The Best 2-Year CD Rates for 2024
If you’d like to save some money for a short-term goal, a 2-year certificate of deposit (CD) might make sense. It can help protect your savings while earning a predictable, guaranteed return. Let’s look at what 2-year CDs are, how they work, and where you can find them.
What Is a 2-Year CD?
A 2-year CD is a bank deposit product that will hold your funds for two years. Compared to traditional savings accounts and money market accounts, 2-year CDs usually earn higher interest rates. However, they’re less liquid. A 2-year CD might be a good option if you’d like to save for a purchase in the foreseeable future.
How Does It Work?
You can open a 2-year CD at a bank or credit union. If you commit to keeping your money in an account for 2-years, your savings will grow via a fixed interest rate. Once the 2-year term is up or your CD matures, you can withdraw the money you deposited plus any interest your account accrued. If you need to access your money before the 2-year term ends, you’ll likely have to pay an early withdrawal penalty, affecting your interest earnings.
How Deposit Amounts Make a Big Impact on How Much You Earn
Interest rates on 24-month CDs vary tremendously. While the national average is less than 2%, there are many banks, credit unions, and neobanks offering APYs well above that amount.
Don’t expect these stellar rates forever, though. Just like any interest rate, CD rates fluctuate.
However, unlike savings accounts in which interest rates can change at any time, CDs lock in your interest rate for anywhere from three months to 10 years.
For some consumers, this could mean putting the bulk of their savings in CDs of varying amounts in a method called the CD ladder.
See what you can earn with different deposits in the table below.
How Much Can You Earn With Different Deposits on a 2-Year CD at 4.5%?
Which Banks Have the Best CD Rates?
Hundreds of banks offer CDs, and there’s fierce competition among them to offer the best rates. We’ve compiled a list of some of the best CD accounts to help you find the ones that best fit your financial goals.
The Best 2-Year CDs
There are several places you can turn to for a 2-year CD. While some 2-year CDs might only be offered for a short time, there are some banks and credit unions that offer consistently high rates on many CDs, not just 2-year ones. Here are several good options to consider:
Capital One 360
Capital One 360 provides regular CDs and IRA CD accounts, offering tax benefits for retirement savings. With terms from six to 60 months, you can tailor your savings strategy. The APY rates increase with longer CD terms. Notably, there’s no minimum deposit required to open these accounts, unlike other banks that may demand $500 or more.
Both Capital One 360 CDs and IRA CDs are federally insured up to FDIC limits, ensuring a secure investment avenue for short or long-term goals. Whether aiming for short-term security or long-term growth, these accounts offer guaranteed returns.
Synchrony
Synchrony Bank offers several innovative CD options, including no-penalty, bump-up, and high-yield. The bank offers over 15 CDs with various maturity periods, from three months to five years. Synchrony‘s bump-up CDs allow you to ask for a rate increase if the rate goes up from when you initially opened your account.
Synchrony’s bump-up CDs have no minimum balance requirements, and you can make additional deposits during the 10-year grace period after your CD matures. Unless you choose a no-penalty CD, which usually comes with a lower interest rate, you’d pay a penalty of 180 days worth of interest for CD terms from 13 months to 3 years if you closed your account before the maturity date.
Discover® Bank CDs
Discover Bank provides a variety of certificates of deposit (CDs) to suit your savings needs, with terms spanning from three months to 10 years. While a minimum deposit of $2,500 is required to open an account, there are no monthly maintenance fees.
Additionally, you can open multiple CDs to build a CD ladder strategy. CD rates at Discover Bank are tiered, dependent on the term length. However, withdrawing funds early may incur penalties. With flexible options and competitive rates, Discover Bank’s CDs offer a secure way to grow your savings for both short-term and long-term financial objectives.
Forbright
If you want to open a CD from a bank that focuses on sustainability, Forbright might be a good choice. You can enjoy great interest rates and no monthly fees, but you’ll need at least $1,000 to start. For the two-year CD, a penalty equal to six (6) months of interest is charged if you withdraw your funds early from the account.
Brio Direct
Brio Direct, a division of Webster Bank, offers competitive high-yield CD rates. The Brio Direct high-yield, 24-month CD can be opened with as little as $500. Although solely focused on CDs, their simple online application ensures quick account openings. However, the absence of checking or savings options may deter some customers.
