CDs Are Paying Real Yield. Many Savers Still Earn Almost Nothing. This Is Not a Small Difference.

Bottom line: The best 12-month CDs are currently paying around the mid-4% to low-5% range. The national average savings account is paying 0.46% APY. The big four banks often pay close to zero. On $25,000, that gap is the difference between earning about $115 per year and well over $1,000. Both accounts are FDIC insured. Both have the same risk profile. The money is just in the wrong place.

Certificates of deposit are experiencing something unusual: people are actually interested in them.

After roughly a decade of near-zero interest rates — when CDs paid 0.10%–0.50% and the argument for owning one was difficult to construct — the rate environment shifted dramatically starting in 2022. The Federal Reserve raised rates 11 times. CD rates followed. Today, a 12-month CD at an online bank pays as much as some stock dividend yields, with none of the volatility.

The decision to lock money in a CD versus keeping it in a high-yield savings account is worth thinking through carefully. But the decision to keep money in a traditional bank savings account at 0.46% APY rather than either of those alternatives? That's just giving money away.

How CDs Actually Work

A CD is a time-deposit agreement: you give a bank a fixed amount for a fixed period, and the bank gives you a fixed interest rate in return. Terms range from 1 month to 7 years. The rate is locked when you open the CD — it won't change regardless of what happens to interest rates generally.

The constraint: withdraw early and you pay a penalty, typically 60–180 days of interest depending on the CD term. A 12-month CD with a 180-day early withdrawal penalty, opened near today's best 12-month CD rate, would cost you approximately 2.4% of the principal if you needed the money at month six.

What you get in return for that constraint: certainty. The rate you agreed to is the rate you receive, regardless of what the Federal Reserve does between now and maturity.

CDs vs. High-Yield Savings: The Right Framework

This is not a question with a universal answer. It depends on two things: whether you believe rates will fall, and whether you need the money before the CD matures.

CDs win when rates fall. If you open a 12-month CD near today's best rate and the Fed cuts rates twice in the next year, bringing HYSA rates down materially, your CD earns that locked rate the entire time. You locked in the better rate. This is the core value proposition of a CD.

HYSAs win when rates stay flat or rise. If you lock into a 12-month CD near today's best rate and market rates rise meaningfully, you're stuck at that lower locked rate and face a penalty to exit.

HYSAs always win on liquidity. There is no early withdrawal penalty. You can move money in or out of a high-yield savings account at any time. If there's any meaningful probability you'll need the funds before the CD matures, the HYSA is the right choice.

Current market pricing (forward rate curves as of April 2026) implies approximately 1.0%–1.5% in rate cuts over the next 18 months. That would favor locking in today's CD rates over staying variable. But forward curves are frequently wrong.

Current Rates Across Terms

| Term | Best online bank rate | National average | Big four bank rate | |---|---|---|---| | 3 months | 4.50%–4.75% | 1.20% | 0.01%–0.50% | | 6 months | 4.70%–5.00% | 1.85% | 0.01%–1.00% | | 12 months | 4.75%–4.90% | 2.10% | 0.01%–1.50% | | 24 months | 4.25%–4.60% | 1.75% | 0.01%–1.00% | | 5 years | 3.90%–4.25% | 1.45% | 0.01%–0.75% |

The yield curve is currently inverted in the CD market — shorter terms are paying similar or higher rates than longer terms. This reflects bond market expectations that rates will decline over the next several years. Locking into a 5-year CD when 12-month CDs are paying more makes limited sense unless you strongly believe rates will fall significantly and you won't need the money for five years.

The CD Ladder: Having Both

The CD ladder is the strategy that resolves the tension between locking in higher rates and maintaining access to cash. Instead of putting all your money in one CD, you spread it across multiple CDs with staggered maturities.

Example with $30,000:

• $6,000 in a 1-year CD near today's best one-year rate
• $6,000 in a 2-year CD at a slightly lower follow-on rate
• $6,000 in a 3-year CD at 4.25%
• $6,000 in a 4-year CD at 4.10%
• $6,000 in a 5-year CD at 3.90%

After year one, the 1-year CD matures — you receive $6,291. You reinvest it in a new 5-year CD at whatever rates are then current. Now you have a CD maturing every year for the foreseeable future, providing regular liquidity while averaging across the rate curve over time.

The result: you're never fully locked in, never fully locked out. One CD matures annually and provides cash if needed or gets reinvested for continued compounding.

No-Penalty CDs: The Compromise

No-penalty CDs solve the early withdrawal problem. After a brief initial holding period (typically 7 days), you can withdraw the full principal without penalty. The rate is typically slightly lower than a comparable standard CD.

Top no-penalty CD options currently:

• CIT Bank 11-month no-penalty: ~4.90% APY
• Ally Bank 11-month no-penalty: ~4.55% APY

No-penalty CDs are particularly useful when you want rate certainty but can't commit to a full lockup period. The slightly lower rate is a small price for complete optionality.

Where to Actually Buy a CD

Online banks, exclusively. The rate differential between online banks and traditional banks is not subtle:

On $25,000 in a 12-month CD:

• Marcus / Ally / Discover: ~$1,200 interest
• Chase / Bank of America: ~$25–$125 interest

Same FDIC insurance. Same safety. The only difference is how much of the return the institution keeps for itself.

Top CD issuers: Marcus by Goldman Sachs, Ally Bank, Discover Bank, CIT Bank, Synchrony Bank, Barclays, American Express Personal Savings.

Note: CD interest is taxable as ordinary income in the year it's received, even on multi-year CDs where the cash isn't distributed until maturity. Factor this into your planning for large CDs. Holding CDs inside a traditional or Roth IRA eliminates this issue.

Sources: FDIC Weekly National Rates; Bankrate CD Rate Survey (April 2026); CME FedWatch Tool forward rate projections.

Compare today's best CD rates → See how HYSAs compare → Build your CD ladder →