Highest Interest Rates Offered on One-Year Certificate Deposits
A one-year Certificate of Deposit (CD) can be an attractive option for short-term savings, offering a competitive fixed interest rate and a low-risk investment. Here's what you need to know about one-year CDs.
Advantages of One-Year CDs
One-year CDs typically offer a competitive fixed interest rate, often around 4% or higher as of August 2025. This means that you can earn predictable interest, for example, $400 on a $10,000 deposit at 4% APY.
Moreover, a one-year CD is a low-risk investment, ideal for conservative savers looking to preserve capital while earning more than typical checking or savings accounts. The fixed term is relatively short, making it suitable for short-term goals.
Disadvantages of One-Year CDs
One-year CDs come with some disadvantages. Funds are not easily accessible before maturity, and early withdrawal incurs penalties that may reduce or eliminate interest earned. If interest rates rise after opening the CD, your money remains locked at the lower rate, causing opportunity cost.
Compared to some short-term saving alternatives like high-yield savings accounts or no-penalty CDs, traditional CDs have less flexibility.
CD Savings and Early Withdrawal
CD savings earn a fixed Annual Percentage Yield (APY), which can be beneficial if the Federal Reserve drops rates. However, accessing funds from a CD account isn't as easy as with a savings account, and early withdrawal will result in a fee.
CDs are best viewed as a park-your-money-and-forget-it type of vehicle. Since you can only withdraw funds when your CD account matures, you won't be tempted to spend your money elsewhere.
CD Account Details
A CD is a type of investment account that holds a fixed amount of money for a fixed term, ranging from one to five years. The minimum deposit required for these CD accounts ranges from $500 to $25,000.
The annual percentage yield (APY) on CD accounts is higher than rates for traditional savings accounts. However, CDs have a lower earnings potential compared with stocks or mutual funds.
Most CD accounts from banks and credit unions are federally insured for up to $250,000. Early withdrawal penalties for these CD accounts range from 3 months of interest.
CDs offer a risk-free way to save with guaranteed returns on your deposit. Short-term CDs give you the flexibility to take advantage of better investment opportunities soon.
For those interested in opening a CD, the FDIC BankFind tool can be used to check if a bank is federally insured.
Rates for One-Year CDs
As of August 2025, the one-year CD rates from Colorado Federal Savings Bank, NexBank, Limelight Bank, Prime Alliance Bank, Bask Bank, Northpointe Bank (11-Month CD Special), Mountain America Credit Union, and TAB Bank are 4.40%, 4.40%, 4.40%, 4.30%, 4.30%, 4.25%, 4.20%, and 4.10% respectively.
In conclusion, a one-year CD can be a solid choice for short-term savings if you do not require access to the money before the term ends, and you want a safe, fixed return potentially higher than basic savings accounts. However, you should be comfortable with reduced liquidity and possible missed gains if rates increase during the year.
Investing in a one-year CD can provide a means of personal-finance management, as it offers a competitive fixed interest rate for short-term goals, often exceeding that of typical checking or savings accounts. Nevertheless, it's crucial to consider the low-liquidity factor and potential penalties for early withdrawal, which may affect personal-finance planning.
While CDs offer a fixed Annual Percentage Yield, they might not have the same earnings potential as stocks or mutual funds. However, the advantage of CDs is that they provide a risk-free way to save with guaranteed returns on one's deposit.
