Best CD Rates

How CD rates work

A certificate of deposit locks a fixed rate for a fixed term. Unlike a savings account, the rate cannot change while the CD is open — which is the point when rates are falling, and the drawback when they are rising.

The early withdrawal penalty

Taking money out before maturity costs you a set number of months of interest. A 12-month CD typically charges three to six months of interest; longer terms charge more. On a short CD, the penalty can exceed the interest earned, leaving you with less than you deposited.

Laddering

A ladder splits a deposit across several maturities so a portion becomes available each year while the rest keeps earning the longer-term rate. On $25,000 split into five rungs, you regain access to $5,000 every twelve months.