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1-Year CD Rates from Online Banks 2019

Certificates of deposit (CD) rates from online banks are often above average if you are willing to open and manage your account using the Internet. Most online banks offer an online application and money can be transferred to fund the CD via an electronic transfer, check, wire, or credit card. You can view a financial snapshot of any online bank by clicking on its name and then the Financial Details tab.

Highest One-Year Online CD Rates - October 15, 2019

1 Year CD National Average: 0.95% ?

Advertiser Disclosure
BANK APY? Vs.
Nat'l
Av.
MIN?
Early Withdrawal Penalty is 6 months interest.
Home Loan Investment Bank
2.45% 2.57x $2,500
Warning: Early withdrawal penalty equals one year of interest.
Sallie Mae Bank
2.35% 2.46x $2,500
Warning: Early Withdrawal Penalty is 2% of the account balance.
Rising Bank, a division of Midwest BankCentre
2.30% 2.41x $1,000
Limelight Bank, A division of Capital Community Bank
2.30% 2.41x $1,000
Discover Bank
2.30% 2.41x $2,500
Live Oak Banking Company
2.30% 2.41x $2,500
Capital One 360
2.30% 2.41x $10,000
Early Withdrawal Penalty is 1% of principal.
BankDirect, a division of Texas Capital Bank
2.28% 2.39x $10,000
Barclays Bank Delaware
2.25% 2.36x $0
Marcus: By Goldman Sachs
2.25% 2.36x $500
Warning: Early Withdrawal Penalty is the greater of: 90 days interest or all interest earned.
Brio Direct, a division of Sterling National Bank
2.25% 2.36x $500
TIAA Bank / Everbank
2.25% 2.36x $1,000
Early Withdrawal Penalty is 180 days interest.
Synchrony Bank
2.25% 2.36x $2,000
Citizens Access
2.25% 2.36x $5,000
CIBC Bank USA
2.25% 2.36x $25,000
MapleMark Bank
2.25% 2.36x $25,000
BAC Florida
2.25% 2.36x $100,000
Connexus
Restrictions
2.20% 2.31x $5,000
Colorado Federal Savings Bank
2.20% 2.31x $5,000
Navy Federal Credit Union
Restrictions
2.20% 2.31x $100,000
Banesco USA
2.15% 2.25x $1,500
WebBank
2.15% 2.25x $2,500
Ally Bank
2.15% 2.25x $25,000
Early Withdrawal Penalty is 180 days interest.
My Banking Direct, a division of New York Community Bank
2.10% 2.20x $0
Early Withdrawal Penalty is 270 days interest.
USAA Federal Savings Bank
2.07% 2.17x $175,000
ableBanking, a division of Northeast Bank
2.05% 2.15x $1,000
Early Withdrawal Penalty is 181 days interest.
Amboy Direct
2.05% 2.15x $10,000
Bank5 Connect
2.00% 2.10x $500
Banco Bilbao Vizcaya Argenteria
2.00% 2.10x $500
Vio Bank, A Division of MidFirst Bank
2.00% 2.10x $500
CIT Bank
2.00% 2.10x $1,000
MainStreet Bank
1.90% 1.99x $500
Early Withdrawal Penalty is all interest earned.
Dollar Savings Direct, a division of Emigrant Bank
1.80% 1.89x $1,000
Radius Bank
1.55% 1.62x $500
Northern Bank Direct
1.40% 1.47x $10,000
Ohio Catholic
Restrictions
1.25% 1.31x $100,000
Ohio Catholic
Restrictions
1.15% 1.21x $25,000
Axos Bank, a division of Bofi Federal Bank
1.01% 1.06x $1,000
Ohio Catholic
Restrictions
1.00% 1.05x $500
Incredible Bank, a division of River Valley Bank
1.00% 1.05x $1,000
American Express Bank, FSB
0.55% 0.58x $0
OneWest Bank, a division of CIT Bank
0.55% 0.58x $1,000
Veridian
Restrictions
0.35% 0.37x $1,000
iGobanking.com, a division of Flushing Bank
0.15% 0.16x $1,000
All rates listed are Annual Percentage Yield (APY). The Min listed is the minimum deposit account balance required to obtain the rate listed.

