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1-Year CD Rates from Online Banks 2020

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 2, 2020

1 Year CD National Average: 0.46% ?

Advertiser Disclosure
BANK APY? Vs.
Nat'l
Av.
MIN?
Sponsored Advertiser Disclosure
Bank5 Connect
1.15% 2.48x $500 Learn More
Limelight Bank, A division of Capital Community Bank
1.15% 2.48x $1,000 Learn More
Early Withdrawal Penalty is 6 months interest.
BankDirect, a division of Texas Capital Bank
1.11% 2.39x $10,000 Learn More
Goldman
1.10% 2.37x $500 Learn More
Navy Federal Credit Union
Restrictions
1.10% 2.37x $100,000 Learn More
Early Withdrawal Penalty is 180 days interest.
CFG Bank
1.05% 2.26x $500 Learn More
TIAA Bank / Everbank
1.05% 2.26x $1,000 Learn More
Rising Bank, a division of Midwest BankCentre
1.05% 2.26x $1,000 Learn More
Gateway First Bank
1.05% 2.26x $25,000 Learn More
Warning: Early withdrawal penalty equals one year of interest.
Discover Bank
1.01% 2.18x $2,500 Learn More
Connexus
Restrictions
1.01% 2.18x $5,000 Learn More
Barclays Bank Delaware
1.00% 2.16x $0 Learn More
Radius Bank
1.00% 2.16x $500 Learn More
Brio Direct, a division of Sterling National Bank
1.00% 2.16x $500 Learn More
iGobanking.com, a division of Flushing Bank
1.00% 2.16x $1,000 Learn More
Dollar Savings Direct, a division of Emigrant Bank
1.00% 2.16x $1,000 Learn More
Early Withdrawal Penalty is 180 days interest.
Live Oak Banking Company
1.00% 2.16x $2,500 Learn More
BAC Florida
1.00% 2.16x $5,000 Learn More
Colorado Federal Savings Bank
1.00% 2.16x $5,000 Learn More
Ally Bank
1.00% 2.16x $25,000 Learn More
Early Withdrawal Penalty is all interest earned.
Sallie Mae Bank
0.95% 2.05x $2,500 Learn More
Banesco USA
0.90% 1.94x $1,500 Learn More
Synchrony Bank
0.90% 1.94x $2,000 Learn More
Warning: Early Withdrawal Penalty is 2% of the account balance.
Citizens Access
0.85% 1.83x $5,000 Learn More
Early Withdrawal Penalty is 181 days interest.
MainStreet Bank
0.80% 1.72x $500 Learn More
Incredible Bank, a division of River Valley Bank
0.80% 1.72x $1,000 Learn More
Bank of Montreal
0.80% 1.72x $5,000 Learn More
Early Withdrawal Penalty is 1% of principal.
CIT Bank
0.75% 1.62x $1,000 Learn More
Home Loan Investment Bank, F.S.B.
0.70% 1.51x $2,500 Learn More
MapleMark Bank
0.70% 1.51x $25,000 Learn More
Ohio Catholic
Restrictions
0.70% 1.51x $100,000 Learn More
Warning: Early Withdrawal Penalty is the greater of: 90 days interest or all interest earned.
Ohio Catholic
Restrictions
0.65% 1.40x $25,000 Learn More
USAA Federal Savings Bank
0.62% 1.34x $1,000 Learn More
Prime Alliance Bank
0.60% 1.29x $500 Learn More
Ohio Catholic
Restrictions
0.60% 1.29x $500 Learn More
ableBanking, a division of Northeast Bank
0.60% 1.29x $1,000 Learn More
Transportation Alliance Bank, Inc. d/b/a TAB Bank
0.60% 1.29x $1,000 Learn More
WebBank
0.55% 1.19x $2,500 Learn More
CIBC Bank USA
0.55% 1.19x $25,000 Learn More
Northern Bank Direct
0.50% 1.08x $500 Learn More
Capital One 360
0.50% 1.08x $1,000 Learn More
OneWest Bank, a division of CIT Bank
0.50% 1.08x $1,000 Learn More
Salem Five Direct
0.50% 1.08x $10,000 Learn More
American Express Bank, FSB
0.40% 0.86x $0 Learn More
Banco Bilbao Vizcaya Argenteria
0.40% 0.86x $500 Learn More
Axos Bank, a division of Bofi Federal Bank
0.40% 0.86x $1,000 Learn More
Early Withdrawal Penalty is 270 days interest.
Brix Direct, a division of Cross River Bank
0.40% 0.86x $50,000 Learn More
Veridian
Restrictions
0.35% 0.75x $50 Learn More
Vio Bank, A Division of MidFirst Bank
0.20% 0.43x $500 Learn More
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 2020

Bank Institution Product Term Interest Rate (APY)
TotalDirect, a division of City National Bank of Florida 1-Year 1.15% APY with $25,000 minimum
BankDirect, a division of Texas Capital Bank 1-Year 1.11% APY with $10,000 minimum
Goldman 1-Year 1.10% APY with $500 minimum
Connexus 3-Year 1.26% APY with $5,000 minimum
Navy Federal Credit Union 3-Year 1.25% APY with $100,000 minimum
TIAA Bank / Everbank 3-Year 1.21% APY with $1,000 minimum
Community Federal Savings Bank 5-Year 1.60% APY with $500 minimum
Connexus 5-Year 1.56% APY with $5,000 minimum
TIAA Bank / Everbank 5-Year 1.50% APY with $1,000 minimum

PRODUCT INFORMATION

One-Year CD - Online Banks 2020

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

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

Recent Articles


1-Year CD Rates Over 2% Are Tempting But Preserving Liquidity In A Crisis Is Essential

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

BestCashCow today shows online banks offering one-year CD rates as high as 2.28%.    Depending on where you live, you may also find local banks or credit unions near where you live that have 1-year CD rates at or around that level.

