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Online CD Rates 2018 – 5-Year CDs

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.

April 23, 2018

5 Year CD National Average: 1.45% ?

BANK APY? Vs.
Nat'l
Av.
MIN?
Sponsored Advertiser Disclosure
Popular Direct
2.90% 2.01x $10,000
Igobanking.com, A Division Of Flushing Bank
2.87% 1.99x $1,000
Bankpurely, A Division Of Flushing Bank
2.87% 1.99x $1,000
Dollar Savings Direct, A Division Of Emigrant Bank
2.80% 1.94x $1,000
M.y. Safra Bank, Fsb
2.80% 1.94x $5,000
Barclays Bank Delaware
2.75% 1.90x $0
Capital One 360
2.75% 1.90x $1,000
Colorado Federal Savings Bank
2.71% 1.88x $5,000
Everbank / Tiaa Direct
2.70% 1.87x $1,500
Live Oak Banking Company
2.70% 1.87x $2,500
Pentagon
Restrictions
2.68% 1.85x $1,000
Sallie Mae Bank
2.65% 1.83x $2,500
Virtualbank, A Division Of Iberiabank
2.65% 1.83x $10,000
Synchrony Bank
2.60% 1.80x $2,000
Navy Federal Credit Union
Restrictions
2.60% 1.80x $100,000
Northern Bank Direct
2.57% 1.78x $10,000
Nationwide Bank
2.56% 1.77x $100,000
Discover Bank
2.50% 1.73x $2,500
Ally Bank
2.50% 1.73x $25,000
American Express Bank, Fsb
2.35% 1.63x $0
Bank Of Internet, A Division Of Bofi Federal Bank
2.25% 1.56x $1,000
Radius Bank
2.20% 1.52x $500
Airbanking
2.00% 1.38x $500
New Dominion Direct
2.00% 1.38x $1,000
Commercial Investment Trust
1.75% 1.21x $100,000
My Savings Direct, A Division Of Emigrant Bank
1.65% 1.14x $1,000
Onewest Bank, A Division Of Cit Bank
1.40% 0.97x $1,000
Usaa Federal Savings Bank
1.11% 0.77x $175,000
All rates listed are Annual Percentage Yield (APY). The Min listed is the minimum deposit account balance required to obtain the rate listed.

PRODUCT INFORMATION

Five Year CDs - Online Banks 2018

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.

Safety

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.

When to Invest in a Five Year CD

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.

Interest

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

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.

ADVANTAGES AND DISADVANTAGES

Advantages

  • 5 year CDs provide a fixed rate for the term of the CD.
  • The rate is higher than a savings account or a 1 year CD to compensate for the longer term.
  • CDs opened online can be done from the comfort of a saver's living room.

Disadvantages

  • The money is locked away for five years unless the CD is broken (for which significant penalties may apply).
  • In a rising rate environment, inflation will reduce the value of the money in the CD over time.
  • The funding process for an online CD can sometimes take 1- 5 business days and often requires some type of validation process.

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.

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