Summary: Today's Highest Online CD Rates - October 2019

Bank Institution Product Term Interest Rate (APY)
TotalDirect, a division of City National Bank of Florida 1-Year 2.50% APY with $25,000 minimum
Home Loan Investment Bank 1-Year 2.45% APY with $2,500 minimum
Quontic Bank 1-Year 2.40% APY with $1,000 minimum
TotalDirect, a division of City National Bank of Florida 3-Year 2.60% APY with $25,000 minimum
Connexus Credit Union 3-Year 2.50% APY with $5,000 minimum
Navy Federal Credit Union 3-Year 2.45% APY with $100,000 minimum
Navy Federal Credit Union 5-Year 3.00% APY with $1,000 minimum
Dollar Savings Direct, a division of Emigrant Bank 5-Year 2.80% APY with $1,000 minimum
Connexus Credit Union 5-Year 2.60% APY with $5,000 minimum

PRODUCT INFORMATION

One-Year CD - Online Banks 2019

Certificates of Deposit (CDs) are offered by most banks in a variety of maturity dates. The 1-year rates in the table above are listed in descending order based on Annual Percentage Yield (“APY”) which is the rate of return that you will earn, when adjusted for compounding, over a 12 month period, and the way in which banks are required by US banking regulations to advertise their CD rates.

A certificate of deposit represents a time commitment between a depositor (someone who has money to put in the bank) and a bank. The depositor agrees to leave a specified amount of money in the bank for a set period of time. The bank agrees to keep the money safe and to provide a fixed rate of return.

A 1-year CD has a very brief time commitment and can also generate a rate of return above the prevailing savings rate. Therefore, many people use 1-year CDs to slightly augment their rates of return over savings with only slightly more risk than they would have if they were entirely in savings accounts and money market accounts.

FDIC Insurance

Provided the bank is FDIC-insured and the deposit amount is within FDIC limits, the principal is also secured by an agency of the United Stated federal government against loss. Further information about FDIC insurance is found in this article and if you have specific questions about your own circumstances you should use the FDIC’s Electronic Deposit Insurance Estimator.

CD Risk

The principal of a CD is safe and insured as long as the deposit amount is FDIC limits. Interest that accrues and is paid or deposited to the principal also is safe as long as the total balance remains within FDIC limits.

A CD however bears two significant risks:

  • Liquidity risk

    If you think you may need access to your principal during the period of the time commitment for a major purchase or an unforeseen expense, CDs are generally not a good place to store money. The terms of most CDs outline the penalty that will be assessed in order to access your capital. This penalty is usually assessed in terms of time periods. For example, a common penalty on a 1-year CD is 3 months, although you should always check this carefully in the terms and conditions before opening a CD as it could be longer. Banks and credit unions are not obliged to offer an early withdrawal penalty, and may change or remove or even refuse to honor the early withdrawal penalty in their paperwork. For further details, please read this article. BestCashCow never recommends a strategy involving the purchase of a CD when you have a high likelihood that you will need your capital.
  • Inflation risk

    Since CDs are considered a very safe investment when you stay within FDIC and NCUA-limits, they often do not pay much over the anticipated rate of inflation, and can often pay under this rate. Were interest rates to rise (or the inflation rates to rise), the real or inflation -adjusted value of your CD can drop over time, especially when you factor in the tax consequences of ownership of a CD. In the event of rates rising, you may be able to use the early withdrawal penalty to get your principal but for the reasons mentioned above, BestCashCow does not recommend relying on such a strategy.

Be sure to think about how CDs fit into your overall portfolio objectives.

