Several federal rate hikes over the past year and a half have not only raised the cost of borrowing, but savers have also seen their savings account APYs increase. Currently, the average national savings rate is at 0.40%—up from 0.07% just a year ago.
The same is true of certificate of deposit (CD) rates. In May 2022, the average national rate for a 1 year CD stands at 0.21%. Since then, that is average shot up to 1.59%, with many banks and credit unions offering more than the national average.
One of the top contenders today: CFG Bank’s 12-month CD.
CFG Bank: 1-year CD offers 5.28% APY
Established in 2009, CFG Bank is a Maryland-based bank that offers one- to five-year CDs, as well as money market accounts, traditional checking accounts, and commercial banking products. They have several brick-and-mortar locations throughout Maryland, though customers can also bank with CFG online or through a mobile application.
Currently, CFG’s 1-year CD offers 5.28% APY—just over three times the national average. Savers who want to take advantage of this APY can open an account online or at one of CFG’s physical branches.
Minimum opening deposit: $500
1 year APY: 5.28%
Penalty: 90 days worth of simple interest
Savers must make a minimum opening deposit of $500, but not more than $500,000, and maintain a minimum daily balance of $500 to earn the 5.28% APY. If necessary, account holders can withdraw within the first 30 days. However, after that point, making any withdrawals will result in a penalty.
Advantages and disadvantages of CD
CDs are very different than traditional savings accounts. Thus, it is not the right type of account for every saver. Some of the pros and cons to consider include:
- Higher rates than a traditional savings account: CDs require that you commit to locking in your funds for the duration of your term. Because of that, these accounts usually offer a higher APY rather than traditional savings accounts.
- CDs offer a fixed interest rate: Unlike a traditional savings account or money market account, CDs offer a fixed interest rate. Savers who prefer stability and don’t want to be subject to the effects of federal rate hikes or market fluctuations may prefer a CD for this reason.
- Locking yourself into a CD can keep you out of a higher rate: One potential downside of CDs is that having a fixed interest rate can also prevent you from earning the highest possible APY when rates rise.
- CDs do not offer the same liquidity as other savings vehicles: Savers who want an extra safety net and want to have access to their money can consider opting for a savings account that won’t penalize them for withdrawing before a certain time. While there are no penalty-free CDs, most CDs charge savers a penalty for withdrawals before their CD matures.
CDs can be part of a lucrative savings strategy for savers willing to lock in their funds for a set period of time. With many financial institutions offering APYs above the national average, savers may consider parking their savings in a CD to increase their savings.