How to get the best CD in 2024?

If you want to grow your money, you don’t want to settle for average, you want to settle for the very best. According to the FDICThe average rate for a one-year certificate of deposit was 1.82% around mid-2024, which isn’t nearly enough to keep inflation from eroding your purchasing power. Fortunately, you can earn several times that amount with today’s best CDs, which offer annual percentage yields, or APYs, of more than 5%.

If you’re ready to make the most of your money, here’s how to find a CD that will give you the highest return.

How to get the best CD in 2024?

To get the best CD in 2024, you should take the same steps as you would any other year: shop around, compare rates and minimum deposit requirements, and pay attention to the fine print. The only difference this year is that looming rate cuts will eventually cause APYs to drop. With that in mind, consider starting your search as soon as possible.

Ask your current bank to match a competitive rate

“The first step is to evaluate the rates your current primary banking partner is offering,” said Jennifer White, senior director, Banking and Payments Intelligence at JD power. It can be easier to open an account, transfer money to open the CD and potentially eliminate fees if you keep all your money in one bank, she added. Knowing what your current bank offers gives you a baseline for finding the most competitive interest rate.

In some cases, if you shop around, your current bank may be able to match the CD rate that another bank is offering. For example, if your bank is offering 4.90% APY for a one-year CD, but you find a bank offering 5.25% for the same term, ask your bank if they will consider a higher rate. Your bank may refuse, but it never hurts to ask.

Look at banks and credit unions that operate online only

If your current bank isn’t willing to match a rate, it’s time to shop around and compare outside options. Check online-only banks, online credit unions, and local credit unions in your area. Because these institutions don’t have the high overhead of operating thousands of brick-and-mortar branches across the country, they can typically offer higher rates and lower fees than big banks.

When narrowing down your options, check to see if the financial institution is covered by the Federal Deposit Insurance Corporation or the National Credit Union Association, which protects your deposits up to $250,000 in the event of the bank’s failure.

Know the benefits of special CDs

A high-yield CD offers a better interest rate than a traditional CD — sometimes as much as 10 times the national average. Other CD types have attractive benefits, but you’ll likely be locking in a lower interest rate as a trade-off.

Most specialty CDs are more flexible than a high-yield CD. For example, an add-on CD allows you to make an additional deposit after your initial deposit. A no-penalty CD allows you to withdraw funds before the CD term expires without paying an early withdrawal penalty. This can be helpful if you need to use your money before the CD matures. You can still find competitive rates, but they will likely be lower than high-yield CDs.

There is one exception. A brokered CD generally has a high interest rate, but you must open an account with a brokerage firm rather than a bank or credit union. Keith Spencer, a financial planner at Spencer Financial Planningprefers brokered CDs because you can easily buy them if you already have an investment account.

A brokered CD has more flexibility – the terms are longer and it can be easier to sell early – but there are drawbacks. Many brokered CDs are callable, meaning the issuer can decide to end the term early. And if it is sold before the term is up and the interest rates are high, you could lose money on the investment. You also want to make sure your brokered CD is FDIC insured, since not all CDs are.

Compare CD terms

If you have money that you know you won’t need for a few years, consider different CD terms to get the best interest rate. For example, if you know you won’t need the money for three years, you might consider a shorter term, such as a one-year CD, to get a higher return and access to your money sooner. Since short-term CD rates are currently higher than long-term CDs, a shorter CD can still be beneficial even if your goals are still a few years away. Once the term expires, you can invest your earnings into a new CD.

Build a CD ladder

If you’re concerned about tying up all of your money in one CD, you can build a CD ladder to spread your deposit across several CD terms with different maturity dates. This gives you the flexibility to lock in higher rates in the future, while also giving you earlier access to your money should you need it.

Let’s say you have $5,000. You can choose to put $1,000 each into a six-month, one-year, two-year, three-year, and five-year CD. When the CD term expires, you can withdraw your money without penalty or roll it over to a new CD to continue your CD ladder if the rates are still favorable. Or you can keep the money somewhere else for more flexibility, such as a money market account.

Consider special CD rate promotions

Some banks and credit unions offer higher rates for certain terms, such as an 11- or 13-month CD. These promotions may come with a few requirements, such as a higher-than-average minimum deposit or requiring you to wire the funds from an outside bank. But if you can meet the requirements and don’t need the funds for the duration of the term, the special CD rate promotions can offer promising returns.