High-Yield CDs: A Smart Way to Grow Your Savings in 2023

Certificates of deposit (CDs) have long been a popular savings option for those looking to earn a fixed return on their money while minimizing risk. Today, the best CDs on the market are offering annual percentage yields (APYs) as high as 4.65%. While these rates are impressive, experts caution that they may not stay this high for long. With the Federal Reserve hinting at potential rate cuts later this year, now might be the perfect time to lock in a high-yield CD to protect your earnings from future rate drops.

How the Federal Reserve Impacts CD Rates

The Federal Reserve plays a significant role in shaping interest rates across the economy, including those for CDs. The Federal Open Market Committee (FOMC) meets eight times a year to set the federal funds rate, which influences how banks set their APYs for CDs. In 2023, the Fed paused interest rate hikes amid signs of inflation starting to rise again. However, some experts predict that rates could decrease by the end of the year if the economy begins to slow down.

While the Fed doesn’t directly set CD rates, banks typically adjust their APYs in response to changes in the federal funds rate. By opening a CD now, you can lock in a high APY for the duration of your term, shielding your savings from any future rate reductions. However, it’s important to note that CDs require you to keep your money locked in the account until the term ends to avoid early withdrawal penalties. This makes CDs a great option for savings you know you won’t need access to in the short term.

Today’s Best CD Rates and What You Could Earn

If you’re considering opening a CD, now is a great time to take advantage of the competitive rates available. Below are some of the highest APYs currently on offer, along with estimates of how much you could earn on a $5,000 deposit:

• 6-month CD: 4.65% APY offered by CommunityWide Federal Credit Union, earning approximately $114.93 in interest.
• 1-year CD: 4.45% APY offered by CommunityWide Federal Credit Union, earning around $222.50 in interest.
• 3-year CD: 4.15% APY offered by America First Credit Union, earning about $648.69 in interest.

• 5-year CD: 4.25% APY offered by America First Credit Union, earning approximately $1,156.73 in interest.

  These estimates assume interest is compounded annually, and the actual earnings may vary slightly depending on the compounding frequency.

Key Features to Consider When Choosing a CD

While a high APY is the primary factor to consider when selecting a CD, it’s not the only one. Here are some additional features to weigh when choosing the right CD for your needs:

1. Term Length: CDs come with a wide range of terms, from as short as a few months to as long as 10 years. Choose a term that aligns with your financial goals and timeline. If you’re unsure when you’ll need the money, consider a no-penalty CD, which allows you to withdraw your funds early without a penalty, though the APY may be slightly lower.

2. Minimum Deposit Requirements: Some CDs require a minimum deposit to open an account, which can range from $500 to $1,000 or more. Make sure you have enough savings to meet this requirement before applying.

3. Fees: Many online banks offer low or no fees for CD accounts, but it’s always a good idea to review the fine print. Maintenance fees, early withdrawal penalties, and other charges can eat into your earnings if you’re not careful.

4. Safety and Security: Ensure that the bank or credit union you choose is insured by the FDIC (for banks) or NCUA (for credit unions). This protection ensures that your money is safe even if the financial institution fails.

5. Customer Ratings and Reviews: Research the bank’s reputation by reading customer reviews on platforms like Trustpilot. A bank with good customer service and a user-friendly online platform can make managing your CD much easier.

CNET’s Methodology for Evaluating CD Rates

CNET regularly reviews and updates CD rates from over 50 banks, credit unions, and financial institutions across the U.S. When evaluating CDs, we consider factors such as APYs, product offerings, accessibility, and customer service. The banks included in our weekly CD averages include well-known institutions like Ally Bank, Marcus by Goldman Sachs, and Synchrony, as well as credit unions like America First Credit Union and CommunityWide Federal Credit Union.

The APYs listed are accurate as of February 11, 2025, and are based on the banks we track. Earnings estimates are calculated assuming annual compounding of interest. By comparing rates and terms from multiple institutions, we aim to help consumers make informed decisions about where to invest their savings.

Conclusion: Why CDs Remain a Great Savings Option

Despite the possibility of future rate cuts, CDs remain one of the safest and most reliable ways to grow your savings. With APYs as high as 4.65% and the security of FDIC or NCUA insurance, CDs offer a low-risk way to earn a guaranteed return on your money. By locking in a competitive rate now, you can ensure that your savings continue to grow even if interest rates decline in the coming months.

However, before opening a CD, it’s essential to carefully consider your financial needs and goals. Whether you’re saving for a down payment on a house, building an emergency fund, or simply looking to earn more on your idle cash, there’s a CD out there that can help you achieve your objectives. Take the time to compare rates, terms, and features from multiple institutions to find the best fit for your situation.

With the right CD, you can enjoy peace of mind knowing that your money is working hard for you, even in an uncertain economic environment.