Certificates of deposit (CDs) are offering their highest returns in years right now, with banks and credit unions rewarding customers with high APYs in exchange for leaving deposits untouched for a specified period of time. The upshot is more generous rates than you would normally find in a savings account.
Five-year CDs are considered long-term CDs. They are best suited for individuals who have money they don’t need to access for several years and want guaranteed returns. Here's a look at the best five-year CDs available right now.
Highest CD rates by term
Best 5-year CD rates today
Our recommendations
Methodology
To determine the best five-year CDs, we employed a comprehensive approach. Firstly, we compared interest rates across various banks and credit unions, prioritizing those offering the highest APY for our chosen term.
In addition to rates, we considered other factors, such as:
- Deposit requirements.
- Early withdrawal penalties.
- Account features.
- Insurance coverage.
- Renewal options.
- Grace periods.
- Compounding schedules.
- Customer service.
- Reputation of the financial institution.
We also considered ease of use and the process for opening an account, giving preference to CD accounts that could be opened online.
Pros and cons of a 5-year CD
- Guaranteed rate of return.
- FDIC or NCUA insured up to legal limits.
- The fixed interest rate protects you against rate drops over time.
What happens if you take your money out early?
CDs offer less accessibility than other deposit accounts. By opening a CD, you agree to leave your funds untouched for a predetermined period of time. Because of this inconvenience, banks and credit unions typically offer higher rates on CDs than other savings accounts.
If you decide to withdraw funds early, you’ll be charged a fee called an early withdrawal penalty. While policies vary among institutions, the penalty amount typically depends on how long the CD's term is. If your CD term is longer, the penalty for taking your money out early will be higher.
Alternatives to 5-year CDs
Five-year CDs aren't the only option for maximizing the interest on your savings. Consider the following alternatives to a long-term CD.
High-yield savings accounts
Many online banks offer high-yield savings accounts (HYSAs), which work just like traditional savings accounts at your local bank but with higher APYs. Plus, HYSAs generally come with no monthly fees and other perks.
Money market accounts
Money market accounts are less common than other types of deposit accounts but typically earn competitive rates. These hybrid accounts earn high yields and often come with checking benefits like a checkbook or ATM card.
Dividend stocks
Investing in companies that pay a portion of their profits to shareholders has the potential to yield much higher returns than a CD. However, dividend stocks, unlike CDs, are not guaranteed, so you could end up losing money. Learn more about how dividend stocks work.
Short-term CDs
Five years is a long time to leave money in the bank untouched, especially if rates increase over that time. Consider opening a short-term CD if you suspect rates will rise or you need access to your money sooner.
TIME Stamp: Use 5-Year CDs to earn interest on funds you don't need to access for a long time
If you have extra funds you don't need to access for a while but you don’t want to risk your principal investment, consider a five-year CD. These accounts offer guaranteed returns through fixed high-yield interest rates. Typically, the highest rates are available through online banks or credit unions but always check traditional banks and other financial institutions to ensure you're getting the best deal.
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