CD Laddering

An effective strategy used by many to bolster their savings strategy is to own CDs with various maturities. In other words, a depositor with $400,000 and put $100,000 in a 3 month CD, $100,000 in a 6 month CD, $100,000 in a 9 month CD and $100,000 in a one-year CD, then your liquidity risk in highly diminished because you are always near maturity on one of your CDs. (Note that no more than 2 of these CDs should be at the same bank in order to avoid exceeding FDIC limits).

The reality is that we are in a very low interest rate environment, and any CD with a maturity of less than 1 year is going to pay below, perhaps well below, the prevailing rates in the leading online savings accounts or at brick-and-mortar banks. Therefore, the strategy outlined above would be largely absurd in the current environment.

A laddering strategy that would make more sense for the same depositor who might otherwise hold $400,000 in cash would be to put $100,000 in a one year CD every three months. Liquidity risk in the same way is diminished as the depositor is never more than 3 months from maturity, yet the depositor is picking up some small improvement over the best savings rates than where all of his money to be in cash.

Laddering strategies can also involve longer term CDs, but one that involves terms as little as 1 year can improve on the savings rates with minimal impairment to your liquidity.

More information on CD laddering is available in this article.

How Interest is Paid

The method of distributing the interest earned on a CD varies by bank. Some banks pay interest monthly, other semi-annually, and others at the maturity of the CD. In general, online banks pay the interest electronically either by adding it to the principal balance or with an ACH transfer back to the depositor's primary linked checking account. Other online banks may pay via a check in the mail.

Interest Rate

Currently, the most competitive banks offer 1-year rates that are slightly above the top online savings and money market rates. Depositors need to decide if they want the fixed rate of the CD or the flexibility of the savings account (savings accounts do not come with any term time requirements).

In a rising rate environment, it is generally better to keep money flexible and liquid and put it into either short term CDs or savings or money market accounts.  In a falling rate environment, it is generally better to lock the rate using a CD or some other fixed rate investment. In a stable rate environment, you may be able to collect a small premium in exchange for your loss of liquidity.

Online banks generally offer CDs available to residents of any of the 50 states. The CD must be opened online and funded either by online transfer or by mail.

FREQUENTLY ASKED QUESTIONS ON CERTIFICATES OF DEPOSIT

What are CD rates?

CD rates are the fix rate that the bank pays a depositor for entering a CD for the entire term of a CD. They are expressed in annual percentage yield (“APY”) terms, so that they are standardized. $100,000 invested in a one year CD at 1% will be worth $101,000 at maturity in exactly 1 year. $100,000 invested in a two-year CD at 1.50% will be worth $101,500 in exactly 1 year and worth $103,022.50 at maturity (assuming the interest is not paid out before maturity, but is added to the principal). Please see BestCashCow’s Savings & CD Calculator to better understand the magic of compounded interest over time.

Do CDs Pay Interest Monthly or Yearly?

When opening a CD, it is important to consider how interest is credited or paid. Interest can be credited to the CD monthly, quarterly or annually. For those CDs of one year or less, interest may be credited only at maturity.

When interest is paid, the CD holder may have arranged for the interest to be mailed to them as a check. The other option is for the interest to be added to the principal of the CD.

Regardless of how and when interest is paid, it is required to be expressed (standardized) by all banks in the form of an annual percentage yield (“APY”) rate.

How Is Interest on CDs Taxed?

Interest on CDs is taxed as ordinary income. Your bank will provide you with a 1099-INT detailing the interest that you must report on your tax return at the end of each year. Regardless of whether interest is paid in the form of a check or added to principal, CD holders need to report the interest in the year in which it is paid. Purchasing a Certificate of Deposit of one-year or less that pays a single lump sum interest payment at maturity may defer tax on interest until the following year, but otherwise holders of CDs should generally expect to pay ordinary taxes on interest earned in every year in which they hold a CD. Further detail is found in IRS Publication 550 (page 5).

Why Are CD Rates So Low?

CD rates on terms of 1 and 2 years were very constantly low for many years from 2009 to 2015 as the Fed Funds rate was held at zero following the great recession. Rates on longer term CDs were occasionally more interesting during this period (depending more heavily on the level and direction of the US Treasury Bond).

