What Is an 18-Month CD and How Does It Work?

Certificates of deposit (CDs) are bank or credit union accounts in which you agree to hold your funds on deposit without withdrawals for a prearranged period. Thus, an 18-month CD requires you to keep the funds untouched for a year and a half. In exchange for giving up access to your funds, you'll generally be rewarded with a higher interest rate than the bank pays on savings and money market accounts that allow flexible withdrawals. When opening a CD, you deposit a lump sum of funds into the account at or above the minimum required deposit for that CD. The funds will then sit in the account for 18 months, earning interest along the way. When the CD hits its maturity date , you can take the funds plus their earned interest out of the account with no penalty.

What if I Need My Money Before the CD Matures?

When you open a CD, you know the precise date that the funds will be ready for penalty-free withdrawal. But sometimes emergencies crop up, or your financial situation changes. If you find you need funds from your CD, the good news is that withdrawing your money is almost always possible. The catch is that doing so before maturity will trigger the institution's early-withdrawal penalty . Each bank and credit union has a policy for how that penalty is calculated, and the most common method is for the bank to keep a certain number of months' worth of interest. For instance, if you break an 18-month CD early, you will typically lose three to six months of the interest you earned.

When Is an 18-Month CD a Good Choice?

An 18-month CD is a suitable option for money you won't need in the coming year or longer. For those with a specific plan for the money, such as a down payment on a house or paying college tuition bills for a child, an 18-month CD might provide just the time frame you need to keep funds safe and reliably earning interest. Another appeal of 18-month CDs is to provide one rung of a shortened CD ladder . A CD ladder is a strategy for investing your funds in five CDs of differing terms rather than all at once. For a yearly ladder, you would own a one-year, two-year, three-year, four-year, and five-year CD. But you can also create a shorter ladder, with six-month increments between the CDs (e.g., six-month, 12-month, 18-month, etc.).

Are Online Bank CDs Safe?

Many of the highest deposit rates, whether for CDs, savings accounts, or money market accounts, are offered by online banks . Some of these are online-only banks, meaning they operate solely on the Internet, while others are brick-and-mortar banks with a separate online banking arm. Sometimes the online operations of physical banks even have an entirely different name and brand identity. Though you may feel nervous depositing your funds into an Internet bank instead of at a physical branch, online accounts and institutions are just as safe as their more traditional counterparts. That's because FDIC insurance doesn't discriminate—the $250,000 in deposit insurance it provides consumers in case of bank failure applies equally to online and brick-and-mortar banks.

Why Do Shorter CDs Sometimes Pay More Than Longer CDs?

Generally speaking, the shorter the CD term, the lower the interest rate paid by the bank, and vice versa. That's because the bank recognizes you need to be rewarded more substantially the longer you're being asked to leave the money on deposit. However, not all institutions use a perfectly linear scale of interest rates that increase with the CD terms. A common strategy is offering one or more promotional CDs that pay a significantly higher interest rate to entice customers to the institution. To limit how long the bank is paying the boosted rate, promotional CDs are often shorter in duration, such as less than two years. Another factor is that banks and credit unions decide their CD yields based on where they think the federal funds rate will be in the future . So when it's expected that future interest rates will be lower than today's rates, it's common to see short- or mid-term CDs paying the best rates.

Best 18-Month CD Rates for November 2023

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Credit Human – 6.00% APY

Term (months): 12–17
Minimum deposit: $500
Early withdrawal penalty: Greater of $50 or 9 months of interest
Membership: Anyone can join Credit Human by agreeing to a complimentary membership in the nonprofit American Consumer Council and keeping at least $5 in a member savings account.

Seattle Bank – 5.80% APY

Term (months): 18
Minimum deposit: $1,000
Early withdrawal penalty: 6 months of interest
About: Established in 1999, Seattle Bank serves online customers across the country as well as operates a branch in downtown Seattle.

