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One Year CD Rates from Online Banks 2016

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.

October 26, 2016

1 Year CD National Average: 0.38% ?

APY Vs. Nat'l Av. MIN
E-Loan 1.30% 3.40x $10,000
Reviews (2) 1.25% 3.27x $1,000 Reviews
Sallie Mae Bank 1.25% 3.27x $2,500
Reviews (1)
Colorado Federal Savings Bank 1.25% 3.27x $5,000
Reviews (7)
EverBank 1.24% 3.25x $1,500 Reviews
BAC Florida 1.24% 3.25x $1,500
Reviews (2)
CIT Bank 1.22% 3.19x $1,000
Reviews (3)
Pentagon Federal Credit Union 1.21% 3.17x $1,000 Reviews
Barclays Bank Delaware 1.20% 3.14x $0
Reviews (1)
Goldman 1.20% 3.14x $500 Reviews
Virtualbank 1.16% 3.04x $10,000 Reviews
Discover Bank 1.15% 3.01x $2,500 Reviews
Navy Federal Credit Union 1.15% 3.01x $100,000 Reviews
Ally Bank 1.05% 2.75x $0 Reviews
Bank5 Connect 1.00% 2.62x $500 Reviews
Bank of Internet 1.00% 2.62x $1,000 Reviews
Nationwide Bank 0.95% 2.49x $100,000 Reviews
USAA Federal Savings Bank 0.76% 1.99x $175,000 Reviews
Capital One 360 0.75% 1.96x $10,000 Reviews
CNB Bank Direct 0.66% 1.73x $1,000 Reviews
OneWest Bank 0.65% 1.70x $1,000 Reviews
ableBanking 0.65% 1.70x $1,000 Reviews
New Dominion Direct 0.60% 1.57x $1,000 Reviews
American Express Bank, FSB 0.55% 1.44x $0 Reviews
AirBanking 0.50% 1.31x $500 Reviews


One-Year CD - Online Banks 2016

Certificate of deposits are offering by most bank 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 (hyperlink - 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 : Can You Always Withdraw Your Money Early From a CD? 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 principle 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 principle 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.


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 Booster Calculator to better understand the magic of compounded interest over time.

Are CD rates Monthly or Yearly?

Interest may be paid on any interval, but the rates that you see listed are required to be expressed / standardized by all banks as an annual percentage yield (“APY”) rate.

Why Are CD Rates So Low?

CD rates on terms of 1 and 2 years have been very constantly low for many years now as the Fed Funds rate has now been at zero from the great recession of 2009 to 2015. We saw a slight uptick in 2015 as the Fed raised rates by 25 basis points and indicated further Federal Reserve action towards normalizing interest rates in 2016. However, longer term CD rates have fallen in 2016 as long term interest rates have fallen due to the European financial crisis and Brexit, and the expectation on Wall Street that US Federal Reserve action towards normalizing interest rates will be substantially slower than earlier expected.

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 Booster Calculator can help you to understand how much more interest a CD can generate over a savings account.


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; strongly recommends that you stay within FDIC insurance limits and that if you are unsure of how the limits affect you, you visit the FDIC website.

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


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  • Ron . cirafice

    August 09, 2016

    Why Keep your money in a low interest savings Bank Account of 00.3 to 00.5
    When you can at least 1.05 % to 1.25 % a Year on a CD
    In Fact i opened a 1 year CD @ Citizens Bank Rate 1.35% Granted you will never get Rich on Bank Interests Today But most are Better then a savings Account. so if you Have @ least 10,000 Dollars in a Low paying savings account Put at least $ 5,000.00 of it into a 1 yr. CD. You will still will be Liquid

  • pmb

    June 01, 2016

    Credit Unions are the better option. Online banks, no thanks.

  • Perry

    May 17, 2016

    I have several 12 month and 14 month CDs at Synchrony Bank at 1.25 and 1.3% respectively. I also have Synchrony's on line savings account at 1.10% (extra .05 because I have a Lowes credit card account). I just follow the basic rule that you only lock up money you aren't going to need for whatever time period you choose. And this money is used as our cash portion of our portfolio. So the top priority is no risk - fairly liquid.

  • Joe

    March 08, 2016

    I have more then 15K to put into a CD. First Bank is giving 1.25% on a 12 month CD. Is that good ???

  • Art Schlesinger

    January 02, 2015

    @H.Arneat, There isn't much to be gained, but short term rates aren't likely to move up that much in 2015 and one year isn't a lot of time so why not make the extra few dollars. I went with CIT and Ally because you can raise your rate if there is a quick move up, but I did also consider Sallie Mae because it only has a 3 month withdrawal penalty. What really seems crazy to me at the 3 and 6 month rates. Years ago, those rates used to be the same as savings and money market rates and now they are much lower. You'd need to make a mistake to open one of those.

  • H.Arneat

    January 01, 2015

    I think you'd be crazy to invest in a 1 year CD now when the top yields are the same as an online savings account. Maybe the ones that allow you to reset but other than that, don't see the financial wisdom in doing so. Can anyone make an argument? I'm curious.

  • Peter Ashton

    March 18, 2014

    Unlike a savings account, however, a CD does not allow early withdrawal without penalty. For those who want to explore opening a CD, there's always a guide to the best CD options available.

  • Michael

    February 11, 2014

    Teresa, use this savings bond calculator from the US treasury. Also use the Treasury Hunt for lost or deseased relatives.

  • Teresa Simmonds

    January 18, 2014

    I have a 50 dollar savings bond. How much is it worth? Got it in 1984.

  • Ray

    August 06, 2013

    What are the alternatives to a one year CD?

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