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A certificate of deposit (CD) offers something most investments cannot: a guaranteed return on your money, backed by federal deposit insurance. In exchange, you agree to leave your money in the account for a fixed period.
In 2026, the best CD rates are still attractive — particularly for 6-month and 1-year terms. This guide covers how CDs work, current rates, and how to decide if one is right for your situation.
Rates and figures as of May 2026.
What Is a CD?
A certificate of deposit is a savings account that holds a fixed sum of money for a fixed term — from a few months to five years or more — at a fixed interest rate. When the term ends (the maturity date), you receive your original deposit plus interest.
CDs are issued by banks and credit unions and are FDIC-insured (or NCUA-insured at credit unions) up to $250,000 per depositor per institution. Your principal is safe as long as you stay within insured limits.
How CDs Differ From Savings Accounts
| Feature | CD | High-Yield Savings Account |
|---|---|---|
| Interest rate | Fixed for the term | Variable, can change anytime |
| Access to funds | Locked until maturity (penalty for early withdrawal) | Available anytime |
| Best for | Money you will not need for a specific period | Emergency fund, money you may need |
| FDIC insured | Yes | Yes |
| Rates vs savings | Often higher (for longer terms) | Competitive but variable |
Best CD Rates in 2026
| Bank | Term | APY | Minimum Deposit |
|---|---|---|---|
| Marcus by Goldman Sachs | 1 Year | 5.10% APY | $500 |
| Ally Bank | 1 Year | 4.80% APY | $0 |
| Discover Bank | 1 Year | 4.70% APY | $2,500 |
| Synchrony Bank | 6 Month | 5.00% APY | $0 |
| Bread Savings | 1 Year | 5.05% APY | $1,500 |
| Popular Direct | 6 Month | 5.15% APY | $10,000 |
Rates change frequently. Check the bank’s website for current rates before opening an account.
CD Terms and What They Mean
CDs are available in a wide range of terms. Common options:
- 3-month CD: Low rate, maximum flexibility. Good for money you expect to need in 3 months.
- 6-month CD: Balance of rate and flexibility. Currently among the highest-yielding terms in 2026.
- 1-year CD: Strong rates, locked for a year. Most popular choice for savings goals 6–12 months out.
- 2-year CD: Higher rate for a 2-year commitment. Useful if you know you will not need the money.
- 5-year CD: Highest rates, longest commitment. Appropriate only if you are sure you will not need the funds.
Early Withdrawal Penalties
If you withdraw money from a CD before it matures, the bank charges an early withdrawal penalty. Typical penalties:
| CD Term | Typical Penalty |
|---|---|
| 3–6 months | 60–90 days of interest |
| 1 year | 150 days of interest |
| 2 years | 180 days of interest |
| 5 years | 365 days of interest |
In some cases, particularly for large penalties on short-held CDs, you can lose a portion of principal. Always read the penalty terms before opening a CD.
No-Penalty CDs
Some banks offer no-penalty CDs that allow you to withdraw your full balance (after a brief initial hold, usually 6 days) without any fee. The trade-off is slightly lower rates.
No-penalty CDs bridge the gap between a CD and a high-yield savings account. If you want the higher rate of a CD but worry about needing the funds, a no-penalty CD is worth considering.
CD Laddering Strategy
A CD ladder lets you balance high rates with regular access to funds. Instead of putting all your money in one CD, you split it across multiple CDs with different maturity dates.
Example: $20,000 split as:
- $5,000 in a 6-month CD
- $5,000 in a 1-year CD
- $5,000 in a 2-year CD
- $5,000 in a 3-year CD
As each CD matures, you reinvest at the longest term (now at whatever rate is current). The result: you always have money maturing soon while earning higher long-term rates on the rest.
Are CDs Right for You?
CDs work well for:
- Money you are saving for a specific goal with a known timeline (home down payment in 12 months, wedding in 18 months)
- Funds you want to protect from being spent but still want to earn more than a savings account
- Retirees and conservative investors who prioritize capital preservation
CDs are less appropriate for:
- Emergency funds (you need immediate access, and CDs penalize early withdrawal)
- Long-term wealth building (over 10+ year horizons, the stock market typically outperforms CD rates by a wide margin)
How to Open a CD
- Compare rates at online banks — they consistently offer better rates than brick-and-mortar banks
- Choose your term based on when you need the money
- Visit the bank’s website and open the account online
- Fund the CD with your deposit (meet the minimum if required)
- Set a calendar reminder for your maturity date — if you do nothing, most banks automatically roll the CD into a new one at current rates
Key Takeaways
- CDs offer guaranteed, FDIC-insured returns at fixed rates for a set term
- The best 1-year CDs in 2026 pay around 4.70–5.10% APY
- Early withdrawal penalties are real — only use CDs for money you will not need until maturity
- CD laddering gives you the best of both worlds: higher rates and regular liquidity
- For emergency funds, use a high-yield savings account or money market account instead