While Brio’s industry-leading APY is enticing, customer support is limited to phone calls, lacking live chat features, and with weekend hours restricted. Based in Jericho, N.Y., Brio Direct operates solely online without physical branches. All accounts are FDIC-insured through Webster Bank. Opening an account requires basic identification and personal information, which can be efficiently completed through their website. Additionally, BrioDirect offers a mobile app for convenient account management.
Prime Alliance Bank
Prime Alliance Bank CDs come with a personalized customer service experience from friendly, knowledgeable banking professionals. You can open a CD account online for $500.
Pros and Cons of a 2-Year CD
Before you go ahead and commit to a 2-year CD, keep these benefits and drawbacks in mind.
Pros
- Guaranteed returns: Since CDs have a fixed rate return, you’ll know exactly how much you’ll earn in interest after the two years are up. You don’t have to worry about economic conditions.
- Great rates: Most 2-year CDs offer higher interest rates than traditional savings and money market accounts. They may not be as high as long-term CDs, but they’re usually still competitive.
- Low risk: 2-year CDs are considered low-risk investments. They’re federally protected up to $250,000 per account if you choose an FDIC-insured bank or NCUA-insured credit union.
- Faster access: You won’t have to wait too long to withdraw your money like you would with a longer-term CD. You can collect your funds plus interest earnings in just two years.
Cons
- Lower rates than long-term CDs: You can expect to earn less interest with a 2-year CD than with a 5-year or longer-term CD, for example. The good news is you can shop around and still secure a good rate on a 2-year CD.
- Early withdrawal penalties: If you withdraw money before the two-year term ends, you’ll be charged an early withdrawal penalty. This penalty can interfere with your savings goals.
- Limited returns: While 2-year CDs are predictable, their returns are limited. If you have a higher risk tolerance, you may maximize your returns by investing in stocks, bonds, and mutual funds.
- Risk of inflation: The inflation rate may be higher than the rate you lock in on your 2-year CD. Therefore, the value of your funds may go down over time.
Who Are 2-Year CDs Best For?
If you’d like to save some money but access it sooner rather than later, a 2-year CD might be a solid option. You won’t have to tie up your money for many years and can pull out your deposit and interest earnings in a relatively short period. A 2-year CD can help you save for a short-term goal, like a wedding, vacation, or furniture.
When Is a CD the Right Choice?
A CD is ideal if you like the idea of guaranteed returns and don’t want to risk significant losses by investing in the stock market. This is particularly true if you can land a competitive interest rate and feel confident you won’t need the funds before the CD matures. It can also be worthwhile if you want to earn more than you would in a traditional savings account or money market account.
How Much Interest Can You Earn on a 2-year CD Compared to Other Investments?
Your interest earnings on a 2-year CD will be based on your deposit amount and the interest rate you secure. Once you know this information, you can calculate your returns.
If you’re considering a 2-year CD to boost your savings, exploring additional factors that can optimize your financial strategy is essential. Diversifying your investment portfolio is crucial for long-term financial success. While 2-year CDs offer security and predictability, consider allocating some of your funds to more dynamic investment options like stocks, bonds, or mutual funds. These assets may present higher returns over an extended period, although they come with increased risk.
Moreover, keep an eye on inflation rates. Inflation can erode the actual value of your money over time, potentially affecting the purchasing power of your savings. While 2-year CDs provide stability, assessing whether the interest rate compensates for potential inflationary effects is wise.
Additionally, explore local credit unions or community banks when searching for 2-year CDs. These institutions may offer competitive rates and personalized services, enhancing your banking experience.
As you navigate the world of CDs, consider ladder strategies. Instead of putting all your funds into a single 2-year CD, distribute them across multiple CDs with varying maturity dates. This approach allows periodic access to your funds while taking advantage of potentially rising interest rates.
Bottom Line
While a 2-year CD provides a reliable savings option, a well-rounded financial approach involves diversification, awareness of inflation, and strategic banking choices to maximize your returns and meet your specific financial goals.
Frequently Asked Questions
A 2-year CD can be a risk-free way to save for a short-term goal, like a vacation or new furniture. You may be able to earn more in interest than you would with other savings products, like traditional savings accounts and money market accounts.
The best 2-year CD depends on your unique situation and preferences. Capital One, Synchrony, Bread, Forebright, and Prime Alliance Bank are good options you might want to explore.
Your interest earnings on a 2-year CD will be based on your deposit amount and the interest rate you secure. Once you know this information, you can calculate your returns.
