What Is a Certificate of Deposit?
A CD is an FDIC-insured bank deposit with a fixed term (3 months to 5 years) and a guaranteed fixed interest rate. You deposit money, the bank pays you interest, and at maturity you receive your principal plus all interest earned. The trade-off: withdraw early and you pay a penalty — typically 3-6 months of interest.
CD terms, rates, and penalties — June 2025
| CD Term | Top APY 2025 | Early Withdrawal Penalty | Best For |
|---|---|---|---|
| 3-month | 5.00% | 1 month interest | Short-term parking |
| 6-month | 5.15% | 3 months interest | Known 6-month timeline |
| 1-year | 5.10% | 6 months interest | Medium-term goals |
| 2-year | 4.75% | 6 months interest | Down payment fund |
| 5-year | 4.40% | 12 months interest | Long-term fixed rate lock |
CD vs. HYSA: The Core Trade-Off
A HYSA offers flexibility (withdraw anytime) but a variable rate. A CD offers a guaranteed fixed rate but locks your money until maturity. In June 2025 top HYSAs actually match or exceed most CD rates, but CDs win when you want to lock in today’s rates ahead of anticipated Fed rate cuts.
If the Fed cuts rates by 1.5% over the next 18 months and your HYSA APY drops from 4.75% to 3.25%, a 1-year CD locked at 5.10% today protects your rate for the full term — earning significantly more.
HYSA vs. CD feature comparison
| Feature | HYSA | CD |
|---|---|---|
| Rate | Variable — follows Fed | Fixed — locked at opening |
| Access | Anytime no penalty | Locked until maturity |
| Penalty | None | 3–12 months interest |
| Rate certainty | None — changes anytime | 100% certain for term |
| Best environment | Rising rates | Falling or stable rates |
Types of CDs to Know About
Beyond standard CDs several specialized options exist. No-penalty CDs allow early withdrawal after 7 days — combine HYSA flexibility with slightly higher fixed rates. Bump-up CDs let you request a one-time rate increase if rates rise during your term. Jumbo CDs require $100,000+ for marginally higher rates.
- Standard CD: fixed rate fixed term early withdrawal penalty
- No-penalty CD: higher rate than HYSA penalty-free after 7 days
- Bump-up CD: option to raise rate once if rates increase
- Jumbo CD: $100K+ minimum for slightly higher rates
- Callable CD: bank can redeem early (avoid these — bank controls timing)
Calculate Your CD Earnings Before You Commit
Enter any balance, APY, and term to see exact interest earnings and compare across term lengths.