My neighbor Mark came over last week, looking genuinely stressed about his money. He had fifty thousand dollars sitting in a checking account earning exactly nothing, and he kept saying he wanted to “do something with it” but was paralyzed by all the options.
“What about a CD?” I asked him.
“A what?”
Turns out, he had no idea what a certificate of deposit was, how much interest he could earn, or why now might be one of the last chances to lock in rates above four percent before they drop even further.
After spending an hour walking him through everything, he opened a CD the next day and locked in a rate that will earn him nearly $2,000 over the next year—money he would have completely missed out on.
If you’re like Mark and have money sitting around not earning interest, this guide will show you exactly where to find the best CD rates in October 2025 and whether opening one makes sense for your situation.
Quick Answer: Highest CD Rates Available Right Now
Before we dive into all the details, here are the banks offering the best CD rates as of October 2025:
Top 5 Highest CD Rates (October 2025):
- LendingClub – 4.45% APY (8-month CD, $500 minimum)
- Daniels-Sheridan Federal Credit Union – 5.11% APY (12-month CD, membership required)
- Ivy Bank – 4.35% APY (3-month CD, $5,000 minimum)
- Bread Savings – 4.30% APY (6-month to 5-year terms, $1,500 minimum)
- Colorado Federal Savings Bank – 4.35% APY (6-month CD, $10,000 minimum)
The national average CD rate is just 1.80% for a one-year term, which means the best rates are more than double what most banks offer.
What Is a CD and How Does It Actually Work?
A certificate of deposit is essentially a deal you make with a bank. You agree to leave your money untouched for a specific period—called the term—and in exchange, the bank pays you a guaranteed interest rate that’s usually higher than a regular savings account.
The keyword here is “untouched.” With most CDs, if you withdraw your money before the term ends, you’ll pay an early withdrawal penalty that can eat into your earnings or even your principal.
Here’s how it works in practice:
Let’s say you deposit $10,000 into a one-year CD paying 4.45% APY. After twelve months, you’ll have earned about $445 in interest. Your money grew without you doing anything—no stock market volatility, no risk, just guaranteed growth.
Why CD Rates Are Dropping (And Why That Matters Now)
Here’s the uncomfortable truth: CD rates have been falling since late 2024, and they’re likely to drop even more.
The Federal Reserve cut its benchmark interest rate for the first time in 2025 at its September meeting, lowering the federal funds rate from 4.25% to 4.50% and then from 4.00% to 4.25%. There are two more Fed meetings scheduled for October and December, and economists expect additional rate cuts.
What does this mean for you?
Banks use the Federal Reserve’s rate as a guide for setting their own interest rates. When the Fed cuts rates, banks typically lower the APY they offer on savings products like CDs within days or weeks.
Translation: The rates you see today will likely be lower in a month, and even lower by the end of the year.
The bottom line? If you’ve been considering opening a CD, now may be the time. Once rates drop, you can’t go back and lock in the higher rate you missed.
How Much Money Can You Actually Make with a CD?
Let me show you real numbers because percentages can feel abstract.
Here’s what you’d earn with different deposit amounts at today’s top rate of 4.45% APY over one year:
- $1,000 deposit = $44.50 earned
- $5,000 deposit = $222.50 earned
- $10,000 deposit = $445 earned
- $25,000 deposit = $1,112.50 earned
- $50,000 deposit = $2,225 earned
- $100,000 deposit = $4,450 earned
Now compare that to a traditional savings account paying the national average of 0.40% APY:
- $10,000 in traditional savings = $40 earned per year
- $10,000 in top CD rate = $445 earned per year
That’s a difference of $405—just for choosing the right place to park your money.
Which CD Term Length Should You Choose?
CDs come in various term lengths, ranging from three months to five years. The term you choose depends entirely on when you’ll need the money and what you’re trying to accomplish.
Short-Term CDs (3 to 12 months)
Best for money you’ll need within the year—like a down payment fund, emergency savings, or holiday shopping money.