The US Federal Reserve’s action towards normalizing interest rates has been painfully slow (resulting from Brexit, European financial instability, etc.), and CD rates have remained at levels that are very low by historical norms. However, we have seen CD rates rise in 2016 and 2017 as the Federal Reserve has begun to slowly raise the Fed Funds rate.

Are CD rates going up or down? When are they expected to rise?

If the Federal Reserve accelerates its plan to raise the Fed Funds rate or if global economic developments were to cause US treasury rates to rise, we would quickly see higher CD rates. However, the global economic environment is uncertain with European long-term interest rates being negative. Should the US also enter a recession and the US 10-year Treasury rate fall still further, it is possible that CD rates could fall further.

What is a good rate for a CD?

BestCashCow lists the best CD rates available from online banks above, and the best rates from local banks and credit unions. A good rate is the best rate that you can find at an FDIC or NCUA-insured institution, provided that it compensates you adequately over the best savings rates for the liquidity that you are giving up. Only you can determine based on your own personal circumstances whether that is a good CD rate for you. BestCashCow’s Savings & CD Calculator can help you to understand how much more interest a CD can generate over a savings account.

Is there an advantage to a 12-Month Certificate of Deposit over Online Savings Accounts?

At any moment in time, there is ordinarily a premium to an online 12-month CD rate over an online savings rate. The table below demonstrates the spread between the two over the last several years. Whether it makes sense for you to take advantage of these higher rates in the 12-month rate depends on your own need for liquidity and your view on whether and how fast savings rates will rise.


ADVANTAGES AND DISADVANTAGES

The advantages of online one-year CDs are:

  • Funds deposited in FDIC banks and within insurance limits are protected by the full faith and credit of the United States government.
  • CDs provide a predictable, set rate of return.
  • The CD can be opened from the comfort of your house.
  • The CDs are generally available to any resident of the United States.

The disadvantages of one year CDs are:

  • One year CDs pay interest rates that are just above the leading rates offered on online and branch-based savings and money market accounts. There is a very slight premium for having the money locked up for one year. Your own circumstances and tax rate will help you to determine if that premium provides adequate compensation to you for your loss of liquidity.
  • The deposited money is committed for one year.
  • The account must be opened online and all inquiries must be conducted online or via the phone.
  • Depending on the bank, the opening and funding process can take several days to weeks although the bank generally locks the rate once the application has been received and approved.

All banks listed on BestCashCow are FDIC insured; BestCashCow.com strongly recommends that you stay within FDIC insurance limits and that if you are unsure of how the limits affect you, please visit the FDIC website.

To understand all of the income generating options available to a saver, please view the Income Generating Investments Comparison Chart.

What to Look for in an Online CD Account:

FDIC and NCUA Insurance - In order to secure the viability of the US banking system, the Federal government provides insurance to a maximum amount of $250,000 per individual per institution (or $500,000 for joint account holders). This insurance is provided to banks through the FDIC and to credit unions through the NCUA. All banks listed on BestCashCow are FDIC insured; most, but not all, credit unions listed on BestCashCow are NCUA insured. Ordinarily, all deposits (CDs, Checking, Savings Accounts) held in the same type of ownership are added together and insured to $250,000, funds held in different types of ownership (Individual, Joint, Trust, Retirement) may fall under separate insurance provisions. In order to determine if your financial institution is insured and to ascertain your coverage limits, please visit - as appropriate - either FDIC.gov and use the BankFind functionality or NCUA.gov and use the Share Insurance Toolkit. We recommend that you deposit funds in only FDIC and NCUA insured institutions and that you do not exceed coverage limits.

Minimum Deposit - There is such competition for your money that the best CD rates are often available for sums as little as $500.

