The Best 12-Month CD Rates
Because traditional savings accounts typically only have interest rates of less than 0.10%, those who are looking for a low-risk way to get a larger return on their money may want to consider putting their money into a 1-year CD. Also known as certificates of deposit, 12-month CDs work like any other CD, except that they are in place for a shorter period of time. Here are the ins and outs of a 1-year CD, how it works, how it differs from other savings methods and the best 1-year CD rates that you can get.
What is a 1-Year CD?
A 1-year CD is simply a short-term certificate of deposit. Like other CDs, this financial product promises to provide investors with higher-than-normal interest rates, provided that they keep the money in the CD for its entire term. In this case, the term only lasts for a year.
This 12-month CD investment could be useful if you have a lump-sum of cash that you won’t need to access for at least a year, such as a work bonus or a cash gift. While certificates of deposit can offer a great return on investment, you’ll likely be subject to penalties if you decide to pull the money out before the term of the CD is over.
CDs Versus Other Accounts
1-Year CDs vs Savings Accounts
Put simply, the rates savings accounts offer are not usually as high as what you might find with a CD or compared to a 1-year CD. However, in return for those lower rates in traditional savings accounts, you do get some added flexibility. While there may be limits on how many withdrawals you can make per month, there are no penalties for withdrawing your money from a savings account. This may be a better option if you’re worried that you may have to pull money out at a certain point in time.
1-Year CDs vs Money Market Accounts
Money market accounts are similar to savings accounts in that, while there are limits on the amount of withdrawals you can make per month, as long as you stay within those limits, there are no penalties for accessing your money. Money market accounts also tend to have a slightly higher yield than even high-yield savings accounts. Plus, some accounts come with the ability to write checks or access your money via a debit card. However, their minimum balances tend to be slightly higher as well, and MMA holders may see penalties or fees for falling below those minimum balances.
1-Year CDs vs 3-Year CDs
The decision between a 1-year versus a 3-year CD boils down to how long you have to put your money away. While these products tend to have similar aspects, their lengths of time are different. As the names suggest, a 1-year CD will last for one year while a 3-year CD will last for three years. In exchange for being unable to access your money for longer, 3-year CDs also tend to come with better rates than their 1-year counterparts.
Interest.com’s Best 1-Year CD Rates November 2019
- Ally – 2.00% APY
- Barclays – 2.15% APY
- Capital One – 2.20% APY
- Charles Schwab – 1.45% APY
- Discover – 2.10% APY
- Marcus – 2.10% APY
- Synchrony – 2.10% APY
- TIAA Bank – 2.20% APY
Ally – 2.00% APY
Ally’s 12-month high-yield CD not only offers a competitive interest rate, but it comes with the company’s “Ten Day Best Rate Guarantee,” which states as long as you fund your CD within the first ten days of opening your account, you’re guaranteed to be given the best 12-month CD rate Ally offers for your term and balance tier, even if it goes up. You’ll also be given compounding interest on your balance and, notably, the account doesn’t come with any pesky monthly maintenance fees.
Barclays – 2.15% APY
Beginning investors or those who don’t have a ton of money to store away may be interested in Barclays CDs — specifically its online options. This 1-year CD option comes with a healthy annual percentage yield and there is no minimum amount required to open the account, which means that you’re free to put away as much or as little as you wish. In addition, though the CD itself only lasts for one year, Barclays also offers a ladder option, which allows you to free up or choose to reinvest your earnings as the CD matures.
Capital One – 2.20% APY
Though the annual percentage yield isn’t as high for Capital One’s 1-year CD, it’s worth noting that this choice offers more flexibility than some of the other best 12-month CD rates that are currently on the market. Here, you have the choice of how you want your interest to be paid out, whether it’s at the end of the term, on a monthly basis or annually. You can also rest easy knowing that all Capital One CDs are FDIC-insured up to the allowable limit of $250,000.
Charles Schwab – 1.45% APY
Charles Schwab does its CDs a little bit differently than most of the other financial institutions on the market. Rather than offering CDs in year-long installments, they offer the flexibility to go month-to-month. Though we’re talking about the best 12-month CD rates, it’s worth noting that you have the option to renew your CD for anywhere from one month to twenty years. That said, however, Charles Schwab accounts do come with a minimum balance requirement of $1,000.
Discover – 2.10% APY
A big selling point behind Discover’s product is not only it’s competitive 12-month CD rate, but also the amount of transparency that the company has online. Not only does Discover’s online presence list the benefits of opening an account with Discover — such as not having any monthly maintenance fees or having a calculator that lets you see exactly how much interest your deposit will earn over the term of the CD — but it also shows you the potential downsides of opening the account. For example, its website lists how much interest you’ll be charged if you withdraw from your account early, allowing you to make a fully informed decision about where to put your money.
Marcus – 2.10% APY
Though Marcus by Goldman Sachs CD rates aren’t as high as some of the other options that are available, in exchange, their minimum amount that is required to open an account is also lower than normal. In this case, for their 12-month CD, you only need to be able to put away a minimum of $500, which is roughly half as much as some of the other high-yield CD options on this list. Notably, CDs through Marcus by Goldman Sachs are only available online as of writing, which could be a drawback for some who prefer a more hands-on approach to their money.
Synchrony – 2.10% APY
By offering a 2.35% annual percentage yield for 12-month year CD rates, Synchrony Bank is setting itself up to be one of the more lucrative options on the list. However, the big drawback comes in the form of the minimum balance required to open an account. At $2,000, that minimum deposit amount is double — sometimes quadruple — what we’ve seen from other banks and, in some cases, it may render them inaccessible to some otherwise interested investors.
TIAA Bank – 2.20% APY
Requiring a $5,000 deposit in order to open the account definitely guarantees TIAA bank the award for the highest minimum deposit requirement on the list. However, if you have the funds, it may be worth the investment. TIAA Bank offers a few features that set it apart from its competitors, including a 20-day maturity alert, which will give you enough time to plan to free up your funds, if needed, and the fact that CD accounts with TIAA are IRA-eligible.
The Impact of 0.1% Change on $1,000
It’s always important to pay attention to the terms of your CD, especially the annual percentage yield rate. The rate that you’re given for your CD can make a big difference on the potential return on investment that you receive. Believe it or not, even a 0.1% difference in APY rate can have an impact on how much money your investment makes over the term of your CD.
Let’s say you have a 3-year CD that garners 2.4% APY. In the first year, you will see that your CD is now worth $1,024. Then, the APY increases and is now 2.5%. It doesn’t seem like a hefty increase, but at the end of the second year of that CD, it will be worth 1,049.60.
While it doesn’t seem like a big difference and you may ask yourself, “What’s the point?” the fact remains that it’s still money going back into your pocket when the CD reaches maturity. Choose your CD provider carefully and be sure to not touch the money until maturity unless you have no other option.
Disclaimer: The rates above were verified November 1, 2019. Credit unions and banks should be contacted directly to determine eligibility for opening accounts with that institution, as well as to verify current rates.