Pros: Quick access to your money, less commitment, can take advantage of rising rates faster
Cons: Usually lower rates than longer terms, less time for compound interest to work
Current top rates: 4.30-4.45% APY
Medium-Term CDs (1 to 3 years)
Best for goals that are a couple years out—like saving for a car, wedding, or home renovation.
Pros: Balance between decent rates and reasonable commitment, good for specific savings goals
Cons: Money tied up longer than short-term, penalties hurt more if you need early access
Current top rates: 4.00-4.35% APY
Long-Term CDs (4 to 5 years)
Best for money you absolutely will not touch for years—like college funds or supplemental retirement savings.
Pros: Historically offer the highest rates, maximum compound interest benefit
Cons: Extremely long commitment, inflation risk, opportunity cost if rates rise significantly
Current top rates: 3.50-4.20% APY
Important note: Currently, we’re experiencing an inverted yield curve situation, where shorter-term CDs sometimes pay more than longer-term ones. This is unusual but reflects expectations that rates will fall. In normal times, longer CDs pay higher rates.
Best CD Accounts by Term Length (October 2025)
Here’s a detailed breakdown of the top CD rates across different terms:
Best 3-Month CDs
- Ivy Bank – 4.35% APY, $5,000 minimum
- Colorado Federal Savings Bank – 3.50% APY, $5,000 minimum
Best 6-Month CDs
- Bread Savings – 4.30% APY, $1,500 minimum
- Colorado Federal Savings Bank – 4.35% APY, $10,000 minimum
Best 1-Year CDs
- Daniels-Sheridan Federal Credit Union – 5.11% APY, membership required
- LendingClub – 4.40% APY, $500 minimum
- Alliant Credit Union – 4.10% APY, $1,000 minimum
Best 18-Month CDs
- Marcus by Goldman Sachs – 4.00% APY, $500 minimum
- NASA Federal Credit Union – 4.05% APY, $1,000 minimum
Best 2-Year CDs
- Popular Direct – 3.90% APY, $10,000 minimum
- First Internet Bank – 3.85% APY, $1,000 minimum
Best 5-Year CDs
- Colorado Federal Savings Bank – 4.20% APY, $5,000 minimum
- Bread Savings – 3.75% APY, $1,500 minimum
CD vs High-Yield Savings Account: Which Should You Choose?
This is the question I get asked most often, and the answer isn’t always “CD.”
Choose a CD if:
- You know you won’t need the money for the entire term
- You want a guaranteed rate that can’t drop
- You’re disciplined and won’t be tempted to withdraw early
- You’re willing to accept penalties for peace of mind on the rate
Choose a high-yield savings account if:
- You might need quick access to your money
- You want the flexibility to add more money anytime
- You’re building an emergency fund that needs to stay liquid
- You prefer no commitment or penalties
The honest truth? You might want both. Many people keep their emergency fund in a high-yield savings account for quick access while putting other savings into CDs for higher guaranteed returns.
Check out our guide on [the best high-yield savings accounts in 2025] for current rates and bank recommendations.
Special Types of CDs You Should Know About
Not all CDs work the same way. Here are some specialty CDs that might fit your situation better than traditional ones:
No-Penalty CDs
These let you withdraw your money early without paying a penalty—usually after seven days from opening.
Best for: People who want CD rates but aren’t sure about tying up their money
Catch: Rates are usually 0.25-0.50% lower than traditional CDs
Top offer: Climate First Bank – 4.34% APY, 6-month no-penalty CD
Bump-Up CDs
If rates rise during your CD term, you can request one rate increase to the current rate.
Best for: People worried rates might go up after they lock in
Catch: Usually offer lower initial rates, and you might not get the timing right
Top offer: Marcus by Goldman Sachs – offers bump-up CDs with competitive rates
Add-On CDs
Let you make additional deposits during your CD term, usually up to a certain limit.
Best for: People who want to keep adding to their savings regularly
Catch: Lower initial rates, deposit limits apply
Jumbo CDs
Require large deposits—typically $100,000 or more—but offer slightly higher rates.
