Certificates of Deposit (CDs) offer a guaranteed return for locking your money up for a fixed period. CD rates differ a lot by bank and term; the rates we read on bank pages in October 2026 are in the table below, next to the FDIC’s national averages. Here’s everything you need to know about whether a CD is right for your savings strategy.
CD Rates by Term (October 2026)
| CD Term | Highest APY We Read (bank) | FDIC National Average (Oct 19, 2026) |
|---|---|---|
| 3 months | 3.60% (EverBank) | 1.14% |
| 6 months | 4.35% (Popular Direct) | 1.39% |
| 1 year | 4.50% (Popular Direct) | 1.76% |
| 18 months | 4.75% (Bread Savings) | n/a (no direct FDIC series) |
| 2 years | 4.70% (Popular Direct) | 1.55% |
| 3 years | 4.85% (Popular Direct) | 1.39% |
| 5 years | 5.00% (Popular Direct) | 1.41% |
Highest rates are from the bank pages we read in October 2026 (dated in best CD rates); they are not a survey of every bank. FDIC averages are from its National Rates and Rate Caps table. Rates change with the federal funds rate (3.75%–4.00% since the Fed’s September 16, 2026 increase), so verify at the bank.
How CDs Work
- Choose a term: From 3 months to 5+ years
- Deposit your money: Minimum varies ($0 to $1,000+)
- Earn guaranteed interest: Rate is locked for the entire term
- CD matures: Get your principal + interest back
- Decide what to do: Withdraw, renew, or roll into a new CD
Key CD Features
| Feature | Details |
|---|---|
| FDIC insured | Yes, up to $250,000 |
| Rate | Fixed for the term (generally) |
| Minimum deposit | $0–$1,000 (varies) |
| Early withdrawal penalty | Varies by bank and term |
| Interest payout | Monthly, quarterly, or at maturity |
| Automatic renewal | Many CDs renew automatically (Ally and Capital One give a 10-day grace period) |
When CDs Make Sense (and When They Don’t)
CDs Are Good When:
- You want to lock in a rate if you expect rates to fall
- You have a known future expense (buying a car in 1 year)
- You want guaranteed returns with zero risk
- You need more discipline than a savings account (penalty discourages withdrawal)
- You have money you won’t need for the CD term
CDs Are Not Ideal When:
- You might need the money unexpectedly (emergency fund)
- High-yield savings rates are equal or higher
- You’re saving for 5+ years (diversified investments have historically outperformed CDs over long horizons, though with more risk)
- You need regular access to funds
- Rates are expected to rise (you’d be locked into a lower rate)
CD vs. High-Yield Savings Account
| Factor | CD | High-Yield Savings |
|---|---|---|
| Rate | Fixed (locked in) | Variable (changes with Fed rate) |
| Access to money | Tied up until maturity (early exit costs a penalty) | As needed, within the bank’s limits |
| Early withdrawal | Penalty (varies by bank) | No penalty |
| Rate direction risk | Protected if rates fall | Rate can drop when market rates fall |
| Best when rates are… | About to decrease | Stable or increasing |
| FDIC insured | Yes | Yes |
| Minimum balance | Often $0-$1,000 | Often $0 |
CD Earnings Calculator
How much your CD earns at different rates and terms (illustrative figures — use these to compare terms, then verify the actual rate at your chosen bank):
$10,000 CD
| Term | 3.5% APY | 4.0% APY | 4.5% APY | 5.0% APY |
|---|---|---|---|---|
| 6 months | $173 | $198 | $223 | $247 |
| 1 year | $350 | $400 | $450 | $500 |
| 2 years | $712 | $816 | $920 | $1,025 |
| 3 years | $1,087 | $1,249 | $1,412 | $1,576 |
| 5 years | $1,877 | $2,167 | $2,462 | $2,763 |
$50,000 CD
| Term | 3.5% APY | 4.0% APY | 4.5% APY | 5.0% APY |
|---|---|---|---|---|
| 6 months | $867 | $990 | $1,113 | $1,235 |
| 1 year | $1,750 | $2,000 | $2,250 | $2,500 |
| 2 years | $3,561 | $4,080 | $4,601 | $5,125 |
| 5 years | $9,384 | $10,833 | $12,309 | $13,814 |
Interest = P x ((1 + APY)^(months / 12) - 1), assuming the APY is earned for the full term.
CD Laddering Strategy
A CD ladder gives you the benefits of higher long-term rates while keeping money regularly accessible:
How It Works
Divide your savings into equal portions and stagger maturity dates:
Example: $25,000 CD Ladder (Popular Direct rates as of October 5, 2026)
| CD | Amount | Term | APY | Matures |
|---|---|---|---|---|
| CD 1 | $5,000 | 1 year | 4.50% | Month 12 |
| CD 2 | $5,000 | 2 years | 4.70% | Month 24 |
| CD 3 | $5,000 | 3 years | 4.85% | Month 36 |
| CD 4 | $5,000 | 4 years | 4.95% | Month 48 |
| CD 5 | $5,000 | 5 years | 5.00% | Month 60 |
Popular Direct needs $10,000 per CD, so the $5,000 rungs here only show how rates step up by term. When CD 1 matures at month 12, reinvest in a new 5-year CD. Now you have a CD maturing every year for the next 5 years.
Benefits of Laddering
- Regular access: One CD matures every year
- Rate averaging: Smooths out rate fluctuations
- Higher returns: Gets benefit of longer-term rates
- Flexibility: Can redirect maturing CDs if needs change
Types of CDs
| Type | Feature | Best For |
|---|---|---|
| Standard CD | Fixed rate, fixed term | Most savers |
| No-penalty CD | Withdraw anytime without fee (after a short hold period) | Those wanting flexibility |
| Jumbo CD | Large minimum deposit ($25K–$100K+); doesn’t reliably pay a premium in today’s market | Large savers who verify the rate first |
| Bump-up CD | Can raise rate once if rates increase | Uncertain rate environment |
| Step-up CD | Rate increases automatically at set intervals | Those expecting rising rates |
| Brokered CD | Purchased through a brokerage | Portfolio diversification |
| IRA CD | Held within an IRA for tax advantages | Retirement savings |
Early Withdrawal Penalties
Early withdrawal penalty formulas are not standardized across the industry; they vary by bank and term. Examples from bank pages: Ally charges 60 days of interest on a CD of 3 to 24 months (30 days under 3 months; 90 days for 25 to 36 months, 120 for 37 to 48, 150 for 49 or more); Capital One charges 3 months of interest on terms of 12 months or less and 6 months on longer terms; Synchrony charges 90 days of simple interest on terms of 12 months or less, 180 days on more than 12 but under 48 months, and 365 days on 48 months or more. We could not read other banks’ schedules, so check the account agreement.
Before withdrawing early: Calculate whether the penalty wipes out your gains or if a no-penalty CD would have been better from the start.
CDs and Taxes
CD interest is taxable income. The IRS says you generally include it in income when you receive it or can withdraw it without a substantial penalty, and for a CD longer than one year you report part of the interest each year as original issue discount (IRS Publication 550). Federal tax on $1,000 of CD interest at each bracket:
| Tax Bracket | Federal Tax on $1,000 CD Interest |
|---|---|
| 12% | $120 |
| 22% | $220 |
| 24% | $240 |
| 32% | $320 |
To defer taxation, consider holding CDs within a Traditional IRA (tax-deferred) or Roth IRA (tax-free growth).
See the full CD guide for best rates, laddering strategies, and how CDs compare to HYSAs and Treasury bills.
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