Short-term vs. long-term CD rates: Which pays more now?

Certificates of deposit (CDs) are a great way to earn interest on your savings. They allow you to lock in an interest rate for a specific period, known as the term, making it easy to predict your returns and earn the same amount even if overall rates drop.

CDs are available in short and long terms, with options ranging from a few months to several years. This can make it daunting to decide which is best for you. For many investors, one of the first ways they narrow down their choices is by which accounts pay the highest interest rate.

See today’s top CD rates here and start earning more interest.

Short-term vs. long-term CD rates: Which pays more now?

Here’s how rates stack up between short- and long-term CDs.

Short-term CDs rates

Short-term CDs typically have a maturity period of one year or less. They can be a good option if you don’t want to lock up your money for too long or you think interest rates might rise soon. 

The interest rates on short-term CDs are usually lower than long-term CDs, but that’s not always the case. Right now, for example, short-term CD rates are as high as 5.50%, while long-term CDs top out at 4.75%.

As of September 18, 2023, the top short-term CD rates are:

3-month CDs

Popular Direct (4.75% APY): $10,000 minimum deposit; 89 days’ interest early withdrawal penaltyAmerica First Federal Credit Union (4.50% APY): $500 minimum deposit; 60 days’ interest early withdrawal penaltyFirst Internet Bank of Indiana (4.18% APY): $1,000 minimum deposit; 90 days’ interest early withdrawal penalty

6-month CDs

Bank5 Connect (5.50% APY): $500 minimum deposit; 90 days’ interest early withdrawal penaltyPopular Direct (5.35% APY): $10,000 minimum deposit; 120 days’ interest early withdrawal penaltyAmerica First Credit Union (5.30% APY): $500 minimum deposit; 60 days’ interest early withdrawal penalty

1-year CDs

Santander Bank (5.50% APY): $500 minimum deposit; three months’ interest early withdrawal penaltyLimelight Bank (5.50% APY): $1,000 minimum deposit; 90 days’ interest early withdrawal penaltyLending Club (5.50% APY): $2,500 minimum deposit; 90 days’ interest early withdrawal penalty

Compare today’s best CD accounts online now!

Long-term CDs rates

Long-term CDs typically mature in three to five years, although some banks and credit unions offer other terms, including two years and 10 years. This can make them a smart choice if you want to lock in a high rate before rates fall or earn more interest over the life of your CD. Long-term CDs can also discourage you from dipping into your funds early, as many charge a penalty for withdrawing funds before the term is up.

While today’s top long-term CDs don’t earn quite as much as short-term ones, they still pay 12 times the national average or more:

3-year CDs

Bread Savings (4.75% APY): $1,500 minimum deposit; 180 days’ interest early withdrawal penaltyPopular Direct (4.75% APY): $10,000 minimum deposit; 365 days’ interest early withdrawal penaltyBMO Harris (4.50% APY): no minimum deposit180 days’ interest early withdrawal penalty

5-year CDs

Popular Direct (4.65% APY): $10,000 minimum deposit; 730 days’ interest early withdrawal penaltyBarclays Bank (4.50% APY): no minimum deposit180 days’ interest early withdrawal penaltyBMO Harris (4.50% APY): no minimum deposit180 days’ interest early withdrawal penalty

Check out current long- and short-term CDs offers here.

The bottom line

In general, long-term CDs tend to pay more than short-term CDs. But it’s essential to research current rates as there are times — like now — when you could earn more with a short-term CD.

Also, there are other factors to consider when choosing a CD term. In addition to the interest rate, you should also bear in mind your investment goals, when you think you may need the funds and how much you have to invest, as many CDs have minimum deposit requirements. With a little research and comparison, you can find the best CD for your needs at the highest rate currently available.

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