Traditional savings accounts typically have interest rates of less than 0.10%, which is pretty low compared to other interest-bearing accounts. Given the low interest rate on traditional savings accounts, there’s better options out there. If you’re willing to put your money away for a set period of time, a 12-month CD may be the perfect way to make the most of your savings.
Also known as certificates of deposit, 12-month CDs require you to lock your money in an account for a certain period of time, facing penalties if you withdraw early. In return, you receive a higher interest rate. Before you commit, you should know 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.
It’s important to note, though, that although CD rates are at an all-time low due to COVID-19, these rates are still sit a lot higher than savings accounts rates. In addition, 12 months is a short enough term to earn some interest and move your money to a CD with higher rates once the market bounces back.
8 Best 1-Year CD Interest Rates for July 2020
|Bank||1-year APY||Minimum Deposit|
|Goldman Sachs Bank USA||1.00%||$500|
Rates data as of 8/5/2020
Ally – 1.00% 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 10 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 – 0.85% 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 – 0.50% 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 – 0.15% 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 – 0.90% 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 – 1.10% 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 – 0.90% APY
By offering a 0.90% 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 – 1.01% 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.
Compare the 8 Best 1-Year CD Rates for July 2020
- Ally: 1.00% APY, $0 minimum deposit
- Barclays: 0.85% APY, $0 minimum deposit
- Capital One: 0.50% APY, $0 minimum deposit
- Charles Schwab: 0.15% APY, $1,000 minimum deposit
- Discover: .90% APY, $2,500 minimum deposit
- Marcus: 1.10% APY, $500 minimum deposit
- Synchrony: .90% APY, $2,000 minimum deposit
- TIAA Bank: 1.01% APY, $5,000 minimum deposit
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. You can use our CD interest rate calculator to see how much interest you’ll earn over the course of a year.
CDs vs. 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.
The Impact of 0.1% Change on $1,000
When you’re comparing rates between CDs and savings accounts, you may notice that CD rates only promise a marginally higher percentage than a traditional or high-yield savings account. Is locking your money in a CD really worth it? Believe it or not, even a 0.1% increase in APY rate could have a noticeable impact over the course of the term of your CD. Let’s say you have a 12-month CD worth $1,000 that garners 2.4% APY. In the first year, the value of your CD will increase to $1,024. Now imagine you were able to get a 12-month CD rate of 2.5% APY. At the end of the year, your CD will be worth $1,025. If you have a CD worth several thousand dollars, you can begin to imagine how quickly a few extra percentage points can add up to real cash — especially if you renew the CD.
The final word
If you have money to invest and you’re confident you won’t need it within the next year, a 12-month CD can be a viable, minimal-risk option. The best 12-month CD rates are significantly better than a traditional savings account, even when lower than normal due to COVID-19. CD rates are usually fixed as well, so you can plan for your exact return.