Five Year Certificates of Deposit (CD) are generally the longest term CD that most banks will offer. They tend to offer the highest rates but require the longest commitment. Five year CDs are especially popular in a declining interest rate environment as depositors can lock money in at the highest rate possible for the longest period of time. They are also popular with depositors who are willing to lock up money for five years in return for extra yield. Online banks often offer Five Year CDs that are above the average national rate.
June 23, 2017
5 Year CD National Average: 1.22% ?
Online banks offer many different CD terms of which the five year CD is generally the longest. Five year CDs provide the highest yield of the common CD terms but in return, savers must keep the money locked in the bank for an extended period of time. While individuals can withdraw the money (termed "breaking the CD") high penalties usually make this undesirable. At times, some five year CDs offer rates that are high enough to make up for the break penalty, and in these cases savers can earn a positive return even if they break the CD in the third or fourth year. These cases are rare though and savers are advised to plan to keep their money in the CD for the full term.
Five year CDs shown from banks on BestCashCow are all insured up to $250,000 per individual per institution by the FDIC. Deposits over that amount may be lost should there be a bank failure and savers are advised to keep their money within FDIC limits. The FDIC provides a tool to help you determine if your deposits are covered.
The biggest risk of a five year FDIC insured CD is that soon after depositing the money, interest rates and inflation will begin to rise. This can often happen in a rising rate environment and savers are advised to be way of investing in a five year CD if interest rates and inflation seem poised to go up. Unlike with bonds, the face value of a CD does not change with increases in interest rates, but no one wants to deposit money into a CD at 2.00% for five year only to have rates rise to 4.00% a year later.
In general, avoid investing in long-term CD at the start of economic recoveries following a recession.
The time to invest in five year CDs is when the economy is doing well and interest rates are high or if the economy seems to be entering a period of slower growth, or a recession. The post 2008 financial crisis period would have been a perfect time to lock in a five year CD rate.
Because it is very difficult to predict the start of a recession or the beginning of a recovery, some individuals prefer to create a CD ladder and five year CDs are an important part of a laddering strategy.
Five year CDs from online banks pay rates that are well above one year CDs and are comparable to five year CDs from branch banks. Five year CDs are the one term where the online banks do not pay much above online banks.
Opening a CD from an online bank has become easier over the past five years. Today, most online banks have an end-to-end online process that takes all depositor information. Savers opening an account should be comfortable providing their social security information online. Once the account has been opened, the rate is locked. Most online banks have an electronic funding mechanism in which an individual can transfer funds using an ACH transaction from their main checking account. Banks also allow funding to be done via check, wire, or credit card.
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.
Find out how much extra money you can earn by moving your bank money into an account that pays more.
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Brian forcey
April 16, 2016
If you have a mortgage at 4.25% or higher (with a descent credit score) ,get a new mortgage probably at 3.73-3.85 for 30 years Do it today,or at least lock in the rate today
If you are a CD saver, search out the highest rate payout,especially 5-7 years. Some are listed on this site, other specials can be found. Always work w/ a bank or credit union w/ government guaranty of 250K.
If during the time set in your CDs, the interest rates rise 1+% try to negotiate w/ the bank or credit union to roll to same length of term at the higher rate......if they refuse,break the CD ,take the penalty, and reinvest in a "safe"institution at the higher rate. The penalty for early withdrawal will soon be made up .....unless your time remaining on original CD was short.....less than 1,5 years or less. Be nimble as you can,but by all means invest in CDs w/ the by far higher rates....even out to 5-7 years! The higher return will compound to a much higher NAV CD value faster, then as stated keep your eyes open in a rising interest rate environment....whenever it comes Good Luck Brian Forcey
Is this review helpful? Yes:5 / No:1
HGL
February 14, 2016
When people were getting 18% under Carter, inflation was 14-15%. What would happen to your fixed retirement with 15% inflation?
Is this review helpful? Yes:6 / No:1
Shorebreak
January 03, 2016
One should continue to ladder their CD portfolio. Having equal funds in accounts from one to five years out will still enable you to take advantage of rising rates and retain a buffer if the Fed stops any rate rises due to deteriorating economic conditions. By the way, Everbank has raised their 5-year CD yield to 2.45% and NASA Federal Credit Union has raised their 49-month certificate yield to 2.30%.
Is this review helpful? Yes:4 / No:1
Mike
December 10, 2015
Vibe credit union in Michigan has a 5 year cd at 2.5%.
Is this review helpful? Yes:3 / No:0
Noel
September 15, 2015
I live in the New Orleans area and I prefer to bank at a local bank. Best deals currently (Sept. 2015) seem to be Crescent Bank and Capital One Bank for 5 yr IRA
CD's. Tried to get CD rates at Whitney Bank.....apparently so low, there rates
don't seem to be available on-line!
Is this review helpful? Yes:4 / No:1
Brian forcey
August 08, 2015
Hey People
Unfortunately all of us have had to endure this low interest rate environment.
1. refi your mortgage,if you have one,in this low int. rate setting
2. Get multiple CD's from multiple banks,credit unions,etc.w/the
highest rates out there,even if it's a 5 year CD
3. When interest rates do rise significantly,offer the bank
or institution to stay w/ them ,but you want to switch to a new
higher paying CD,if they refuse,withdraw your money take the
somewhat modest penalty. It will soon make back the fine
and you will be much better off
Is this review helpful? Yes:10 / No:1
Jack
May 16, 2015
Low interest rates on CD's not only hurts savers ,especially seniors but the economy as well. I read that almost 1 trillion dollars have been lost to savers due to low interest rates over the last 5 years!Seniors don't mind spending if they were getting a good rate of return. All that lost interest revenue would have gone a long way to helping the economy and creating jobs.This Government thought the economy would get a boost to the money saved on lower gas prices, but this is only a drop in the bucket when compared to loss of income due to low saving rates for savers.I know I'm not buying a lot of stuff due to my spendable income being eroded because of low interest rates.
Is this review helpful? Yes:9 / No:1
Dorothy
April 21, 2015
After reading these comments, I sure agree the people who saved to take care of themselves are now not finding any interest rates to live on.
It gets worse all the time and when the interest do raise they will be a few cents at a time and won't help the people who need it most.
Is this review helpful? Yes:4 / No:0
Doc Myron
February 14, 2015
Our miserable federal Government is giving free $$$$ to banks which penalizes retirees who have built and served this country. I have 4 CDs coming due and need a modest 3.5% to stretch my funds to the end.
A terrible disservice. Why not identify a source for people on SS to receive a modest but reasonable return. How many seniors will exhaust their savings forced to depend on Government benefits to love and pay for thier Medicare and living expenses. Broke seniors are angry voters.
I recall locking up funds for 10 years at 18%. God Bless Jimmy.
Is this review helpful? Yes:8 / No:3
Porter
December 11, 2014
Look into cd's that will allow you to raise your rate at least once during the term
Is this review helpful? Yes:8 / No:1
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