll be able to lock that same rate in over the course of the term, even if inflation subsides and interest rates come down.

Cons

• No access to the funds: Though CDs have their perks, one of the big drawbacks is that you cannot touch the money until the term is complete, or you’ll incur a penalty for an early withdrawal. When you open a CD, you lock the money in the account, and this could be for a substantial amount of time, up to several years. There are some options, like liquid CDs, that do have flexibility, so you can access the money originally deposited, but these accounts don’t have the high interest rates of the traditional options.
• Rates are locked in: As mentioned, timing is everything with CDs. If you are savvy and open an account during times of inflation when interest rates are high, you’ll be able to secure an ideal APY. But, if you open a CD when rates have leveled out, you won’t be able to take advantage of higher interest if those rates jump up over the course of the term.
• Earning potential: While CDs earn interest at a higher rate than a regular savings account, there are other investment options that have even greater yields, such as securities and stocks. However, CDs are generally a safer, less volatile investment.

Types of CDs

Under the umbrella of certificates of deposit, there are a number to choose from, all offering their own terms and advantages:

• Traditional: This is the standard CD method, where you contribute a particular dollar amount that stays locked in the account for a predetermined amount of time. It’s ideal if you know what you want to contribute ahead of time and won’t need to take early withdrawals. It also offers the highest interest rate of the various forms of CDs.
• No penalty: Also known as a liquid CD, this option does have more flexibility, allowing for withdrawals before the maturation date of the savings plan without a penalty. However, the financial institution may still impose a waiting period before you take out money. Also, they might not let you take out a percentage but rather mandate you have to take out the full amount, which means you won’t be able to earn on the original deposit. The interest rate for a no-penalty CD will be a bit lower than a traditional CD.
• Bump-up: The advantage of this type of CD is that you are allowed to ask the bank to raise your interest rate during the term. This can be useful if you think interest rates will rise during the months or years you have specified for the CD, such as during a period of high inflation. Choosing this option may provide the chance to get more interest over time, but it also means a lower interest rate at the start of the term.

How To Choose a CD Account

The terms of a CD are the length of time you commit to keep your funds in the account. When you open a CD, you’ll choose the “term,” or length of time you are locking in the money before it’s vested. Typical CDs offer 3-month and 6-month terms, as well as terms of one, three and five years.

Be aware that you do not have access to the money in your CD account until the account reaches maturity. This means you can’t withdraw funds earlier than the term length without incurring early withdrawal penalties.

Alternatives to CD Accounts

There are several factors to compare when choosing whether a CD or another bank account is best suited for you.

CDs vs. Traditional Savings Accounts

The main difference between savings accounts and certificates of deposit, or CDs, is the amount of access you have to the funds in the account. Where standard savings accounts allow you immediate access to your account balance, when you put your money in a CD, you agree to the CD term, which is the time your CD will take to mature.

Withdrawing funds from a CD before maturity can result in early withdrawal penalties. CDs do tend to earn more interest, so these accounts are better for those who can leave their money in the account for an extended time period without touching it.

CDs vs. High-Yield Savings Accounts

High-yield savings accounts allow account holders to earn significant interest on their balance and are good to grow an emergency fund. CDs, though they operate similarly, are better to possibly save for a large purchase down the line, as you can’t access the funds until the CD has matured.

CDs vs. Money Market Accounts

A CD differs from a money market account in that the money market account has checking account features, such as the ability to write check or link a debit card. A CD is a time-deposit account, and a money market account isn’t, so it generally pays less than a CD. This is because a CD requires you to keep your balance in the account for a set period of time. This is known as the CD term.

CDs vs. Bonds

CDs and bonds are both considered safe-haven investments that yield higher returns than a standard savings account. However, when interest rates are high, as they currently are, CDs may be a better option, which also works in the reverse — bonds are preferable when interest rates are low. Interest rates impact which of these will be the higher-paying investment.

CDs and Taxes

Anytime you earn money, you should always be aware of the tax implications. Here are some answers to frequently asked questions about CDs and taxes. 

Are You Taxed When a CD Matures?

Short-term CD income, typically 12-month terms or less, is taxed at maturity. This can be used to defer taxable income from year to year. Keep this in mind when you are trying to figure out your annual income. Income from CDs with terms over 12 months is taxed as it accrues.

Are CDs Taxed at the End of a Term?

The interest you earn with a CD is considered taxable interest as defined by the IRS. If you earn any amount over $10 during the term of your CD, you’ll receive a Copy B of Form 1099-INT or Form 1099-OID that you’ll need to report when you file your tax return.

Does Cashing a CD Count as Income?

If you cash a CD when it reaches maturity, it is taxed on the interest you’ve earned. However, if you cash out before the account reaches maturity, you need to report the interest accrued to that point as taxable income. You can deduct any penalty charged by the bank, and the return of the principle is a nontaxable return of capital.

CD Rates and the Federal Reserve

Though a savings account typically has a variable rate, a CD account has a fixed interest rate, which means the rate won’t fluctuate with the Fed rate of the Federal Reserve. If you have not opened a CD account yet, be aware that the already rising rates are predicted to continue to increase in 2024.

When the Federal Reserve raises rates, it affects everything from national averages to individual account rate increases. It is often good to lock in a solid fixed APY when you see one.

Caitlyn Moorhead and Nicole Spector contributed to the reporting for this article.

Recap of Winners

• Ally Bank – Best for Renewal Bonus Rates
• Barclays Bank Delaware – Best for Range of Competitive Rates
• BMO Alto – Best for High Long-Term APYs
• Capital One – Best for Big Bank With High APYs
• Discover Bank – Best for Website Transparency
• EverBank – Best for 9-Month Rate
• LendingClub Bank – Best for High Interest Rates
• Marcus by Goldman Sachs – Best for Short-Term Rates
• Synchrony Bank – Best for 15-Month CDs
• Zions Bancorporation – Best for 1-Year CDs