State Bank of Texas - 5.05% APY

  • Term (months): 12
  • Minimum deposit: $25,000
  • Early withdrawal penalty: Two months of interest
  • About: Established in 1987, State Bank of Texas is a family-owned bank that operates eight branches in Texas and Chicago, while serving online-only customers nationwide.

Capital One - 5.00% APY

  • Term (months): 11
  • Minimum deposit: Any amount
  • Early withdrawal penalty: Three months of interest
  • About: Capital One is the 7th largest U.S. bank by assets, offering various banking products online to customers nationwide.

Barclays - 5.00% APY

  • Term (months): 12
  • Minimum deposit: Any amount
  • Early withdrawal penalty: Three months of interest
  • About: Barclays is the online-only banking arm of the U.S. division of the well-known British bank established in 1690.

CFG Bank - 5.00% APY

  • Term (months): 12
  • Minimum deposit: $500
  • Early withdrawal penalty: Six months of interest
  • About: Headquartered in Baltimore with two brick-and-mortar branches in that area, CFG offers select banking products online to customers throughout the country.

Credit Human - 5.00% APY

  • Term (months): 12
  • Minimum deposit: $500
  • Early withdrawal penalty: Greater of $50 or nine months of interest
  • Membership: Anyone can join Credit Human by agreeing to a complimentary membership in the nonprofit American Consumer Council and keeping at least $5 in a member savings account.

BMO Harris - 5.00% APY*

  • Term (months): 12
  • Minimum deposit: $1,000
  • Early withdrawal penalty: Three months of interest
  • About: BMO Harris is a U.S. subsidiary of the Canadian multinational Bank of Montreal, and is one of the 25 largest U.S. banks. In addition to online products, BMO Harris operates branches in eight states.

*This rate may differ for those residing in Arizona, Florida, Illinois, Indiana, Kansas, Minnesota, Missouri, or Wisconsin (i.e., the states where BMO Harris operates physical branches).

Umbrella Bank - 5.00% APY

  • Term (months): 12
  • Minimum deposit: $1,000
  • Early withdrawal penalty: Complex formula, with minimum penalty of 1% of withdrawn amount
  • About: An internet-only arm of Beal Bank, which operates seven physical branches in Texas, California, Ohio, and Pennsylvania, Umbrella Bank serves customers nationwide.

Bread Savings - 5.00% APY

  • Term (months): 12
  • Minimum deposit: $1,500
  • Early withdrawal penalty: Six months of interest
  • About: Bread Savings is the online consumer deposits bank operated by credit card issuer Comenity Capital Bank.

Home Savings Bank - 5.00% APY

  • Term (months): 12
  • Minimum deposit: $5,000
  • Early-withdrawal penalty: Three months of interest
  • About: Home Savings Bank was established in 1979 in Salt Lake City, Utah, where it operates a sole brick-and-mortar branch. It also serves nationwide customers online.

Synchrony Bank - 5.00% APY

  • Term (months): 14
  • Minimum deposit: Any amount
  • Early withdrawal penalty: Six months of interest
  • About: In addition to being the largest U.S. provider of private label credit cards, Synchrony Bank is an online-only bank offering consumer deposit accounts.

Chevron Federal Credit Union - 5.00% APY

  • Term (months): 14
  • Minimum deposit: $500
  • Early withdrawal penalty: Three months of interest
  • Membership: Anyone can join Chevron Federal by donating $15 to the Contra Costa County Historical Society and keeping $25 or more in a savings account.

Spectrum Federal Credit Union - 5.00% APY

  • Term (months): 14
  • Minimum deposit: $500
  • Early withdrawal penalty: Three months of interest
  • Membership: Anyone can join Spectrum Federal by donating $15 to the Contra Costa County Historical Society and keeping $25 or more in a savings account.

First Internet Bank - 4.96% APY

  • Term (months): 12
  • Minimum deposit: $1,000
  • Early withdrawal penalty: Six months of interest
  • About: First Internet Bank is so named for being the first FDIC-insured bank to operate exclusively online. Founded in 1999, it is based in the Indianapolis suburb of Fishers, Ind.

Popular Direct - 4.96% APY

  • Term (months): 12
  • Minimum deposit: $10,000
  • Early withdrawal penalty: Nine months of interest
  • About: Popular Direct is the online-only arm of Popular Bank, the U.S. banking subsidiary of Popular, Inc., which serves banking customers in the U.S., Puerto Rico, and the Caribbean.

