CD rates vary by bank and term length, and they change weekly

A CD (certificate of deposit) pays you a fixed interest rate for agreeing to leave your money untouched for a set period—usually three months to five years. The rate you get depends on three things: which bank you choose, how long you lock your money away, and what week you open the account.

Right now, rates across the industry range from under 1% at some large national banks to over 5% at online banks and credit unions—but those numbers shift constantly. A CD that pays 5.25% this week might pay 5.10% next week. The only way to know what a specific bank is offering today is to check their website or call them directly.

The pattern that stays consistent: longer terms usually pay more than shorter ones. A one-year CD typically pays less than a five-year CD at the same bank. And online banks almost always pay more than brick-and-mortar branches because they have lower overhead costs.

Key Takeaways

  • CD rates change weekly and vary significantly between banks, so comparing rates across multiple institutions before opening an account will affect how much you earn.
  • Longer CD terms (three to five years) generally pay higher rates than shorter terms (three to six months) at the same bank.
  • Online banks and credit unions typically offer higher rates than traditional bank branches because they have lower operating costs.
  • The rate you lock in when you open the CD stays the same for the entire term, regardless of whether market rates rise or fall.
  • Early withdrawal from a CD usually costs you some or all of the interest you earned, so only lock away money you won't need before the term ends.

How to find the actual rate a bank is offering

Banks post their current CD rates on their websites, usually under a heading like "Rates & APY" or "CDs." You will see a table showing different term lengths and the annual percentage yield (APY) for each one. That APY is the actual rate you will earn—it already includes any compounding that happens during the year.

The rate shown is what you get if you open the account that day. If you wait a week, the rate may be different. If you want to lock in a specific rate, you need to open the account while that rate is posted.

To compare across banks quickly, visit a rate-tracking site like Bankrate, DepositAccounts, or your bank's own comparison tool. These sites update daily and let you filter by term length. Write down the top three or four options, then visit each bank's website directly to confirm the rate is still current before you transfer money.

Why rates are different at different banks

Banks set CD rates based on what they need to attract deposits and what they can earn by lending that money out. When the Federal Reserve raises its benchmark interest rate, banks have more room to offer higher CD rates. When the Fed cuts rates, CD rates fall across the industry.

But individual banks also compete differently. A large national bank with millions of customers may offer lower rates because people open accounts there for convenience. An online-only bank with no physical branches can offer higher rates because it spends less on buildings and staff. A credit union might offer competitive rates to members as a benefit of membership.

Some banks also offer promotional rates—temporarily higher rates for a limited time—to attract new deposits. These rates are real, but they may drop back down after the promotion ends. Always check whether a rate is promotional or standard before you commit.

What happens to your money during the CD term

Once you open a CD, the bank holds your money and pays you the interest rate you locked in. The interest either gets paid to you monthly, quarterly, or at the end of the term—depending on the bank's rules. Some banks add the interest to your CD balance so it compounds; others send it to a linked savings account.

You cannot withdraw the money before the term ends without paying a penalty. That penalty is usually a certain number of months of interest. For example, a three-month CD might have a penalty of one month of interest. A five-year CD might have a penalty of six months of interest. The longer the term, the steeper the penalty usually is.

When the term ends, the bank will either automatically renew the CD at the current rate or move the money to a regular savings account. Check your account settings or call the bank to see what happens at maturity so you are not surprised.

How much you actually earn depends on the amount and the rate

The interest you earn is calculated as: your deposit amount × the annual rate ÷ 12 (for monthly interest). So a $10,000 CD at 5% APY earns about $50 per month, or $600 per year. A $1,000 CD at the same rate earns about $5 per month, or $60 per year.

The higher the rate and the larger your deposit, the more you earn. But the term length also matters. A $10,000 CD at 5% for one year earns $500. The same $10,000 at 5% for five years earns $2,500 total (assuming simple interest, not compounding). Longer terms mean more total interest paid to you.

Some banks also have minimum deposit requirements—you might need $500 or $1,000 to open a CD. A few online banks have no minimum, which makes them worth checking if you have a smaller amount to save.

When a CD makes sense versus other savings options

A CD is useful when you have money you know you will not need for a specific period. The locked-in rate protects you if interest rates fall—you keep earning the same rate for the full term. It is also useful for building discipline: the penalty for early withdrawal discourages you from dipping into the money for impulse purchases.

A regular savings account makes more sense if you might need the money sooner. Savings accounts have no withdrawal penalties, though they usually pay lower rates than CDs. A money market account sits between the two: it pays more than savings but less than CDs, and you can withdraw money without penalty (though there may be limits on how often).

If you think interest rates will rise soon, a shorter CD (three to six months) lets you reinvest at a higher rate when it matures. If you think rates will fall, a longer CD locks in today's higher rate for years.

Understanding APY versus interest rate

Banks show CD rates as APY (annual percentage yield), not just a simple interest rate. APY includes the effect of compounding—when interest gets added to your balance and then earns interest itself. A CD with 5% APY will actually give you slightly more than 5% of your deposit over a year because of that compounding.

The difference is usually small for CDs because the compounding happens within a single year. But it matters when you are comparing two banks. Always compare the APY numbers, not the stated rate, because APY is the true number you will earn.

The bank is required by law to show you the APY clearly, usually right next to the rate. If you see only a rate and not an APY, ask the bank for the APY before you open the account.

Frequently Asked Questions

Do CD rates change after I open the account?

No. The rate you lock in when you open the CD stays the same for the entire term, even if the bank's rates go up or down. That is the whole point of a CD—you get a may provide rate. When the term ends and the CD matures, you can open a new one at whatever rate the bank is offering then.

What is the penalty for taking money out early?

The penalty varies by bank and CD term. It is usually expressed as a number of months of interest. A three-month CD might have a one-month interest penalty; a five-year CD might have a six-month penalty. Some banks charge a flat fee instead. Check the bank's disclosure document before you open the account to know the exact penalty.

Can I open multiple CDs at the same bank?

Yes. You can open as many CDs as you want at the same bank, with different term lengths or different amounts. Some people open a "CD ladder"—multiple CDs that mature at different times—so they have access to some of their money each year while keeping the rest locked in at higher rates.

Are CDs safe if the bank fails?

Yes. CDs are covered by FDIC insurance (at banks) or NCUA insurance (at credit unions) up to $250,000 per depositor per bank. If the bank fails, the government guarantees you get your money back, including the interest you earned up to that point.

Should I open a CD now or wait for rates to go higher?

That depends on your outlook for interest rates and your need for the money. If you need the money locked away safely for a set period, today's rate is better than guessing about tomorrow. If you think rates will rise significantly soon, a shorter CD lets you reinvest at a higher rate when it matures. There is no perfect answer—it depends on your situation.