With this overview in mind, here's a closer look at how CD rates have shifted over time. Source: Board of Governors of the Federal Reserve System The graph below shows how closely CD rates-in this case, three-month rates-have followed the federal funds rate over time. Banks and credit unions sell them, including brick-and-mortar institutions, such as CIT as well as online banks, including Quontic, Nationwide, Discover, and others. 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.