First Harvest Credit Union – 5.75% APY

Term (months): 15
Minimum deposit: $1,000
Early withdrawal penalty: 6 months of interest
Membership: Anyone is eligible for membership by agreeing to join the CrossState Credit Union Foundation, and First Harvest will cover the membership fee.

Heartland Credit Union – 5.75% APY

Term (months): 17
Minimum deposit: $500
Early withdrawal penalty: 3 months of interest
About: Anyone can join Heartland by keeping $25 in a member savings account.

USAlliance Financial – 5.75% APY

Term (months): 18
Minimum deposit: $500
Early-withdrawal penalty: 12 months of interest
Membership: Anyone can join USAlliance by agreeing to a free membership in the nonprofit American Consumer Council and keeping at least $1 in a savings account.

Alabama Credit Union – 5.71% APY

Term (months): 15
Minimum deposit: $10,000
Early withdrawal penalty: 6 months of interest
Membership: Anyone can join Alabama Credit Union by donating $10 to the Secret Meals Association and keeping $5 or more in a member savings account.

Luana Savings Bank – 5.68% APY

Term (months): 17
Minimum deposit: $5,000
Early-withdrawal penalty: 6 months of interest
About: Luana Savings Bank was founded in 1908 in northeastern Iowa, and in addition to operating six Iowa branches, it serves nationwide customers online.

All In Credit Union – 5.64% APY

Term (months): 18
Minimum deposit: $1,000
Early-withdrawal penalty: 3 months of interest
Membership: Anyone can join All In by signing up for a free membership in the Fort Rucker/Wiregrass Chapter of the Association of United States Army, keeping at least $5 in a savings account, and paying a one-time fee of $1.

Merrick Bank – 5.60% APY

Term (months): 18
Minimum deposit: $25,000
Early-withdrawal penalty: 6 months of interest
About: Primarily a credit card issuer and consumer finance provider, Merrick Bank offers online-only certificates of deposit.

Prime Alliance Bank – 5.55% APY

Term (months): 18
Minimum deposit: $500
Early withdrawal penalty: 3 months of interest
About: Established in 2004, Prime Alliance operates one branch in metropolitan Salt Lake City, while also offering deposit products online to customers throughout the U.S.

Newtek Bank – 5.55% APY

Term (months): 18
Minimum deposit: $2,500
Early withdrawal penalty: 6 months of interest
About: FDIC-insured since 1963 as National Bank of New York City, Newtek is the bank's 2023 rebranded identity, which operates one branch each in New York and Miami while serving nationwide customers online.

The Federal Savings Bank – 5.55% APY

Term (months): 18
Minimum deposit: $5,000
Early withdrawal penalty: 6 months of interest
About: The Federal Savings Bank is a national bank with a network of over 55,000 ATMs across the U.S. It offers checking and savings accounts, in addition to mortgages and loans.

Expedition Credit Union – 5.51% APY

Term (months): 15
Minimum deposit: $2,500
Early-withdrawal penalty: 4 months of interest
Membership: Anyone is eligible for membership by joining the Expedition Foundation for a one-time, tax-deductible donation of $5.

Citizens State Bank – 5.51% APY

Term (months): 15
Minimum deposit: $10,000
Early-withdrawal penalty: 6 months of interest
About: Headquartered in Hudson, Wisconsin, Citizens State Bank dates back to 1904. It has five locations in Wisconsin but also offers online banking nationwide.

Genisys Credit Union – 5.51% APY

Term (months): 20
Minimum deposit: $500
Early withdrawal penalty: 6 months of interest
Membership: Anyone can join Genisys by making a $5 donation to the Arthritis Foundation or the Paint Creek Center for the Arts and keeping at least $5 in a member savings account.

