CD Rates Climbed in 4 Terms, Held Onto Records in 2

Once a month, we get hard-and-fast numbers from the Federal Deposit Insurance Corporation (FDIC) on how average certificate of deposit (CD) rates have changed. Representing the rates of all FDIC banks as of Dec. 31, the latest CD averages were published this week—and it was once again a rosy report.

The January report shows the national average climbed again for 3-month and 6-month terms, setting new records since the FDIC began recording averages in 2009. For 6-month CDs, this represents the 22nd consecutive monthly increase, rising every month since the April 2022 report.

The 1-year and 2-year terms meanwhile saw their monthly averages hold steady at the record level established in the December report. These two averages began climbing in February 2022, and the 1-year average has climbed in 22 of the 24 months since then, with two readings where there was no change. The 2-year average has climbed similarly, though it also registered one month of a single basis point decline.

The 3-year average was the only reading to dip this month, falling just 1 basis point below the record notched in the December report.

Today's historically high CD rates are thanks to the Federal Reserve, which aggressively hiked the federal funds rate between March 2022 and July 2023 in a fight against post-pandemic inflation. Across 12 meetings, the central bank raised the benchmark rate 11 times for a cumulative increase of 5.25%—taking it to its highest level since 2001. This in turn has pushed banks and credit unions to offer increasingly higher rates on savings accounts, money market accounts, and CDs—raising those returns to historic levels as well.

The FDIC began calculating and publishing these averages in May 2009, allowing us to definitively say today's averages are higher than at any time in nearly 15 years. But since CD rates and the federal funds rate are so directly correlated, it's fair to say we've likely not seen CD rates this high in 22 years, given that the fed funds rate has not been this high since 2001.

Shopping the Best CDs Can Earn You 3-4 Times More

While the gains seen in the national rate averages are encouraging, keep in mind that you can easily earn 3-4 times more than these national averages by simply shopping around. While the averages are good indicators of rate trends over time, they are far below the rates you'll find in our daily ranking of the best nationwide CD rates.

Take, for instance, 6-month CD rates. The national average is currently an unimpressive 1.51% APY. But with the best 6-month CD available nationwide, you can earn an eye-popping 5.70% APY, with numerous other options paying 5.50% APY or better. The same is true in the other CD terms—you can almost always earn at least three times as much as the national average with one of the country's top-paying offers.

Where Will CD Rates Go in 2024?

Though the latest FDIC rate averages suggest CD returns are still climbing across the spectrum of U.S. banks, we've seen some softening of rates among the institutions that pay the very highest rates. At the end of 2023, the top nationwide CD rate stood at 5.79%. Today the top nationally available rate is a bit lower at 5.70% APY.

That's due to the Fed opting at its last three rate-setting meetings to hold the fed funds rate steady instead of raising it further—signaling that its rate-hike campaign could be complete. Though the Fed rate-setting committee's meeting minutes show that an additional rate hike is still within the realm of possibility—odds look a bit stronger that the central bank will begin cutting its benchmark rate in 2024.

Specifically, the median projection by Fed committee members in December—shown in their most recent "dot plot" projection—was that they would reduce the fed funds rate three times, for a total of 0.75%. Given that forecast, top-paying banks and credit unions have taken their foot a bit off the gas for CD rates, since a CD represents a rate promise that's guaranteed into the future.

Whether the Fed actually implements one or more rate cuts in 2024 remains to be seen. As we always caution, the economic landscape can change quickly, and in fact, the most recent inflation report came in higher than expected, possibly making it harder for the Fed to pull the trigger on its first rate cut.

It's also worth noting that Fed members' predictions on rate cuts were for 2024 as a whole, with no signals on when this year the first cut might take place. All this points to it being a good time to lock in a historically high CD rate while you can, as there is a significant risk rates will start steadily falling in the near future.

How We Find the Best CD and Savings Rates

Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer money market, savings accounts, and CDs to customers nationwide, in addition to determining daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account's minimum initial deposit must not exceed $25,000.

Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.