What is the current average CD rate for a 1-year term?

As of April 2026, the current average CD rate for a 1-year term typically ranges from 4.50% to 5.00% APY at traditional banks, with leading online banks often offering rates above 5.10% APY. These rates can fluctuate based on market conditions and Federal Reserve policy.

Are Certificates of Deposit safe investments?

Yes, Certificates of Deposit are considered one of the safest investments. CDs offered by FDIC-insured banks or NCUA-insured credit unions are protected up to $250,000 per depositor, per institution, per ownership category, meaning your principal and accrued interest are guaranteed even if the financial institution fails.

Can I lose money in a Certificate of Deposit?

It is highly unlikely to lose your principal in a traditional CD, especially if it's FDIC or NCUA insured and you hold it until maturity. However, if you withdraw funds before the maturity date, you will typically incur an early withdrawal penalty, which can reduce your interest earnings and, in rare cases, might dip into your principal if insufficient interest has accrued.

How does a CD ladder work?

A CD ladder involves dividing your investment into multiple CDs with staggered maturity dates (e.g., 1-year, 2-year, 3-year). As each CD matures, you reinvest the funds into a new, longer-term CD at the end of the ladder. This strategy provides regular access to a portion of your money while allowing you to benefit from the higher rates typically offered by longer-term CDs.

What is the difference between a CD and a savings account?

A CD requires you to lock in your money for a fixed term at a fixed interest rate, typically offering higher rates than a savings account, but with penalties for early withdrawal. A savings account offers more liquidity, allowing you to deposit and withdraw funds freely, but usually pays a lower, variable interest rate.

Is CD interest taxable?

Yes, the interest earned on a Certificate of Deposit is generally considered taxable income by both federal and state governments in the year it is credited to your account, even if you don't withdraw it until maturity. This interest is typically taxed as ordinary income.

What is a "no-penalty" CD?

A no-penalty CD, also known as a liquid CD, allows you to withdraw your money before the maturity date without incurring an early withdrawal penalty, usually after an initial waiting period (e.g., seven days). The trade-off for this flexibility is often a slightly lower interest rate compared to traditional CDs of the same term.

Certificate of Deposit Guide: Types, Rates & Strategy | One…