Term and CD Rates- Three month and six month certificates of deposit rates do not dramatically exceed those in online savings and money market accounts, and money market funds. Moreover, investors in states with higher state tax, such as New York and California, in an ordinary environment (not 2011) will perform equally well in a three-month US Treasury Bond or pre-refunded municipal bonds after they account for the fact that interest produced on those products are tax advantaged.

Generally, longer the CD term, the higher the CD rate. In general, the term you choose depends on how long you want to tie up your funds and also what you think will happen to interest rates.

Interest rates will fall. Then it is better to put money into longer-term CDs to maintain the high rate as long as possible.

Interest rates will rise. Put money into short term CDs. By keeping your cash more liquid, you can re-invest it as rates go up.

Interest rates will remain flat. In this case, going for longer-term CDs will help you maximize your interest income.

Learn more about getting the best CD rates.

Avoiding CD Pitfalls:

Early Withdrawal - Any certificate of deposit will bear substantial penalties for early withdrawal, if it is even allowed. Ordinarily, the penalty for early withdrawal will be a loss of all of your accrued interest, but there are certain circumstances where banks will also assess penalties that will result in a loss of some of your principal.

SAVINGS & CD CALCULATOR

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Recent Articles


Be Careful Not to Rush Too Heavily Into Long-Term CDs Here

Rate information contained on this page may have changed. Please find latest cd rates.

Interest rates have collapsed over the last several weeks and that may be good news for those interested in remortgaging or buying a new property.   It is also good news for anyone considering taking out a new home equity loan or line of credit or an auto loan.

It may not be good news for your savings.   Many banks dropped their online savings rates going into the July rate cut and still others are dropping their rates now based on the assumption that the Fed is not done cutting.

We are getting a lot of notes from savers who remember well a lengthy period from 2009 to 2016 when savings rates were below 1%, and are terribly fearful that we may be heading back there.   Indeed, anyone looking at Japanese or German rates and watching the talking heads on CNBC or Bloomberg can get the feeling that there is a real paradigm shift and that interest rates are never going up.

There are still banks and credit unions that are offering online 5-year CDs over 3%.   In your local market, you may even find brick and mortar opportunities at banks and credit unions to get these kinds of rates.

Here are two reasons why you should be cautious.

First, we’ve seen a panicked move in Treasuries.   Rates may not stay this low for very long.   We could be in a completely different environment in a year or 18 months with the 10-year back over 3% and perhaps even with the Fed Funds rate back over 3%.   If that happens, you will regret having limited your liquidity by locking into a long-term CD.

Second, even if rates go back to zero, you are still going to see attractive 5-year CD offers as banks will still need to lock up long-term deposits from depositors to fill their capital needs.   From 2011 until 2015, while the Fed Funds rate was at zero and the best savings rates were below 1%, it was still always possible to find 5-year CDs at or just under 2.50%.    So, even if we see a continued complete collapse in interest rates, you will always be able to get a premium for locking in for a long period.    And, yes, there is a difference between 2.50% and 3.50%, but the difference is not a matter of life or death (especially after you calculate the net income from the CD after tax).

If you see 5-year CDs as a sort of insurance against collapsing rates, then you can go ahead and devote a small amount of your savings to provide some level of protection against falling rates (be sure to check the best rates here).  But, we’d be much more inclined to direct that energy towards one-year CDs where the rates may be slightly lower, but so is the risk of getting this wrong.


Avoid The TIAA 4-year Diversified Assets Marketsafe CD

I’ve written about TIAA’s “Marketsafe CD” products, and those issued by Everbank prior to its acquisition by TIAA.   I’ve suggested that the offering of these products violates the 1933 Securities Act, and I maintain that position.  More importantly, I have always written to advise depositors to avoid thinking of these products as CDs (they should not be called CDs), and I am doing that again here.   

The latest product purports to give depositors so-called “safe” exposure to the Brazilian Real, the Euro and gold and emerging market equities.   In this case, these assets are all priced using ETFs on a pricing date, and then measured against the price of those ETFs in 4 years.   The investor gets back their principal and the weighted appreciation, if any, at maturity.   Interestingly, the video, featuring Chris Gaffney, uses the hypothetical appreciation of 6% over 4 years which would underperform by at least half the compounded performance on a 4-year CD (where you can still earn well over 3% per year).

