:max_bytes(150000):strip_icc()/Prostock-Studio-6ffe667415ca47018ea7a94c7132b784.jpg "Short-Term CDs Are Still Paying Record Rates. Will They Go Even Higher?")
Key Takeaways
- Average CD rates climbed to fresh records in two shorter CD terms on Jan. 31, according to the FDIC’s latest release of monthly rate data.
- In longer terms, average rates have slipped slightly from records set in December and January.
- CD returns have skyrocketed since early 2022 due to the Federal Reserve’s aggressive fight against decades-high inflation.
- You can currently earn as much as 5.75% APY by shopping the nation’s best CD rates, or you could choose from dozens of others that pay above 5%.
- Now that inflation has cooled, it’s expected the Fed will cut interest rates sometime this year. This makes now a smart time to lock in a top CD rate that you can enjoy for months or years into the future.
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CD Rates Set New Records in Short Terms but Declined in Longer Terms
Once a month, we get hard-and-fast numbers from the Federal Deposit Insurance Corporation (FDIC) on how average certificate of deposit (CD) rates have changed. Representing the rates of all FDIC banks as of Jan. 31, the latest CD averages were published yesterday.
The February report shows the national average climbed once again in the 3-month and 6-month terms, setting new records since the FDIC began recording averages in 2009. For 6-month CDs, this represents the 23rd consecutive monthly increase, rising every month since the April 2022 report.
The 1-year, 2-year, 4-year, and 5-year terms, however, saw their monthly averages dip. The decline was fortunately slight, moving just 1 to 3 basis points below the records they established last month.
The remaining term of 3-year CDs saw its rate average hold steady from last month, remaining just 1 basis point under the record set in December.
| CD Term | Jan 2024 FDIC Report (Average APY) | Feb 2024 FDIC Report (Average APY) | Monthly Change (Percentage Points) | Record FDIC Average Since 2009* |
|---|---|---|---|---|
| 3 months | 1.67% | 1.69% | + 0.02 | Current average is the record |
| 6 months | 1.51% | 1.53% | + 0.02 | Current average is the record |
| 1 year | 1.86% | 1.83% | – 0.03 | 1.86% (Jan 2024) |
| 2 years | 1.57% | 1.54% | – 0.03 | 1.57% (Jan 2024) |
| 3 years | 1.40% | 1.40% | No change | 1.41% (Dec 2023) |
| 4 years | 1.34% | 1.32% | – 0.02 | 1.34% (Jan 2024) |
| 5 years | 1.41% | 1.40% | – 0.01 | 1.41% (Jan 2024) |
Today’s historically high CD rates are thanks to the Federal Reserve, which aggressively hiked the federal funds rate between March 2022 and July 2023 in a fight against post-pandemic inflation. Across 12 meetings, the central bank raised the benchmark rate 11 times for a cumulative increase of 5.25%—taking it to its highest level since 2001. This in turn has pushed banks and credit unions to offer increasingly higher rates on savings accounts, money market accounts, and CDs—raising those returns to historic levels as well.
The FDIC began calculating and publishing these averages in May 2009, allowing us to definitively say today’s averages are higher than at any time in nearly 15 years. But since CD rates and the federal funds rate are so directly correlated, it’s fair to further say we’ve likely not seen CD rates this high in 22 years, given that the fed funds rate has not been this high since 2001.
Shop the Best CD Rates to Earn 3–4 Times More
Keep in mind that you can easily earn three to four times more than the FDIC’s national average rates by simply shopping around. While the averages are good indicators of rate trends over time, they are far below the rates you’ll find in our daily ranking of the best nationwide CD rates.
Take, for instance, 6-month CD rates. The national average is currently an unimpressive 1.53% APY. But with the best 6-month CD available nationwide, you can earn an eye-popping 5.75% APY, with numerous additional options paying 5.50% APY or better. The same is true in the other CD terms—you can almost always earn at least three times as much as the national average with one of the country’s top-paying offers.
With their rate locked and guaranteed, CDs are an exceptionally safe place to stash some of your savings. In addition, all of the certificates in our rankings are offered by federally insured banks and credit unions (either by the FDIC or the NCUA), meaning even in the unlikely case the institution fails, your deposits up to $250,000 per institution are protected.
Will CD Rates Climb Higher in 2024?
CD rates surged to record highs last fall, compliments of the Federal Reserve‘s 11 inflation-fighting increases to the federal funds rate between March 2022 and July 2023. But the central bank has held its benchmark rate steady since July and is almost certain it won’t raise rates further. With the threat of additional rate hikes finally off the table, banks and credit unions have begun lowering their CD yields over the last two months.
But it’s likely that much more substantial CD rate declines are on the horizon this year, as the Fed currently expects to make one or more rate cuts in 2024. While it’s unknown when the first rate decrease will occur, the Fed’s December “dot plot” report showed that almost 80% of Fed committee members predicted two to four rate cuts would be made this calendar year, with a median forecast of a 0.75% rate reduction.
Once the first decrease appears imminent, banks and credit unions will start dropping their CD rates more substantially than they have so far. That makes now an excellent time to lock in a top rate you can enjoy for a year or more down the road. Whether you choose one of the highest APYs available on short- to mid-term CDs or opt for a slightly lower rate you can extend to 2027, 2028, or even 2029, you’ll set yourself up to enjoy guaranteed and predictable returns far into the future.
How We Find the Best Savings and CD Rates
Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account’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.