Best CD Rates of November 2023: Highest Rates Up to 6.50%

What Is a CD Rate?

A CD rate is an interest rate that shows what a bank or credit union will pay you for depositing your money with them for a certain period of time. For example, if the rate is 5.50% for a 1-year CD, the bank or credit union will pay you 5.50% in interest on your money for keeping it in the account, untouched, for 12 months.

How Does a CD Work?

Opening a certificate of deposit (CD) is very similar to opening any bank deposit account. The difference is what you're agreeing to when you sign on the dotted line (even if that signature is now digital).

After you've shopped around and identified which CD(s) you'll open, completing the process will lock you into four things:

1. The interest rate: Locked rates are positive in that they provide a clear and predictable return on your deposit over a specific time period. The bank cannot later change the rate and therefore reduce your earnings. On the flip side, a fixed return may hurt you if rates later rise substantially and you've lost your opportunity to take advantage of higher-paying CDs.
2. The term: This is the length of time you agree to leave your funds deposited to avoid any penalty (such as 6 months or 1 year, etc.) The term ends on the "maturity date," when you can withdraw your funds penalty-free.
3. The principal: With the exception of some specialty CDs that allow add-on deposits, this is the amount you agree to deposit into the CD, at the time of opening.
4. The institution: The bank or credit union where you open your CD will determine aspects of the agreement, such as early withdrawal penalties and whether your CD will be automatically reinvested if you don’t provide other instructions at the time of maturity. Credit unions may also require you to have open a high-yield savings account or money market account before you open a CD.

Once your CD is established and funded, the bank or credit union will administer it like most other deposit accounts, with either monthly or quarterly statement periods, paper or electronic statements, and usually monthly or quarterly interest payments deposited to your CD balance, where the interest will compound.

How Much Does $10,000 Earn in a CD in One Year?

If you invest $10,000 in a CD for one year, you could earn $618—that's based on the best 1-year CD rate offered right now (6.18% APY). CD rates fluctuate and can change, so locking in a high interest rate today could guarantee you the maximum earnings, especially if CD rates drop by next year.

Types of CDs

There are several types of CDs in which you can deposit your money. Some have variable rates, while others have fixed rates (like those listed above). Others are connected to a brokerage, and some have large minimum opening requirements.

• Regular CDs: A regular CD is a CD with a fixed interest rate for a set period of time. Brick-and-mortar traditional banks, as well as online institutions and credit unions, offer these kinds of CDs. They may also be called traditional CDs.
• Variable-rate CDs: This kind of CD is one where the interest rate can change based on the prime rate, the Consumer Price Index (CPI), Treasury bills, or a market index. The entire term for the CD is still fixed, though, and does not change. These are sometimes called "flex" CDs.
• Jumbo CDs: A jumbo CD is a CD that requires a larger opening deposit, such as $50,000 or $100,000.
• No-penalty CDs: A no-penalty CD is exactly what it sounds like—you do not pay a fee for withdrawing your money early.
• Brokered CDs: A brokered CD is one that an investor can buy through a brokerage firm or from a sales representative other than a bank or credit union.
• Step-up CDs: A step-up CD is one that allows you to increase your interest rate when you can. Your rate is not fixed for the entire term; you can capitalize on higher interest rates with a step-up CD. A step-up CD may also be called a bump-up CD.
• Promotional-rate CDs: This CD offers a promotional rate that may be higher than a regular CD rate and is only offered for a certain time period. You may be able to lock in a high rate by opening this kind of CD within a promotional period, like 30 days or before the end of the month.
  

Pros and Cons of CDs

What Are the Benefits of a CD?

• Guaranteed yield for the CD's full term: CDs are a fixed-rate product, so you're guaranteed to earn the rate you lock in until the CD's maturity date, no matter what the Federal Reserve does with the fed funds rate in the future.
• Higher interest rates than liquid accounts: Banks generally offer higher rates on CDs than on liquid accounts such as savings and money market accounts, in exchange for you keeping the funds reliably on deposit and not being allowed any transactions until the final withdrawal.
• Fully predictable earnings and withdrawal date: Because you know the CD's rate and term, you can calculate exactly how much you'll earn and when you can withdraw the funds without penalty.
• Extremely safe, with almost no bank or market risk: When you open a CD at an FDIC bank or an NCUA credit union, up to $250,000 in deposits are federally protected against the institution's failure. You're also safe from the market volatility—and potential loss in value—that can occur with stock and bond investments.
• Can deter spending temptations: Withdrawing funds before your CD matures cause you to pay an early withdrawal penalty, which can help keep you from giving into temptations to dip into your savings for an unplanned purchase.

What Are the Downsides of a CD?

• Early withdrawal of the funds incurs a penalty: If you do need to withdraw your CD funds before maturity, the bank or credit union will impose an early withdrawal penalty. Typically, it's calculated as a certain number of months of forfeited interest earnings.
• You can’t add to your deposit: With the rare exception of add-on CDs, you can only deposit funds into the certificate at the time of initial deposit.
• If CD rates rise, you may miss out on a higher yield: If you lock in your CD rate, but rates increase shortly after, you may wish you'd waited to score a higher return.
• If CD rates drop, you may wish you’d chosen a longer CD: Though you'll still be well-served by any CD yield you have locked in before interest rates drop, you may wish you'd locked in a longer-term CD to extend that competitive yield for a longer period.
• Typically return less than stocks over long periods: Though stock investments involve more risk and less predictability, they may offer greater returns over long periods.