Pros and Cons of 18-Month CDs

Pros

Offers a guaranteed rate for 18 months
May pay a higher APY than other terms
Pays reliable and predictable earnings
Is safe and virtually risk-free
Can deter the temptation to spend since funds are tied up

Cons

Incurs a penalty if you withdraw early
Allows only one deposit amount
If rates fall, you may wish you'd opted for a longer term
If rates rise, you'll be locked at a lower rate until maturity

Pros Explained

Offers a guaranteed rate for 18 months: No matter what happens with the Federal Reserve and interest rates, the bank cannot change the APY you secure when you sign your CD agreement and make your deposit.
May pay a higher APY than other terms: Shopping around is critical, as rates can vary widely across institutions and also across different CD lengths.
Pays reliable and predictable earnings: Because your CD rate is fixed and your term is known, you can calculate exactly how much your earnings will amount to once the CD matures.
Is safe and virtually risk-free: CDs opened at an FDIC bank or NCUA credit union are federally insured, protecting up to $250,000 of your deposits in the unlikely event that the institution fails.
Can deter the temptation to spend since funds are tied up: Withdrawing your funds before the CD matures will trigger an early withdrawal penalty, which may be enough to stop you from pulling the funds out for unplanned spending.

Cons Explained

Incurs a penalty if you withdraw early: Every bank and credit union specifies their policy on how they'll calculate your penalty if you don't keep your CD funds deposited until maturity. Typically, the penalty is a number of months' interest that you'll forfeit.
Allows only one deposit amount: With most CDs, you get one chance to decide how much you want to invest in the certificate. Additional deposits are generally not allowed.
If rates fall, you may wish you'd opted for a longer term: Investing in a longer CD would have allowed you to retain a good rate for a longer period of time
If rates rise, you'll be locked at a lower rate until maturity: If you lock into an 18-month CD and then rates rise, you'll be stuck with your current rate until you can withdraw your funds.

Important

Though consumers tend to think about CD maturity terms in nice round numbers, be sure to consider odd-term CDs, such as 15-month, 18-month, or 21-month certificates. It's not uncommon for promotional rate CDs to have unusual durations, so don't limit yourself to only the conventional terms.

Alternatives to 18-Month CDs

Other CD Terms

Anytime you're choosing a CD, a decision on the length of term is one of the most critical considerations. You'll want to select a term that you feel reasonably confident you can stick with, so that you won't incur a penalty for withdrawing early.

Instead of an 18-month CD, you could choose a shorter certificate to limit the amount of time your funds are tied up, but you may have to settle for a slightly lower rate. The same is true if you go with a longer-term CD: rates could be lower than what you can earn on 18 months. It all depends on the current rate environment, so it's important that you shop around.

For example, if rates are higher now than you think they will be in the future, locking in one of today's rates for as long as possible can be a smart move, so that you'll retain your APY for a longer period than if you chose a shorter-term CD.

Liquid Accounts

Instead of locking up your money in an 18-month CD, you can instead keep it in one of several types of liquid accounts. Keeping it in a checking account is one option, providing ultimate convenience and flexibility. But since checking accounts generally pay zero interest, it's a poor choice for your savings.

Opening a top-paying high-yield savings account or a money market account is a better option, enabling you to earn a competitive return on your funds. The downside compared to a CD, however, is that savings and money market accounts pay a variable rate, which means that if interest rates go down in the future, so will the rate you're earning in these accounts.

The same is true for cash reserve and money market funds at brokerage firms. Many of these pay much lower rates than you can earn with a high-yield savings account at a top-paying bank. But even when the APY on a brokerage cash account is competitive, it too is a variable rate that you can't lock in like you can with a CD.

US Savings Bonds & Treasuries

You could alternatively put your funds in U.S. savings bonds or Treasuries. The U.S. government offers two types of savings bonds: EE bonds and I bonds. EE bonds offer a fixed interest rate that you'll know at the time of making your deposit decision, while I bonds offer a rate that changes every six months based on current inflation levels (hence, the name I bonds). These investments are exceptionally safe, but they do not allow a withdrawal within the first 12 months for any reason.

