How to Get the Best CD in 2024

When you’re trying to grow your money, you don’t want to settle for average -- you want the absolute best. According to the FDIC, the average rate for a one-year certificate of deposit was 1.82% around the halfway point of 2024, which isn’t nearly enough to stop inflation from eroding your purchasing power. Thankfully, you can earn several times that amount with today’s top CDs, which offer annual percentage yields, or APYs, north of 5%.

If you’re ready to maximize your money, here’s how to find a CD that will give you the best returns.

How do you get the best CD in 2024?

Getting the best CD in 2024 involves the same steps you would take in any year: Shop around, compare rates and minimum deposit requirements and pay attention to the fine print. The one difference with this year is that looming rate cuts will eventually APYs 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 reviewing the rates offered by your current primary bank partner,” said Jennifer White, senior director, Banking and Payments Intelligence at J.D. Power. It may be easier to open an account, transfer funds to open the CD and potentially eliminate fees if you keep all of your funds in one bank, she added. Knowing what your current bank offers gives you a baseline to find the most competitive rate. 

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

Look at online-only banks and credit unions 

If your current bank isn’t willing to match a rate, it’s time to start shopping around and comparing outside options. Check online-only banks, online credit unions and any local credit unions in your area. Since these institutions don’t have the steep overhead costs of managing thousands of physical branches nationwide, they can usually offer higher rates and lower fees than big banks. 

When narrowing down options, make sure the financial institution is backed by either the Federal Deposit Insurance Corporation or the National Credit Union Association to protect your funds up to $250,000 in case of a bank failure. 

Know the trade-off for specialty CD perks 

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 compelling benefits, but you’ll likely be locking in a lower rate as a trade-off.  

Most specialty CDs come with more flexibility than a high-yield CD. For example, an add-on CD lets you make an additional deposit after the initial deposit. A no-penalty CD lets you withdraw money before the CD term ends without paying an early withdrawal penalty, which can come in handy if you have to use your funds before the CD matures. You can still find competitive rates, but they’ll likely be lower than high-yield CDs.

There is one exception. A brokered CD generally has a high interest rate, but you’ll need to open an account at a brokerage firm instead of a bank or credit union. Keith Spencer, a ​​financial planner at Spencer Financial Planning, likes brokered CDs because you can buy them easily if you already have a brokerage account.

A brokered CD has more flexibility -- terms are longer, and it can be easier to sell early -- but there are some downsides. Many brokered CDs are callable, which means the issuer may decide to end the term early. And if it’s sold before the term ends and rates are high, you may lose money on this investment. You also want to ensure your brokered CD is FDIC-insured since not all of them are. 

Compare CD terms

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

Build a CD ladder 

If you’re worried about locking all your money in one CD, you can build a CD ladder to spread your deposit across several CD terms with varying maturity dates. This gives you the flexibility to lock in higher rates down the road while also offering earlier access to your money, should you need it.

Let’s say you have $5,000. You may choose to put $1,000 each in a six-month, one-year, two-year, three-year and five-year CDs. When the CD term ends, you can withdraw your funds penalty-free or roll them over into a new CD to continue your CD ladder if rates are still favorable. Or you can stash the money elsewhere for more flexibility, like a money market account. 

Consider special CD rate promotions 

Some banks and credit unions offer higher rates for select 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 may require you to transfer the money from an external bank. But if you can meet the requirements and don’t need the funds for the length of the term, the special CD rate promotions can yield a promising return.