North American Savings Bank - 4.86% APY*

  • Term (months): 13
  • Minimum deposit: $5,000
  • Early withdrawal penalty: Complex formula, with a minimum penalty of six months' interest
  • About: Established in 1927, North American Savings Bank operates more than a dozen branches in the Kansas City area, while offering a menu of online banking products to customers nationwide.

*Some of NASB's deposit rates are zip-code dependent; you therefore may or may not have access to the same APY indicated here.

What Is a 1-Year CD and How Does It Work?

Certificates of deposit, or CDs, are essentially agreements between savers and financial institutions that offer consumers a boosted interest rate on their savings in exchange for keeping the funds on deposit for a fixed amount of time. For this reason, CDs are also called time deposits.

Like a savings or money market account, CDs provide an opportunity to stash your cash and earn a return. They are simply another type of account you can open at a bank or credit union. But unlike those simpler savings accounts, CDs come in many flavors and carry the stipulation that you can't access the funds until the CD reaches maturity. Withdrawing early isn't impossible, but it will incur a financial penalty.

The trade-off, of course, is that banks are willing to pay more interest on funds they can count on for a fixed period, rather than funds that can unpredictably come and go in a savings or money market account.

Banks and credit unions typically offer CDs in a variety of terms, from one month up to 10 years, so you can choose how long you're willing to lock up your funds. The most common CD terms, however, range from six months to five years, with 1-year certificates being the most widely available of all.

In general, longer terms pay a higher return than shorter terms, but as we’ll discuss later, this doesn’t always hold true. In any case, the rates banks and credit unions choose to pay on CDs varies widely, with the top rates in the country typically sitting at least three to five times higher than the national average. So smart savers will research the top available CD rates—and not limit themselves to CDs from their existing bank—to ensure they maximize their return.

How much you can sock away in the certificate will also influence which CD is best for you, as each institution can set its own minimum deposit requirements. You'll also want to ask in advance what the bank charges for a penalty if you find you need to cash out early.

KEY TAKEAWAYS

  • CDs enable you to earn more on your savings than you could earn from holding your funds in a liquid savings or money market account.
  • A one-year CD is a good choice for funds you feel confident you won't need to access over the next 12 months. A short term is also beneficial if it's expected that interest rates will rise in the near term.
  • By shopping for the highest rates nationally available, a CD saver can typically earn three to five times as much as the national CD average.
  • It pays to be open-minded on the CD term you'll accept, as many of the top-paying certificates are special promotions with an odd term that is slightly shorter or longer than a standard full-year term.

When Is a 1-Year CD a Good Choice?

Opening a one-year CD can be an attractive move in a number of situations. First and foremost, your personal goals and financial situation must come to bear. Is this money you feel reasonably sure you won't need for the next 12 months but that you aren't comfortable locking up for much more than a year?

Also important to consider is how much you can currently earn on a top-paying one-year certificate vs. a top-paying high-yield savings account. If you can earn as much or more on a savings or money market account, you may want to choose that more flexible option.

On the other hand, a CD's locked-in time commitment can be a useful constraint for savers who want to minimize their temptation to dip into savings for anything but the most important unexpected expense. So if easy access to your funds in a savings or money market account has you concerned the funds won't stay put, a one-year CD can serve as a good savings motivator and spending deterrent.

One-year CDs may also be appealing if interest rates are expected to rise in the coming years. Although interest rates are impossible to predict, some savers prefer shorter-term CDs when it seems likely the Federal Reserve will be raising rates in the coming year. By only locking into a short term of a year or less, a saver's funds will be available sooner to potentially capitalize on future higher rates.

Lastly, a one-year CD is a critical component to a CD ladder. The laddering strategy allows savers to capitalize on the higher rates offered by long-term certificates (usually five-year) while keeping a portion of their CD funds accessible every 12 months. To complete a five-year CD ladder, you will need at least one one-year certificate.

Best High-Yield Savings Accounts

Typical Rates, Minimums & Penalties for 1-Year CDs

Most retail banks and credit unions offer a menu of CDs, though the offerings vary on a number of fronts. Some will offer a full array of different CD durations, from short- to long-term certificates, while others will offer just one or two CD options. The minimum deposit requirements also differ among institutions, as do their penalties should you need to access the funds before maturity.

Although the FDIC tracks national average rates for savings and CD accounts across more than 4,000 banks, the saver who does their homework can easily earn much more. You can see that our list of the top nationally available one-year CDs far outperforms the FDIC national average of 1.36% APY.1 It's not hard to find certificates paying three to five times the national average—or even more—if you're willing to shop around and to bank with an institution that may be new to you.

