Three years ago, the best online 5-year CDs were at or around 2.30% - 2.35%.  At the time, I put a fair amount of my personal money in 5-Year CDs, and I recommended that readers of BestCashCow to continue doing the same. 

I obviously regret not having put the money in Facebook or Netflix or Amazon!  But, these CDs have given me safety for savings accounts and a return on cash well above that offered by any savings accounts for the last three years.  To boot, at no time in the interim has it been possible to buy a 5-year CD at that rate.  (In early 2016, the best 5-year CD rates briefly reached 2.25%, but for most of the last year-and-a-half, 5-year rates were below 2%).

Now, the best 5-year rates are back to 2.35%.  Synchrony and Sallie Mae are both established online banks offering this rate and it seems tantalizing in light of where rates have been. 

But, savings rates are normalizing quickly (see the best rates here).    2-year CD rates and 3-year CD rates offer returns close to the 5-year CD without the time commitment.  I would be inclined to hold on the 5-year and stay in savings for now.   Given the Fed’s continued tendency to raise interest rates over the next 12 to 15 months, I think we may see 5-year CD rates above 3% before Janet Yellin hands over the reigns of the Fed to Gary Cohn.  In fact, the Federal Reserve continues to guide towards a Fed Funds rate at or above 3% in 2019 in which case savings rates and short-term CD rates will be at that level in less than 2 years.

Many other commentators will argue that you should jump on the 5-year CD at this point and pay the early withdrawal fee in a year if rates go up.  We aren’t inclined to recommend this strategy here either.  While Synchrony has an early withdrawal penalty of only 1-year’s interest and Sallie’s is 6-month’s interest, it is important to note generally that banks retain the right to refuse to allow early withdrawals (https://www.bestcashcow.com/can-you-always-withdraw-your-money-early-from-a-cd.html).   Therefore, BestCashCow would not recommend general investment or savings strategies relying on early withdrawals from CDs.

Before investing in any CD, we highly recommend that you read our 65 questions to ask which is also available to download as an E-Book by clicking on the right column.  

We also always recommend that you check rates at local banks and local credit unions before locking into online CDs; institiutions near you may offer better rates! 

2.78% APY is an excellent rate on a 4-year CD.   It is also an excellent rate on a 5-year CD.  The 2.78% number is actually much higher than we have seen on a CD of that length in years, and higher than any nationally offered rate.

Community Trust Bank is offering the 2.78% APY rate on both the 4-year and the 5-year product at 6 of its branches in the Lexington, KY market.  If you are lucky enough to live in that market, you have the opportunity to get into a rate that still is very hard to get in much of the rest of the country.

In fact, the rate is so much higher than those offered nationally, if I lived there I might just choose to opt for the 5-year product over the 4-year one, and be assured of locking into an extra year of interest at the 2.78% rate.

Community Trust is offering these products only at its 6 branches in Lexington, Kentucky - its Beaumont branch, its Hamburg branch, its Leestown branch, its Pasadena branch, its Richmond branch and its Vine Street branch.  The rate requires a $1,000 minimum deposit and proof of residency in Fayette County.

You may be able to get a 4-year CD rate or a 5-year CD rate like this at a bank where you live!  Check the best local 4-year CDs here.   Check the best local 5-year CDs here.

Also see the best online 4-year CD rates here and the best 5-year CD rates here.  

Less than two months ago, I locked into a 1-year CD paying 1.35%.   It was the best rate at the time and I really am unlikely to need the cash for the next 12 months (now 10 months).  Nonetheless, I know now that I locked in too low.

The best nationally offered one-year CD rates are now paying close to 1.50%.   One-year CD rates offered by banks or credit unions in your local area or state may even be paying higher.  And, Ally Bank is offering an 11-month No Penalty CD that pays 1.50% on balances over $25,000.  The Ally product gives depositors a much better rate than I am receiving and the ability to break the CD without an early withdrawal penalty. 

But, I am not even so sure that I should have locked into a one-year CD at all.  Savings rates are moving up quickly now with plenty of national offerings at 1.30%.  Again, local rates at banks and credit unions that may be available to you may be even higher.

Since I might need the cash to take advantage of the stock market crash that may come when impeachment proceedings begin in the fall, I certainly now wish I had just foregone locking into a gain over cash of what now looks at best to be just a couple of dollars.

Did you know that at some banks it may not even be possible to redeem your CD early, even with the payment of early termination fees?    

Before getting a CD read our 65 Questions to Ask before Choosing a CD which is also available as a e-book by clicking in the right column.