With its past products, TIAA and Everbank provided some rationale for tying their products together.   They represented earlier products as a play on oil currencies here and here a play on emerging market currencies here or emerging market equities here or a rise in interest rates here or here.  

I am not sure of the rationale for tying together the Brazilian Real, the Euro, gold and emerging market equities.   It now seems to be a kind of “we think you’ll like this” type of thing.  A prudent investor might look at which of these things they want to own and invest in them though the ETF directly or some other means.  For example, my own personal opinion is that while gold and the Euro might appreciate against the dollar over the coming 4 years, the Brazilian Real and the emerging market ETF could easily fall quite severely.    I would look at the gold ETFs (IAU or GLD) as one alternative, and interest-earning Euro accounts as another.

As anyone who has invested in any of TIAA’s or EverBank’s Marketsafe products knows, it just takes one nasty thing in the basket to destroy it and to leave you waiting for maturity to get your principal back.  Previously, however, TIAA damaged your wealth but did not hit you with a 1099 reporting Original Issue Discount (OID).    However, if you read the terms of the latest offering, TIAA will hit you with an OID statement for imputed interest in each of the four years that you are holding this product.   While the bank would have had an obligation under Federal Tax law to have reported OID, EverBank did not do this prior to its acquisition and the fact that they are now doing it means that their products go from a dreadful idea to a ever worse one.

Bottom line: Continue to avoid TIAA Marketsafe CDs.


Avoid Municipal Bonds For Now

Those paying taxes this month in States like New York, New Jersey and California have been hit with quite a wake up call over the last few days.

Our tax bills, as a result of the 2018 Republican tax cuts, are much higher, especially since we have lost all sorts of deductions for our state taxes.

Out of the woodwork are emerging two groups of people eager to present their solutions to making April 2020, as compared with this April, a little less painful:

  1. Real estate agents from Florida and Texas.
  2. Those pushing municipal bonds.

I have nothing bad to say about the former, and I am not going to comment about the risks and benefits of relocating to Florida or Texas (I do know that New York spends a lot of money each year checking to be sure that former NY residents have met the required criteria of residency in another state and tracking them down for past taxes where they haven’t).

Rather, I want to address the people pushing municipal bonds and municipal bond funds.    I am going to say, quite simply, that my view is that buying these instruments at this time is a terrible idea for all but the extremely wealthy.  Here are 2 reasons:

First, most people, especially now, need their liquidity and should not tie up large amounts of cash in a low interest rate environment.   One-year municipal bonds - if you can find them – in New York or California have a yield to maturity below 1.40%.   Even if you are in a 50% effective tax bracket, that is still a fully tax equivalent return of only 2.80%, and you can still get 2.80% (or better) in a 1-year CD.   Unlike municipal bonds, however, you can withdraw your money early from 1-year CDs with a reasonable early withdrawal penalty (BestCashCow recommends that you identify CDs with only three month of interest as such a penalty).   As long as you stay within FDIC and NCUA limits, your CDs bear no credit risk.   Check online CD rates here.  Check local rates at banks here and credit unions here.

Second, municipal bond interest rates are extraordinarily low.   You need to go out 30 years to find a municipal bond yielding over 3%.   As a point of comparison, I was purchasing high-quality AA New York municipals in 2009 (during the financial crisis) that were seven years in duration and were yielding over 5%.    As a general rule, I do not recommend that anyone should buy municipal bonds of more than 5 to 10 years in duration under any circumstance.   At the moment, high quality municipal bonds of those durations have tax equivalent yields that, again, do not offer significant premiums over 5-year CDs.  They also are extraordinarily  risky as they can lose tremendous value (even those of intermediate durations) should long-term rates increase.

Bottom line: Wait until you see higher long-term rates before considering municipal bonds.