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What is the average CD interest rate?

Knowing the current average rates for CDs gives you an idea of what you can expect to earn.

Yahoo Personal Finance· Getty Images
Ivana Pino
·Senior Writer
4 min read

Certificates of deposit (CDs) can be a great option for savers with a clear goal who are prepared to lock in their funds for a set period. However, it’s important to vet your options carefully before choosing a CD.

One of the most important factors to consider when choosing an account is the interest rate or annual percentage yield (APY). A higher APY allows your balance to grow at a faster rate, helping you reach your savings goals sooner.

So what is a good CD rate? It depends on the present market. But it can help to look at the current average as a benchmark for comparing offers.

See our picks for the best CD accounts and rates on the market>>

National average CD interest rates fluctuate over time based on factors such as market conditions, the Federal Reserve’s target rate, and individual policies of banks and credit unions.

Knowing the current average rate for different CD terms gives you an idea of what you can expect to earn. Here’s a look at the national average rates as of July 2024, according to the FDIC:

CD rates are set by individual banks and credit unions, but they’re also influenced by other external factors. Knowing how these different factors impact CD rates can help provide some context for why rates change and when it might be the best time to open an account.

The federal funds rate is the target interest rate set by the Federal Reserve. It determines the rate that banks charge one another to borrow funds overnight in order to meet reserve requirements. This rate trickles down to influence rates on consumer banking products such as high-yield savings accounts and CDs. When the federal funds rate is high, it usually leads to higher rates on CDs, which is good news for savers who want to lock in the highest possible APY.

Unfortunately, the opposite is also true; when the Fed lowers its target rate, deposit rates also fall. The good news is that, unlike savings accounts, CDs allow you to lock in your rate for the entire term, which can be especially beneficial in a falling interest rate environment.

Read more: What the Fed rate decision means for bank accounts, CDs, loans, and credit cards

Banks and credit unions may raise their CD rates to remain competitive with other financial institutions and drum up new business. Plus, those deposits can be used for lending, investing, and other revenue-generating activities.

Read more: How do banks make money?

CD terms range from a few months to several years. Typically, longer CD terms offer higher rates, though that’s not always the case, especially in a rising rate environment. Of course, locking in a longer CD term means you’ll be without your money for a longer period. So carefully consider your savings goals and timeline when choosing a CD.

Read more: Short- or long-term CD: Which is best for you?

If you don’t love the idea of locking in your savings for an extended period, there are strategies you can use to take advantage of today’s best CD rates while maintaining some flexibility.

  • CD laddering: A CD ladder is a strategy where you split your funds across multiple CDs with staggered term lengths. As your shorter-term CDs mature, you can reinvest the money in another CD, or choose to use it for another purpose. Meanwhile, your longer-term CDs will continue earning interest.

  • Bump-up CD: Bump-up CDs allow you to raise your APY if rates increase during the term. The catch: Rates on bump-up CDs are typically lower than the rates offered on regular CDs, and most bump-up CDs mature at either 12 or 24 months. Still, this kind of account affords you the option to request a rate increase (usually once) during the life of your CD.

  • Step-up CD: Unlike a traditional CD with a fixed interest rate, step-up CDs allow you to earn more interest on your balance over time with periodic APY increases.

Ultimately, CDs can offer competitive rates, but the trade-off is that you have to keep your money on deposit for months or years (or else pay an early withdrawal penalty) at the cost of locking up your funds for a fixed period of time. If this kind of account isn’t right for you, consider an alternative such as a high-yield savings account or money market account.

Read more: How to avoid taxes on CD interest