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 - July 22, 2019

1 Year CD National Average: 1.05% ?

BANK APY? Vs.
Nat'l
Av.
MIN?
Sponsored Advertiser Disclosure
Warning: Early withdrawal penalty equals one year of interest.
Banesco USA
2.70% 2.58x $1,500
Live Oak Banking Company
2.70% 2.58x $2,500
Early Withdrawal Penalty is 180 days interest.
Sallie Mae Bank
2.65% 2.54x $2,500
Warning: Early Withdrawal Penalty is 2% of the account balance.
Warning: Early Withdrawal Penalty is the greater of: 90 days interest or all interest earned.
ableBanking, a division of Northeast Bank
2.60% 2.49x $1,000
Early Withdrawal Penalty is 180 days interest.
Colorado Federal Savings Bank
2.60% 2.49x $5,000
Early Withdrawal Penalty is 6 months interest.
BAC Florida
2.60% 2.49x $100,000
Warning: Early Withdrawal Penalty is 12 months interest.
Bank5 Connect
2.55% 2.44x $500
TIAA Bank / Everbank
2.55% 2.44x $1,000
Limelight
2.55% 2.44x $1,000
Early Withdrawal Penalty is 1% of principal.
MapleMark Bank
2.55% 2.44x $25,000
Barclays Bank Delaware
2.50% 2.39x $0
Marcus: By Goldman Sachs
2.50% 2.39x $500
Rising Bank, a division of Midwest BankCentre
2.50% 2.39x $1,000
Synchrony Bank
2.50% 2.39x $2,000
WebBank
2.50% 2.39x $2,500
Citizens Access
2.50% 2.39x $5,000
Ally Bank
2.50% 2.39x $25,000
Early Withdrawal Penalty is 270 days interest.
Discover Bank
2.40% 2.30x $2,500
Connexus
Restrictions
2.40% 2.30x $5,000
Navy Federal Credit Union
Restrictions
2.40% 2.30x $100,000
My Banking Direct, a division of New York Community Bank
2.30% 2.20x $0
Incredible Bank, a division of River Valley Bank
2.27% 2.17x $1,000
AirBanking, A Division of MainStreet Bank
2.25% 2.15x $500
iGobanking.com, a division of Flushing Bank
2.25% 2.15x $1,000
Early Withdrawal Penalty is 181 days interest.
USAA Federal Savings Bank
2.22% 2.12x $175,000
CIT Bank
2.20% 2.11x $1,000
Early Withdrawal Penalty is all interest earned.
Amboy Direct
2.05% 1.96x $10,000
Vio Bank, A Division of MidFirst Bank
2.00% 1.91x $500
BBVA Compass Bank
1.90% 1.82x $500
Dollar Savings Direct, a division of Emigrant Bank
1.80% 1.72x $1,000
Northern Bank Direct
1.76% 1.68x $10,000
Radius Bank
1.55% 1.48x $500
Axos Bank, a division of Bofi Federal Bank
1.00% 0.96x $1,000
American Express Bank, FSB
0.55% 0.53x $0
OneWest Bank, a division of CIT Bank
0.55% 0.53x $1,000
Veridian
Restrictions
0.35% 0.33x $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 - July 2019

Bank Institution Product Term Interest Rate (APY)
Quontic Bank 1-Year 2.85% APY with $1,000 minimum
Live Oak Banking Company 1-Year 2.70% APY with $2,500 minimum
Sallie Mae Bank 1-Year 2.65% APY with $2,500 minimum
Bank5 Connect 3-Year 2.90% APY with $500 minimum
AirBanking, A Division of MainStreet Bank 3-Year 2.85% APY with $500 minimum
M.y. Safra Bank 3-Year 2.76% APY with $1,000 minimum
Navy Federal Credit Union 5-Year 3.50% APY with $1,000 minimum
Texas Dow Employees 5-Year 3.25% APY with $1,000 minimum
AirBanking, A Division of MainStreet Bank 5-Year 2.95% APY with $500 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.

SAVINGS & CD CALCULATOR

Find out how much extra money you can earn by moving your bank money into an account that pays more.

Use or Change these Amounts And Rates

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.    


Kyle Bass Says Interest Rates Will Be At Zero in 2020

There are many people who believe that the 2008-2009 financial crisis marked a seismic shift in the interest rate paradigm and that interest rates will never go back to a pre-crisis “normal”.

When Jerome Powell became Chairman of the Federal Reserve, he seemed determined to raise rates back to a new normal long-term goal of 3%, and in fact stated that the Fed intended to raise the Fed Funds rate above that level.  But, the Fed Funds rate now sits at a target of 2.25% to 2.50%, and may not be going higher any time soon as Powell has bowed to Presidential pressure.  Some Fed governors and former Chair Janet Yellen have recently come out and said that the next Federal Reserve move could well be to cut.  And, today, Kyle Bass says that interest rates could be back to zero before the end of next year.

The idea of interest rates going back to zero concerns me, as it does many.   It is, indeed, difficult to fathom how we could finally have pulled out of this recent multi-year period where the public at large was forced into risk assets in order to avoid deterioration in their wealth, only now to be heading right back into it.