How To Pick the Best CD for You

When choosing a CD, consider your financial goals—both short-term goals and long-term goals. First, how much money do you have to deposit into a CD? From there, find a CD that meets your minimum balance requirements. Next, ask yourself how long you can leave that money in the CD, without touching it. That will help you determine the right term—whether that's a one-year CD or a three-year CD. After that, look for the highest interest rate offered for your term and minimum deposit. You'll also want to look at the type of CD, whether it's a bump-up CD or a regular CD, to ensure you're choosing one that meets your needs and goals. Once you choose a CD, open the account, and deposit your money to start earning interest.

How To Build a CD Ladder

Smart CD investors have a specific tactic for hedging against rate changes over time and maximizing their return. It's called a CD ladder and it enables you to access the higher rates typically offered on 5-year CDs, but with the twist that a portion of your money becomes available every year, rather than every five years. Here's how to do it.

At the outset, you take the amount of money you want to invest in CDs and divide it by five. You then put one-fifth of the funds into a top-earning 1-year CD, another fifth into a top 2-year CD, another into a 3-year CD, and so forth through a 5-year CD. Let’s say you have $25,000 available. That would give you five CDs of varying lengths, each with a value of $5,000.

Then, when the first CD matures in a year, you take the resulting funds and open a top-rate 5-year CD. A year later, your initial 2-year CD will mature, and you'll invest those funds into another 5-year CD. You continue doing this every year with whichever CD is maturing until you end up with a portfolio of five CDs all earning 5-year APYs, but with one of them maturing every 12 months, keeping your money a bit more accessible than if all of it were locked up for a full five years.

CDs and Taxes

Just like how the interest you earn on any money you have in savings, money market, and checking accounts is taxable as interest income at both the state and federal levels, the interest you earn on your money in a CD is too.

Your CD earnings will be reported to the IRS in the year they were earned and posted to your account, so that's when they're taxable—even though you may not withdraw the funds for one or more years into the future.

For example, if you have $1,000 in a 1-year CD with a 5.00% interest rate, you'll earn $50 in interest. You owe taxes on that $50, but not on the $1,000 principal you deposited at the start of the term.

Alternatives to CDs

CDs vs. High-Yield Savings Accounts

If you just aren't sold on committing your funds for a certain amount of time, or simply can't afford to because you may need the money in the near term, a high-yield savings account. You'll be free to withdraw and deposit funds as you like, though some institutions will limit how many withdrawals you can make each month. Some savings accounts may also require a minimum balance.

CDs vs. Money Market Accounts

If you're looking for other high-yield accounts, a money market account may serve your needs. Money market accounts offer the feature of allowing you to write checks on the account. They may also come with minimum deposit or balance requirements like savings accounts, and money market account rates can easily compete with savings account rates.

You can always find the top nationally available rates in our daily rankings of the best high-yield savings accounts and best money market account rates. Both accounts have deposit insurance through the FDIC or NCUA.

CDs vs. Bond Options

If you're interested in venturing out of the bank and into the world of bonds, you have numerous options. You could put cash savings into U.S. government I bonds, which are designed to track or beat the inflation rate. Or you could invest in U.S. Treasuries, in which you lend money to the U.S. government for a fixed amount of time. The Treasury notes with durations of four weeks to one year are called T-Bills.

Another option is corporate and municipal bonds. Though it's difficult to research individual bonds on your own, you can easily invest in a bond mutual fund or bond exchange-traded fund which is diversified across a bundle of different bond issues. You can also enter and exit these funds at any time.

CDs vs. Brokerage Options

If you have a brokerage account, you can also hold savings in the brokerage’s cash reserve account or their money market fund (not to be confused with the money market accounts offered by banks). Just be sure to research what rate you’ll earn because in many cases, these brokerage cash accounts pay far less than what you can earn by keeping your money in an outside CD, savings account, or money market account.

CDs vs. Annuities

An annuity is a type of fixed-income investment provided by financial institutions. You can buy an annuity and pay into it with monthly payments or a lump sum. Then, in the future, you receive fixed monthly payments. Annuities are insurance contracts that can guarantee income. While they are similar to a CD in that the income is guaranteed as long as you follow the rules of the contract, they are not as short-term as CDs may be. Annuities are most often used in retirement planning. CDs can also be used for retirement planning, but they are usually bought and held for terms of 6 months to 5 years, rather than an annuity which could be owned for 20 years, or something similar. There may also be different withdrawal rules and limits, as well as tax consequences with annuities.

CDs vs. Treasury Bills

Treasury bills are debt obligations backed by the U.S. government. They usually have maturities of one year or less. That timing is similar to CDs with shorter terms, but Treasury Bills may not offer the same level of return on the investment. Rates are comparable, around the 5.50% mark as of the end of October 2023, but they can fluctuate daily. CD rates can also change daily. The thing with T-bills is that you buy them at a discount and when they mature, you receive the full amount back, plus a little more. For example, you might buy a $1,000 T-bill for $950. When the bill matures, you will get $1,000, or $50 more than what you paid for it. This increase of $50 is the interest you earn. CDs are a little less complicated, where you put in a set amount, and then receive a fixed interest rate when it matures.

CD Rates vs. Inflation

CD rates reached historic highs in 2023, while inflation cooled from its recent high of 9.1% in June 2022. In September 2023, inflation was down to 3.7%, while the top rate offered across all CDs was 6.00%, almost double what inflation was. CDs can help you combat inflation by paying you interest on your money, even though you may be paying more for goods and services. This will not always be the case, though. Interest rates are often increased to help combat high inflation. When inflation drops back to the standard 2% mark the Federal Reserve aims for each year, then interest rates may also drop back from their highs.

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.