A certificate of deposit, or CD, is a popular financial tool that typically provides higher yielding interest rates for consumers when compared to savings or money market accounts. The trade-off, though, is you’re expected to leave your initial deposit untouched for the length of the term or risk paying a penalty for withdrawing early.
Table of contents
- The Best 5
- Best CD Rates for 2021: Our Picks
- The Bottom Line
- Quick Questions
The Best 5
- Ally CDs: Highest APY with no minimum deposit.
- Connexus Credit Union CDs: Second highest APY for 5-year CDs.
- Tab Bank CDs: Low minimum deposit with comparatively high APY.
- Marcus By Goldman Sachs High-Yield CD: Competitive rates on short-term CDs.
- Synchrony CDs: Online bank with competitive rates on all CD terms.
Best CD Rates for 2021: Our Picks
Ally CDs — No Minimum Deposit and High APYs
Ally is an online bank that uses its lack of physical presence to provide interest-bearing accounts to consumers. There’s no minimum deposit, though rates may change depending on the account balance.
With a 5-year CD that currently gives you 1% APY, you’ll be hard-pressed to find a better interest rate from any competitor. For those unwilling to lock their money away for the length of a term, Ally also offers CDs with no early withdrawal penalties.
Ally is a well-regarded online bank that offers some of the best CD rates available.
Connexus Credit Union CDs — High Rates For 5-Year CDs
Connexus Credit Union currently offers the second-highest APY for 5-year CDs, though a large initial deposit is required. If you’re able to deposit at least $5000, you’ll receive excellent rates for 1-, 3-, and 5-year CDs.
Compared to Ally, Connexus offers similar rates across the board. They actually edge Ally slightly on the 3-year CD with 0.80% compared to Ally’s 0.75%.
For those able to make the steep initial deposit, it’s hard to pass up these interest rates.
Tab Bank CDs — Low Minimum Deposit with Competitive APYs
A new CD at Tab Bank only requires an initial deposit of $1000, but you’ll receive a competitive APY across terms of all lengths. For comparison, their 5-year CD rate is currently 0.85%, and their 3-year CD rate matches Ally’s 0.75%.
While $1000 can be a difficult threshold for some to meet, this minimum deposit is actually on the lower end of the range. Tab Bank offers short- and long-term CD terms, with their shortest being 6 months and their longest at 5 years.
Tab Bank is another online financial institution whose business model benefits consumers with high APYs.
Marcus By Goldman Sachs High-Yield CD — Best Rates On Short-Term CDs
A CD through Marcus By Goldman Sachs combines the best of both worlds. Its minimum deposit requirement is only $500, and its interest rates on short-term CDs sit near the head of the class.
A 1-year CD through Marcus by Goldman Sachs earns 0.65% APY. You’ll earn the same rate for a 3-year CD, and the 5-year CD sits slightly higher at 0.70%. However, they offer a CD guarantee that gives you the highest rate offered within 10 days of opening a new account. This benefits you should CD rates suddenly increase.
If you’re looking for a short-term CD and a smaller initial investment, Marcus by Goldman Sachs is an ideal financial institution.
Synchrony CDs — Competitive Short- and Long-Term CD Rates
Synchrony Bank sits in the middle of the pack when it comes to both the best CD rates and minimum required deposit.
You’ll need at least $2000 to open a new CD, while APYs will range from 0.60% to 0.80%, depending on your term. The endpoints of that APY range represent their 1-year and 5-year CD. A 3-year CD has a 0.70% APY, which is lower than Ally, Tab, and Connexus but higher than Marcus by Goldman Sachs.
Some financial institutions offer lower minimum balances and some offer higher APYs than Synchrony, but few offer both.
The Bottom Line
A CD is an excellent way to earn higher interest than a savings account or money market. Typically, the longer your term and the higher your initial deposit will grant you even better APYs.
Penalties differ based on the bank, the length of the term, the interest rate, and how much you withdraw. Typically, the penalty is at least one month’s worth of interest.
This differs, as well. Some banks may automatically deposit the proceeds of your CD into a checking or savings account. Others may roll over your CD for the same term length but at the current APY.
A CD is most advantageous for those who don’t need to keep their investment liquid. People often put the money they’re saving for weddings, tuition, or other necessities into a CD.
If you’re searching for the best financial products, be sure to check out our look at the 5 best Money Market Accounts of 2021.