Best for: High-net-worth individuals or people with substantial savings
Catch: Need significant capital to qualify, rates often only marginally better
Brokered CDs
Purchased through investment brokerages like Fidelity or Schwab rather than directly from banks.
Best for: Investors who want access to CDs from many banks in one place
Catch: Can be sold on secondary markets (which adds complexity), different FDIC rules
The One Thing Everyone Gets Wrong About CDs
Here’s the mistake I see constantly: People compare CD rates to stock market returns and think CDs are a waste of time.
“Why would I lock up money at 4% when stocks average 10% per year?” they ask.
This completely misses the point.
CDs aren’t competing with stocks. They’re competing with other safe, fixed-income savings products like savings accounts, money market accounts, and Treasury bills.
CDs are part of your safe money strategy—the portion of your finances where you absolutely cannot afford to lose money. This includes emergency funds, short-term savings goals, and money you’ll need within the next few years.
Comparing CD rates to stock returns is like comparing a helmet to a motorcycle. They serve completely different purposes, and you probably need both.
How to Open a CD (Step-by-Step)
Opening a CD is straightforward. Here’s exactly how to do it:
Step 1: Decide how much to deposit
Figure out how much money you can truly afford to set aside without needing it. Remember, early withdrawal penalties are real and can be steep.
Step 2: Choose your term length
Match the term to when you’ll actually need the money. Don’t just chase the highest rate.
Step 3: Compare rates and requirements
Look at minimum deposits, membership requirements for credit unions, and whether the institution is FDIC or NCUA insured.
Step 4: Read the fine print on penalties
Know exactly what the early withdrawal penalty is before you commit. It’s usually 60 to 365 days of interest depending on the term.
Step 5: Open the account online or in person
Most online banks let you open CDs completely online in about 10-15 minutes. You’ll need:
- Social Security number
- Driver’s license or state ID
- Funding source (bank account to transfer from)
Step 6: Fund your CD
Transfer money from your existing bank account. Most banks offer ACH transfers, wire transfers, or check deposits.
Step 7: Save your documents
Keep records of your CD certificate, terms, maturity date, and renewal policies.
CD Ladder Strategy: How to Get Higher Rates AND Flexibility
Here’s a clever strategy that gives you the best of both worlds: higher rates from longer-term CDs combined with regular access to portions of your money.
It’s called CD laddering, and here’s how it works:
Instead of putting all your money into one CD, you split it across multiple CDs with different maturity dates.
Example CD Ladder with $10,000:
- $2,000 in a 1-year CD at 4.40% APY
- $2,000 in a 2-year CD at 3.90% APY
- $2,000 in a 3-year CD at 3.85% APY
- $2,000 in a 4-year CD at 3.95% APY
- $2,000 in a 5-year CD at 4.20% APY
Every year, one CD matures. You can either use that money or reinvest it into a new 5-year CD at current rates.
Why this works:
- You get access to money every year instead of waiting five years
- You earn higher average rates than keeping everything in short-term CDs
- You’re protected against rate changes because you’re consistently reinvesting at current rates
- You reduce timing risk of locking everything up right before rates rise
Are CDs FDIC Insured? (And Why This Matters)
Yes, CDs from banks are FDIC insured up to $250,000 per depositor, per bank, per account ownership category.
CDs from credit unions are NCUA insured with the same $250,000 limit.
This means if the bank fails, the federal government guarantees your money up to that amount. CDs are one of the safest places you can put your money—as safe as keeping cash in a savings account.
Important note: The $250,000 limit applies per ownership category. So if you have:
- $250,000 in a CD in your name only
- $250,000 in a joint CD with your spouse
- $250,000 in a trust account
All three accounts are fully insured because they’re different ownership categories.
If you have more than $250,000 to invest in CDs, consider spreading it across multiple banks to stay under the insurance limit at each institution.
Should You Reinvest When Your CD Matures?
When your CD reaches its maturity date, you typically have a grace period of 7-10 days to decide what to do with your money.
Most banks will automatically renew your CD into a new one with the same term length at current rates—unless you tell them otherwise.