If you're interested in opening a CD but don't have a large sum to commit, don't worry that certificates are out of reach. In fact, many of the best CDs have minimum deposits of just $500 or $1,000. True, sometimes the top CD will require a deposit of $5,000, $10,000, or even $25,000. But if you scroll down the rankings a bit, you'll almost surely find one with an attainable minimum deposit.

Early withdrawal penalties, or EWPs, also differ greatly among banks and credit unions. For a one-year term, the most common EWP is three or six months' worth of interest. What that means is, if you cash in your CD before its maturity date, the funds returned to you will be docked by the amount of interest the CD would have earned in three or six months.

But don't assume all EWPs are similar, or even reasonable. You may find one that charges a whole year's worth of interest, while another assesses a mild 30 days' interest. Still others have more complicated or onerous policies that can even eat into principal. That's why due diligence is critical before funding any CD. You want to be sure you understand what you're signing up for.

 

Be sure to carefully review the terms of your prospective CD before signing off on it and funding the account. But if you find you've changed your mind about the CD within the first few days of opening it, some banks offer a grace period enabling you to quickly exit penalty-free.

Why It's Important to Consider Odd Terms

One-year CDs are a very common product, and one of the most popular. But you can sometimes earn even more than the top 12-month CD by stretching your boundaries on the exact term you'll accept.

This is because many banks and credit unions offer their best certificate rates as special CDs or limited-time promotions, and often, they will set these apart from their regular menu of certificates by giving the special CD a non-standard term. So, for instance, you may see a 13- or 14-month CD special. The odd term promotions can also be shorter than the standard yearly duration; that's why our rankings for one-year CDs include any certificate with a term of 10–14 months. In short, it's wise to keep your options open by looking for the best CD of approximately one year, rather than rigidly considering only 12-month certificates.

Why Do Shorter CDs Sometimes Pay More, or Longer Ones Less?

In theory, the longer you're willing to commit your funds, the more attractive your deposit is to the bank and the more it will be willing to pay you in interest. And in general, this plays out in the marketplace, with the highest five-year CDs paying more than the best six-month certificates.

But it isn't always true. Each bank offers its particular menu of CDs based on its individual need for deposits as well as its existing portfolio of time deposits. If a bank is growing its lending side of the business at a fast rate, for example, it may more aggressively work to attract deposits, and it also may need deposits of a certain duration.

Alternatively, a bank may have offered a CD special for some period of time and concluded the promotion when it reached its target goal for deposits of that length. Now it may want to shift its efforts to attracting longer or shorter deposits.

Perceptions about future interest rate moves by the Federal Reserve also factor heavily into a bank or credit union's decisions on whether it wants to prioritize securing short-, mid-, or long-term deposits. If rates are expected to fall, banks will be less motivated to lock consumers into attractive long-term rates that they will have to honor for years going forward.

Conversely, expected hikes by the Fed will lead some banks to push longer-term CDs at today's rates. Still another scenario is when rates are flat or uncertain, and banks prefer to take a "wait and see" approach by only committing heavily to short- and mid-term CDs.

That said, finding the best CD for your own situation will depend on the term that best fits your personal goals and financial situation, not the bank's. Then doing your homework on the top national rates currently available for that term will lead you to the options offering the maximum return, no matter the rate environment.

How to Open a 1-Year CD

Opening a CD is generally no more difficult than opening a savings or checking account. You'll have to provide personal information and be able to identify yourself, but almost all of the certificates in our rankings of the top nationally available CD rates can be opened online within 10 or 15 minutes. In fact, many of the top nationwide CDs are offered by Internet-only banks.

Just as with other bank accounts, you'll usually be offered multiple options for funding the CD, with the two most common means being sending a check (or bringing it in person if the bank has branches in your area) or setting up an electronic transfer from another bank account.

After opening the certificate, you'll be provided with the written terms of your agreement, which will stipulate the interest rate you'll be paid, the date of the CD's maturity, the frequency with which your interest will be paid and compounded, and the specific penalty calculation that will be used if you withdraw your funds before maturity.

After that, CDs are ideally a "set it and forget it" product. You'll receive monthly or quarterly statements showing your certificate's growth, but hopefully you can leave the funds untouched until the maturity date rolls around.

Although the bank or credit union will notify you in advance of the CD maturing, it's wise to set your own calendar reminder sometime ahead of that date so you can be ready with a decision on what to do with the funds when the CD expires.

If you aren't looking to lock your money up for a period of time and want easier access to it, you could look at opening a high-yield savings account as an alternative. Below are some savings account options from our partners which can be competitive with the rates you can earn on CDs. It should be noted that unlike a CD, where your rate is locked in, with a savings account the bank or credit union can change your rate at any time.