Kyle Bass is pretty smart and, while he isn’t always right, he has made some very prescient predictions in the past.   Those who can tolerate Brian Sullivan, can watch Bass’s interview here (he is largely talking about China, and doesn’t make this prediction until the end):

While Bass did not got into too much detail about how he formed his hypothesis, he did say he believes that US will experience a slowdown following a global economic slowdown beginning by the end of this year.   One might surmise that he believes the precedent is in play for the Fed to use all bullets in its resolve to fight a global economic slowdown.   The additional reality here is that interest rates around the world remain at or near zero and unless they start to move higher and stay higher, the Fed could need to move rates lower to prevent the US dollar from becoming too strong.   Plus, the President has Chair Powell’s ear and if he remains a free man, it is a certainty that he will be lobbying forcefully for as many rate cuts as possible just in front of the 2020 election

Bottom line: This could be a good time to begin to consider putting some of the cash that you cannot afford to risk into long-term time deposits (Certificates of Deposit).   Check the best 3-year CD rates, 4-year CD rates and 5-year CD rates here.


Jim Cramer Says to Buy CDs

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

Amazingly, Jim Cramer, the biggest proponent of the stock market was interviewed on NBC’s Today show the other day and couldn't say anything other than to buy CDs.

It is a video so extraordinary that you need to watch it here.

To be clear, BestCashCow thinks that CDs should always be an important part of a well-diversified, safe portfolio.   We provide the most comprehensive list of the best online CD rates here, and we also encourage folks to look at rates at banks near them and at credit unions near them.

But, we’ve been suggesting people take extreme caution around anything longer than a year, even though two-year CD rates are now above 3% and may attract attention.   In fact, I wrote just yesterday that I do not find a one-year CD at 2.85% APY to be particularly attractive since online savings rates are strong and the Fed is still raising rates.

But, what is quite extraordinary here is that Cramer could be so easily perturbed (to put it mildly) by the recent market volatility.  This is, in fact, the same man who was encouraging people to buy into Facebook at 200, Nvidia at 290, and Amazon at 2000 in November.

I speak at conferences and extol the virtues of CDs, but I certainly wouldn’t tell people to run out of the market here, and I have no intention of unloading my Nvidia or Amazon at this time.

So what is Cramer afraid of?   I, for one, suspect he just trying to create a record of saying everything imaginable in the most vague way possible so that he can point to it and say he was right (especially if we have a 2009 scenario and he winds up on the Daily Show again).


I Am Just Not Too Excited About a 1-Year CD at 2.85% APY

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

There are several well-known online banks that are offering 1-Year CDs at 2.85%.  In fact, some banks may even be a little higher.   You can see the list of the best online 1-year CD rates here.   You may also find better one-year CD rates offered by local banks near you or credit unions near you.

BestCashCow, of course, provides the most comprehensive list of CD rates in the US.   At various points, I have highlighted what I believe to be great one-year rates.

I, however, have not been particularly eager to recommend that people get heavily into one-year CDs at 2.85% and that has caught many of BestCashCow’s readers by surprise and been the source of a lot of queries that I have received.

Here are the reasons why I would be hesitant to jump in heavily:

First, the Federal Reserve is still raising rates, most recently moving the Fed Funds rate to a range of 2.25% to 2.50%.   The Fed has also most recently guided towards a neutral rate of 2.80%.  But, they also said that there are 2 more moves in 2019 and one in 2020 and that would take the Fed Funds rate to 3.00% to 3.25% in a little over a year.

Second, I see a risk of real inflation in 2019 and into 2020 as I outlined at the end of this article.  If that happens, we are looking at higher rates and a Fed that will raising faster and higher.

Third, savings rates are pretty high and getting more so.   Even if I believe that they aren’t going higher, they really are unlikely to go lower over the next twelve months.   I count no fewer than ten nationally available online savings offerings at 2.25% and many more available at banks locally and at credit unions.   $100,000 deposited in any of those places paying 2.25% is going to deliver no more than $600 less than a one-year CD (and that $600 difference is fully taxable).   The savings account could also wind up delivering roughly the same amount or even more than a one-year CD if savings rates continue on their upward trajectory. 

Fourth, you are locking your money up and even though 1-year is a short period of time, it is still locked up.   In return for that extra fully taxable $600 (or less) on $100,000, you are locking your money up into 2020.   If you need your principal back, Sallie Mae or Live Oak Bank are going to charge you three months’ interest (other online banks, such as Marcus or Purepoint will actually charge you more to break a one-year CD).  A three-month’s interest penalty on $100,000 at 2.85% is $712.50.

If you have money that you don't need for a year, you can always put some of it into 1-year CDs.  However, if you think that there is even a remote chance that you will need the money back or that rates could go much higher, then the risk-reward of the 1-year CD just is not very exciting.   I’d stay primarily in online savings accounts.


Avoiding Early Withdrawal Fees on CDs by Withdrawing Only Accrued Interest

Like many people who realized three or four years ago that interest rates were not going to go up at the time, I locked some money into 5-year CDs back then.

These CDs are now within a year or two of maturity.   The early withdrawal fees on these are either 6-months’ interest or 12-months’ interest.   As long as you don't need the cash, a quick calculation that most people can do in their heads shows that the penalty would be more than any additional yield that you can get and it therefore makes more sense to hold them until maturity.

Yet, as rates have risen, the interest that these CDs are now paying is a little lower than today’s best online savings rates and is quite a bit lower than current best online one-year CD rates.

All online banks that I am aware of will allow you to withdraw the interest that has accrued to the CDs without any penalty.   While the release of accrued interest is not a transaction that can always be done online, I found that with some online banks it is a 2-minute phone discussion.

It releases a small part of the money in the CD, freeing that money to earn a higher rate.