This article discusses the top 5-year CD rates available. However, there’s a point of caution: committing to a 5-year CD at present rates might not be the most strategic move.
With the ongoing trend of rising interest rates, the Federal Reserve has been upping the rates for the past year and shows no signs of slowing down soon. Opting for a 60-month CD during this phase isn’t typically recommended.
Yet, sometimes stability outweighs maximizing returns. Locking in a rate now for the next five years can be more appealing than waiting. If this resonates with your situation, this article aims to guide you.
💡 On the hunt for the peak yield? Current 5-year CD yields are decent, but some shorter terms might offer better. Given the transient rise in interest rates, banks are hesitant to guarantee high rates for extended periods like five years. You might find more competitive rates in the 12 to 24-month segment or with no-penalty CDs, as these are gaining traction among banks.
BMO Harris – 4.50% APY
BMO Harris presents a 60-Month CD boasting a promising 4.50% APY, necessitating a minimum deposit of $1,000. The bank offers an array of unique CD terms, spanning from 13 to 59 months, in addition to conventional ones. Other perks include:
- Daily interest compounding
- Zero monthly charges
- $1,000 essential balance
Furthermore, BMO Harris runs a promotion where a $300 bonus accompanies new BMO Smart Advantage or BMO Smart Money Checking accounts.
Barclays – 4.50% APY
With a history spanning three centuries, Barclays provides a 60-month CD at 4.50% APY. Their CD terms range from 12 months to five years. Noteworthy attributes include:
- Daily interest compounding
- Absence of monthly fees
- No mandatory balance
Barclays pairs traditional banking’s reliability with digital banking advantages, like a savings account offering 4.35% APY.
Quontic Bank – 4.30% APY
A new-age online bank, Quontic Bank, stands out due to its commendable approach. As a certified Community Development Financial Institution, they target aiding underprivileged communities. They proffer a 60-month CD at 4.30% APY, complemented by:
- Daily interest compounding
- No recurring fees
- A $500 base balance
Ally Bank – 4.10% APY
Ally Bank, my primary banking choice, lists an array of CDs, including a 60-month one at 4.10% APY. Benefits encompass:
- Daily interest compounding
- Zero monthly charges
- No stipulated balance
- Minimal early withdrawal fees
They also offer a 11-Month no-penalty CD yielding 4.55% APY.
Discover Bank – 4.00% APY
Discover Bank’s CDs, especially shorter terms, are alluring. Their 60-month CD offers 4.00% APY. Features include:
- Daily interest compounding
- Zero monthly costs
- $2,500 foundational balance
They often have online savings account promotions worth exploring.
All institutions listed above are FDIC members.
Thoughts on 5-Year CDs
Time flies, and five years can pass quickly. Half a decade back, the Federal Reserve was eyeing 2% target interest rates. By early 2020, this dipped to between 0.00% and 0.25% and only started to climb in 2022 due to inflationary concerns.
A glance at recent interest rate trends will highlight their volatility. Keep in mind that penalties for early withdrawals from 5-year CDs can be hefty, typically equivalent to 180 days of interest. A strategy to mitigate this is by opening multiple small CDs instead of a larger one.
Lastly, consider Series I Bond rates. Comparable to 5-year CDs in structure, these had competitive rates in the past, though they’ve since moderated. Their interest isn’t state or local taxable and can be advantageous for educational expenses.
In sum, while 5-year CDs have their niche in financial strategies, ensure they align with your objectives.