You have three options:
- Let it auto-renew – Easiest option if rates are still good
- Withdraw the money – Take your principal and interest to use elsewhere
- Reinvest in a different CD – Move to a different term or shop for better rates
Here’s my advice: Set a calendar reminder for two weeks before your maturity date. This gives you time to compare current CD rates and decide if your bank is still competitive or if you should move your money.
Don’t just let it automatically renew without checking. Banks often renew at lower promotional rates or standard rates that are worse than what new customers get.
What Are the Penalties for Withdrawing Early?
Early withdrawal penalties vary by bank and term length, but here are typical penalties:
Short-term CDs (less than 1 year):
- Usually, 60 to 90 days of interest
Medium-term CDs (1-2 years):
- Usuall,y 90 to 180 days of interest
Long-term CDs (3-5 years):
- Usual,ly 180 to 365 days of interest
What this means in real terms:
Let’s say you have a 1-year CD paying 4.40% APY, and the penalty is 90 days of interest. If you withdraw early, you will lose approximately 1.10% of your principal (roughly one-quarter of your annual interest).
If you’ve only had the CD open for two months, the penalty could actually eat into your principal since you haven’t earned enough interest yet to cover the penalty.
Some banks have particularly harsh penalties. For example:
- Popular Direct charges up to two years of interest on a 5-year CD
- Some banks charge 365 days of interest on any term over 3 years
Always check the penalty structure before opening a CD. It’s listed in the account terms and conditions.
Common Questions About CDs
Can you lose money in a CD?
Technically no, as long as you don’t withdraw early and your bank is FDIC insured. Your principal is guaranteed and your interest rate is fixed. However, you can lose purchasing power to inflation if your CD rate is lower than the inflation rate.
What happens if you need money before your CD matures?
You’ll pay an early withdrawal penalty, which is usually a certain number of days or months of interest. In some cases, this can eat into your principal if you haven’t held the CD long enough.
Can you add money to a CD after opening it?
Not with traditional CDs. Once you deposit your money, that’s it. However, some banks offer add-on CDs that let you make additional deposits during the term.
Do you pay taxes on CD interest?
Yes. Interest earned on CDs is taxed as ordinary income in the year you earn it, even if you don’t withdraw the money. You’ll receive a 1099-INT form from your bank if you earned more than $10 in interest.
Are CD rates negotiable?
Generally, no, especially at online banks. However, if you’re depositing a very large amount (over $100,000) at a local bank, you might have some negotiating power.
CD Rates vs Treasury Bills: Which Is Better?
Treasury bills (T-bills) are another safe option worth considering. They’re short-term government securities with terms of 4 weeks to 1 year.
Current 1-year T-bill rate: Approximately 4.60% (as of October 2025)
How they compare to CDs:
T-Bills Advantages:
- Backed by U.S. government (safest possible investment)
- Interest is exempt from state and local taxes
- Can be sold on secondary market if you need money early
- No early withdrawal penalty
CD Advantages:
- FDIC insurance up to $250,000
- Sometimes higher rates than T-bills
- Can find terms longer than 1 year
- No minimum purchase at many banks ($100 minimum for T-bills)
For most people, both are excellent options. If you’re in a high-tax state like California or New York, the tax advantages of T-bills can make them more attractive even if the nominal rate is slightly lower.
The Bottom Line: Are CDs Worth It in 2025?
Here’s my honest take after covering personal finance for two decades: Yes, CDs are absolutely worth it for the right person in the right situation.
CDs make sense if you have money you don’t need to touch for at least several months, you want guaranteed returns with zero risk, and you’re looking for better rates than a traditional savings account.
CDs don’t make sense if you might need the money unexpectedly, you’re comfortable with market risk for potentially higher returns, or you want the flexibility to add money over time.
The key insight for October 2025 specifically is that rates are likely near their peak before dropping further. If you’ve been on the fence about opening a CD, this is probably your best window to lock in rates above 4% for the foreseeable future.
Just remember: The best CD is the one that matches your actual needs, not the one with the highest rate that requires you to lock up money you might need.
