What is a CD and what are CD rates?

A certificate of deposit account is a savings product offered by most banks and credit unions in the US. They are different from savings accounts in that they mature over a specific term and typically come with a fixed rate of interest.   

CD term lengths usually range from one month to five years, during which they earn a fixed rate of interest. They typically have a higher APY than savings accounts and money market accounts. Withdrawing from a CD account before maturity can attract penalties, subject to the conditions of the financial institution where it’s held. Depending on the prevailing interest rates, CDs are often the best way to take advantage of the highest interest rates on your savings at low risk.

CDs are immensely popular because they protect your savings from the volatility of the stock market and the general economy. However, before you put your money into one, consider that there are several types of CDs that come with their own set of unique features and benefits. Let’s take a look at the most common types of CDs:

• Traditional CDs: Also known simply as CDs or fixed-rate CDs, these are the most basic format in the category. They are essentially time deposits with fixed interest rates and limited liquidity, which means that your deposit is locked in for the period of the deposit.
• Bump-up CDs: This type of CD lets you jump to a higher interest rate during the deposit period. Let’s say you opened a 12-month CD account at 2% APY. Six months down the line, you notice that your bank is now offering 2.5% APY on CDs. A bump-up CD lets you request your bank to raise your APY to the new rate at no extra charge or commitment.
• Step-up CDs: This is pretty much the same as a bump-up CD. The sole difference is that instead of having to manually request your bank for a bump-up to a better interest rate, it happens automatically when you’ve put your money in a step-up CD.
• High-yield CDs: Similar to a high-yield savings account, a high-yield CD offers a substantially higher rate of interest than regular CDs. The catch is that you may be required to make a bigger initial investment or commit to a longer lock-in period in a high-yield CD account.
• No-penalty CDs: As the name suggests, these CDs do not require you to pay a penalty if you make a withdrawal before maturity as most other types of CDs do. This is a great option for people who are interested in using a CD as an emergency fund.
• Add-on CDs: This is another unique CD that lets you make additional deposits to your account during its term. The minimum add-on amount differs from bank to bank, as does the minimum deposit amount for this type of CD. It offers a great opportunity for people who want to use CDs as a recurring savings instrument.

Beyond the six most common types listed here, there are multiple other CD formats with varying features and benefits. For instance, market-linked CDs, foreign currency CDs, jumbo CDs, IRA CDs, brokered CDs, zero-coupon CDs, and so on. Do your research to find out which one suits your requirements the best before investing.

The biggest draw of CDs is that they offer predictable returns at low risk. You know exactly what you’ll earn when your CD matures right at the time of opening your account. That makes them ideal for people who are saving up for retirement or a specific financial goal and cannot afford to risk their principal investment.

On the flip side, interest earned on a CD can seem meager in comparison to certain other savings and investment options that offer tantalizingly high returns. However, these high yields are predicated on you accepting a significantly higher level of risk. What that often means is that not only may you not earn any interest on your investment, you could potentially lose a part or most of your principal.

The bottom line here is that as long as you’re willing to err on the side of caution, CDs are a reliable option to keep your money safe and growing over time.

Like any other banking instrument, interest rates on CDs are closely tied to Federal Reserve benchmarks, and generally follow the cues set by the US central banking system. Banks and credit unions often raise or lower interest rates predictively in anticipation of Federal Reserve announcements depending on their demand for consumer deposits.

According to the FDIC, average interest rates on CDs ranged from 0.22% (for one-month CDs) to 1.31% (for five-year CDs), as of March 2025. Meanwhile, the average interest rate on a one-year CD stood at 1.80% during the same time.

Being able to secure the best APY on CDs, however, goes beyond the prevailing interest rates. Much of it depends on a variety of choices and factors. For instance, you can secure a higher rate of interest on your deposit if you’re willing to have your money invested for a longer term. Similarly, a CD with a high minimum deposit requirement is likely to return a better rate of interest than one with a low entry amount.

Finding the best CD can be daunting when you consider the sheer number of options available out there. That’s why Raisin makes it easy for you to locate and invest in a CD that meets your specific savings requirements, often at rates multiple times  the national average. 

We are an online marketplace that lists savings and deposit instruments from federally regulated banks and credit unions across the US. Raisin lets you operate multiple accounts with different financial institutions, all with the comfort of a single log-in. 

Sign up on Raisin today to see your savings grow faster and safer!