Can you earn a 7% CD interest rate? The truth behind high CD rates (2024)

FAQs

Can you earn a 7% CD interest rate? The truth behind high CD rates? ›

Right now, there aren't any financial institutions offering 7% interest on a CD. Alpena Alcona Area Credit Union, a local financial institution in Michigan, previously offered a 7.19% APY on a 7-month CD special, but that offer has ended. There are a few financial institutions with CDs paying 6% APY or more, though.

If you're in a position to save in today's higher interest rate environment, investments like CDs could help accelerate your savings. CD rates have skyrocketed since 2022: 1-year CD rates have increased more than twelve-fold, with 3-year and 5-year CDs up nearly six-fold and five-fold, respectively.

Can You Get a 7% CD Account? There was a lot of excitement in August 2023 about a few credit unions offering 7% APYs on certificates. But those rates were offered for a limited time only and are no longer available. However, the nation's best CD rates are still well above 5%, with some pushing toward 6%.

Getting a CD when rates are low and breaking it when rates are high might be an opportunity to benefit from a higher-rate CD and earn you more than you would gain otherwise. A savings account is a place where you can store money securely while earning interest.

Can you get 6% on a CD? There are still 6.00% CDs out there, but they are getting harder to find. If you do find one, it will likely be a short-term CD and you'll probably have to join a credit union to get it.

Unlike traditional or high-yield savings accounts, which have variable APYs, most CDs lock your money into a fixed interest rate the day you open the account. That's why if you suspect that interest rates will soon drop, it can be a good idea to put money in a CD to preserve the high APY you would earn.

CD Rates Forecast 2024

The CME FedWatch Tool, which measures market expectations for federal funds rate changes, shows that most experts expect rates to sit between 4.50% and 5.25% by December 2024.

Average CD interest rates at credit unions nationwide are almost an entire percentage point higher than bank CD rates at the time of this writing. In general, credit unions offer better savings account rates than banks. Of course, rates differ among credit unions and among banks.

CDs have a typical minimum balance or opening requirement that's often around $1,000, but it can range from $0 to $10,000. There are jumbo CDs with minimums traditionally around $100,000, though these CDs don't necessarily have the best rates in the industry.

What is the biggest negative of putting your money in a CD? ›

The biggest risk to CD accounts is usually an interest-rate risk, as federal rate cuts could lead banks to pay out less to savers. 7 Bank failure is also a risk, though this is a rarity.

Key takeaways. Interest earned on CDs is considered taxable income by the IRS, regardless of whether the money is received in cash or reinvested. Interest earned on CDs with terms longer than one year must be reported and taxed every year, even if the CD cannot be cashed in until maturity.

A Certificate of Deposit (CD) could lose money if funds are withdrawn early, incurring penalties that may exceed earned interest. CDs are generally low-risk and guarantee a fixed interest rate for the term. Early withdrawal penalties can sometimes reduce the principal, not just the interest.

One local credit union has CD paying 6% APY. To open a 6% APY CD, you may need to meet certain eligibility requirements. There are also banks and credit unions with CDs paying over 5% APY, which are available nationwide.

The national average return on a 6-month CD is currently 1.49%. Online banks, however, offer much higher returns — as high as 5.50% APY right now.

It's not just the physical attachment to the music that has been lost in the streaming era. In some ways, streaming has made the playlist more valuable than the music itself. Clicking like on a song provides significantly less emotional attachment for a consumer than buying and holding a CD, cassette or vinyl record.

If you don't need access to your money right away, a CD might be a good savings tool for you in 2024 while average interest rates remain high. CD interest rates are high in 2024 — higher nationally, on average, than they've been in more than a decade, according to Forbes Advisor.

Projections suggest that we may see no rate increases in 2024, and that the Fed might start dropping its rate later this year, according to the CME FedWatch Tool on April 30. If the Fed rate drops, CD rates will likely follow suit, though it's up to each bank and credit union if and when that occurs.