Traditional CDs are savings accounts with fixed deposits and rates of return, with terms ranging from a month to several years.
It’s also important to know how CDs function and where to buy them. Understanding the history of deposit accounts over many years can help you obtain the best CD rates, given current economic conditions. As of mid-July 2023 rates have rebounded to more than 5%, with some banks and credit unions paying as high as a 5.65% annual percentage yield (APY), depending on the term and minimum deposit. The period from 1984 to the present day featured interest rates on three-month CDs that peaked at 11.56% in July 1984, then declined to a low of 0.09% in June 2021. As the Fed raises its interest rate to reduce high inflation, most banks raise the interest rate paid to customers who open deposit accounts, including high-yield savings accounts, money market accounts (MMAs), and CDs. Interest rates on certificates of deposit (CDs) are influenced by the Federal Reserve funds rate.