You can also lend money to the U.S. government by purchasing Treasury bonds. These are called T-bills for durations of four weeks to one year, and Treasury notes for durations of two to 10 years. Treasuries are considered one of the safest investments in the world, but their rates are not always as high as the best CDs or high-yield savings accounts.

Frequently Asked Questions

What Is an 18-Month CD and How Does It Work?

Certificates of deposit (CDs) are bank or credit union accounts in which you agree to hold your funds on deposit without withdrawals for a prearranged period. Thus, an 18-month CD requires you to keep the funds untouched for a year and a half. In exchange for giving up access to your funds, you'll generally be rewarded with a higher interest rate than the bank pays on savings and money market accounts that allow flexible withdrawals.
When opening a CD, you deposit a lump sum of funds into the account at or above the minimum required deposit for that CD. The funds will then sit in the account for 18 months, earning interest along the way. When the CD hits its maturity date, you can take the funds plus their earned interest out of the account with no penalty.
What if I Need My Money Before the CD Matures?

When you open a CD, you know the precise date that the funds will be ready for penalty-free withdrawal. But sometimes emergencies crop up, or your financial situation changes. If you find you need funds from your CD, the good news is that withdrawing your money is almost always possible.
The catch is that doing so before maturity will trigger the institution's early-withdrawal penalty. Each bank and credit union has a policy for how that penalty is calculated, and the most common method is for the bank to keep a certain number of months' worth of interest. For instance, if you break an 18-month CD early, you will typically lose three to six months of the interest you earned.
When Is an 18-Month CD a Good Choice?

An 18-month CD is a suitable option for money you won't need in the coming year or longer. For those with a specific plan for the money, such as a down payment on a house or paying college tuition bills for a child, an 18-month CD might provide just the time frame you need to keep funds safe and reliably earning interest.
Another appeal of 18-month CDs is to provide one rung of a shortened CD ladder. A CD ladder is a strategy for investing your funds in five CDs of differing terms rather than all at once. For a yearly ladder, you would own a one-year, two-year, three-year, four-year, and five-year CD. But you can also create a shorter ladder, with six-month increments between the CDs (e.g., six-month, 12-month, 18-month, etc.).
Are Online Bank CDs Safe?

Many of the highest deposit rates, whether for CDs, savings accounts, or money market accounts, are offered by online banks. Some of these are online-only banks, meaning they operate solely on the Internet, while others are brick-and-mortar banks with a separate online banking arm. Sometimes the online operations of physical banks even have an entirely different name and brand identity.
Though you may feel nervous depositing your funds into an Internet bank instead of at a physical branch, online accounts and institutions are just as safe as their more traditional counterparts. That's because FDIC insurance doesn't discriminate—the $250,000 in deposit insurance it provides consumers in case of bank failure applies equally to online and brick-and-mortar banks.
Why Do Shorter CDs Sometimes Pay More Than Longer CDs?

Generally speaking, the shorter the CD term, the lower the interest rate paid by the bank, and vice versa. That's because the bank recognizes you need to be rewarded more substantially the longer you're being asked to leave the money on deposit.
However, not all institutions use a perfectly linear scale of interest rates that increase with the CD terms. A common strategy is offering one or more promotional CDs that pay a significantly higher interest rate to entice customers to the institution. To limit how long the bank is paying the boosted rate, promotional CDs are often shorter in duration, such as less than two years.
Another factor is that banks and credit unions decide their CD yields based on where they think the federal funds rate will be in the future. So when it's expected that future interest rates will be lower than today's rates, it's common to see short- or mid-term CDs paying the best rates.

Rate Collection Methodology Disclosure

Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs to customers nationwide, and determines daily rankings of the top-paying certificates in every major term. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the CD's minimum initial deposit must not exceed $25,000.

Banks must be available in at least 40 states. 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 (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.

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