It is very compelling to want to rush into 1-year CDs at or around that level with any FDIC-insured bank up to FDIC limits.   Savings rates are still strong, but they seem guaranteed to fall further as we work our way through 2020.

But, it also seems to me that it is an especially important time to think very, very differently about liquidity than we may have ever thought about it before.   As we work our way through a COVID-19 crisis that is certain to become more and more profound over the next several months with a desperate President.

If you anticipate that you might be economically vulnerable through a loss of job or sickness, the next year would be an important time to keep your liquidity.

Those who are not economically vulnerable and are certain to have the resources to get to the other side of the Coronavirus pandemic will also want to be certain that they have the liquidity to take advantage of opportunities that we will certainly see in equity and bond markets over the summer and fall as it proves difficult to safely reopen the economy.    Opportunities to invest in real estate and in struggling small businesses where you live are almost certain to emerge as well.

Finally, when I encourage people to be careful to preserve their liquidity, they often tell me that they can always get their money out of CDs with the payment of an early withdrawal penalty.   I would encourage these folks to read this article that I wrote in 2016.   Banks and credit unions retain discretion to deny early withdrawal request, and while it is exceedingly rare, we really do not know what steps banks may need to take to preserve their positions as we get through 2020. 

BestCashCow has always advocated that consumers keep large percentages of their assets in cash for difficult periods and that they make the most of their cash by seeking the highest returns available.   This next year, however, could be an important time to favor liquidity over the premiums that short-term CDs may offer.

If you insist on locking down a rate, no penalty CDs may offer a solution.   You’ll find those rates listed among our special CD products here.


Some 1-Year CDs Are Still over 2% APY Following the Coronavirus-Induced Fed Cut

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

We’ve read and heard a lot of financial markets information since the Federal Reserve’s emergency rate cut last Tuesday in response to the spread of Coronavirus.

By the end of the week, 10-year US Treasuries were trading under 70 basis points.

I’ve seen articles recommending people buy US Treasuries.   Although we did not anticipate Coronavirus or anything like it in the fall and warned then against long-term bonds, we continue to highlight extraordinary risks to principal in long-term low yielding instruments should rates rise before maturity.   Hence, US Treasuries are inappropriate now for non-institutional investors.

Likewise, this article in a well-respected publication over the weekend caught my attention.   In the first half of the article, the author is citing an opportunity in Series EE and Series I bonds.  These US government instruments are fully detailed here, but because of the limits they are inappropriate for most.   (Also, those with accounts at Merrill and Morgan have access to other, higher yielding instruments that are tied to CPI-U).

The second half of the same article cites what the author seems to believe is an extraordinary opportunity in municipal bonds.   The author points out that, for those in the highest tax brackets, a 10-year municipal trading at 90 basis points has a tax equivalent yield of almost 1.40%, but fails to point out the illiquidity of municipals, that this illiquidity causes still greater risk to principal should rates rise over the course of the bonds (and they will), or that some (perhaps many) municipalities will face credit problems the longer the Coronavirus crisis lingers.

There may be a temptation to believe that interest rates are going to be low forever when you watch the incompetent response of the Trump Administration.  But, in one year, you could easily be looking back at your actions as having been too rash. 

Think about whether you really want to make a bet that interest rates in the US are going to be low forever.

If you believe that Gilead and our medical professionals are going to get a handle on this crisis over the next year, you should be buying 1-year CDs.   With many on offer still above 2%, this is a much more sensible place to let your assets hang out.   And, in the worst case, you’ll be liquid in a year.  

Check online CD rates here.

Compare local CD rates where you live here.


Should You Really Be Buying 1-Year CDs Right Now?

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

I was at the gym yesterday and a friend who manages money for wealthy New Yorkers asked me if his clients (a married couple) should be putting $500,000 into a 1-year CD here and now at 2.00%.

He believes that with the stock market at an extremely elevated valuation and likely to correct, with the 10-year bond at 1.60% and yields likely to rise, and with little opportunity for appreciation in gold and other alternative assets, a one-year CD seems like a good place to hide out.

I quickly explained that 2.00% is not the highest one-year CD rate.    You will find higher rates online here (hyperlink), and you may find still higher rates at banks and credit unions where you live.

Then, I turned to the cash versus CD discussion.

For some time, I have recommended one-year CDs as a way to improve your return on cash that you want to keep liquid but know that you will not need for over a year.   As the Fed was increasing rates and the expectations was for further increases, the spread between CDs and savings was also increasing.   This time last year, the best online savings rates stood around 2.30% and one-year online CDs were around 2.85%.   

While BestCashCow’s surveys still reflect a wide spreads nationally (see the chart on the top of our online one-year CD page), the highest online savings rates are not much below the best one-year CD rates today.  

Savings is always going to give you more flexibility.   It can be accessed without penalty in an emergency.   It can be deployed instantly should you see a market opportunity or some sort of other opportunity.   So, I think that there is a strong argument for holding cash in savings or No Penalty CDs here and not now buying new short-term CDs (or allowing short-term CDs to auto-renew).

At the same time, I’ve always argued that there is very little risk in a one-year CD.   You are never very far from maturity, and the standard early withdrawal penalty on one-year CDs is only three months’ interest (but, you should always check on the early withdrawal rules and fees before buying a CD).   And, while it is hard to get excited about the narrowing margin, there is a real risk as we work through 2020 that President Pence will try to raise money from real estate developers and try to force Fed Chairman Jerome Powell to continue to lower the Fed Funds rate to zero (as Trump did).