Best 1-Year CD Rates for November 2026

Bank CD Rates · 1-Year

APYs from the banks' official rate pages · checked 2026-11-09

National CD Rates Today

FDIC national rates and rate caps · October 19, 2026

How Much Does $10,000 Earn in One Year?

The best 1-year CD rates on the rankings above are fixed annual percentage yields (APYs) on certificates of deposit you hold for about 12 months. Each one is compared against the FDIC’s national average and national rate cap for 12-month CDs, shown in the National CD Rates Today panel. Top-rated CDs, whether bought from a bank directly or as investment CDs through a brokerage, are worth comparing on more than the headline APY. The minimum deposit decides whether you qualify. The early withdrawal penalty decides what happens if your plans change. The deposit insurance decides whether a large balance is fully protected. And the benchmark rates decide whether an offer is genuinely high or merely above a low average.

How to Read the 1-Year CD Rankings

The ranking table lists one 1-year certificate per institution, sorted by APY from highest to lowest. Each column answers a different question.

• Bank: the institution or platform offering the CD. Some names in this kind of list are banks issuing their own certificates. A brokerage platform may instead be selling CDs issued by other banks. That distinction affects insurance and early exit, and it is covered in its own section below.
• Term: the length of the commitment. “1 year,” “12 months” and “12-month CD” describe the same maturity. Each institution labels its product its own way, and the table repeats the label it uses.
• APY: the annual percentage yield, which folds compounding into a single annual figure. It is the number to compare across institutions because it puts different compounding schedules on the same footing.
• Minimum: the smallest opening deposit the institution accepts for that CD. A high APY with a $10,000 minimum is not available to someone opening with $2,000, so this column filters the list before APY does.
• $10,000 earns (1 yr): the dollar interest a $10,000 deposit would earn over one year at the listed APY. The calculation is simply $10,000 × APY. For example, a hypothetical 4.50% APY gives $10,000 × 0.045 = $450. The figure assumes the full deposit stays in the CD for the whole term, credited interest stays in the account, and no penalty is triggered.
• Source: the official rate page each APY was taken from.

The note under the table says the APYs come from the banks’ official rate pages and gives the date they were checked. A CD rate can change on any day until you open and fund the account. Once the CD is funded, the rate is locked for the term. Treat the listed APY as what the institution was offering on the check date, and confirm it on the institution’s own page before you transfer money. Some institutions guarantee the rate quoted at application only if you fund within a stated window, so the funding date can matter as much as the application date.

Using the $10,000 column for other amounts

The earnings column scales in a straight line with the deposit, because the APY is a percentage of whatever you put in. To estimate interest on a different amount, multiply your deposit by the APY. The hypothetical figures below all assume 12 months, no withdrawals, and interest left in the account:

Two limits apply to that scaling. First, some CDs set a maximum deposit, so a large balance may not fit in one certificate. Second, federal deposit insurance stops at $250,000 per depositor, per insured institution, per ownership category. A $1 million deposit at a 4.50% APY would mathematically earn $45,000 in a year, but most of it would sit above the insurance limit if it were held in one name at one bank. The section on deposit insurance explains how larger balances are usually spread out.

Why the minimum deposit and the APY interact

A higher APY does not always mean more dollars for you. Suppose CD A pays a hypothetical 4.75% APY with a $1,000 minimum and CD B pays 4.60% with a $10,000 minimum. On a $5,000 deposit, CD B is simply unavailable. On a $10,000 deposit, CD A still pays $15 more for the year ($475 versus $460). The minimum decides which offers you can choose from. The APY decides which of those pays more.

What the FDIC National Rates Show

Below the rankings, the National CD Rates Today panel reproduces the FDIC’s monthly national rates and rate caps for savings, checking, money market and CD products. The figures carry the FDIC’s publication date, so they refresh monthly rather than daily. Three numbers appear for each product.

National rate

The FDIC’s national rate is an average of the rates paid by insured banks and their branches, weighted by each institution’s share of domestic deposits. The weighting matters. The largest banks hold a large share of U.S. deposits, so the rates they post on standard CDs carry the most weight in the average, regardless of how many small banks or online banks pay more.

That is why the national average for a 12-month CD can sit far below the top of the rankings without any contradiction. The ranking table shows a handful of the highest offers. The national rate shows what a dollar of deposits earns on average across the banking system. If you have a CD at a large bank’s standard posted rate, the national rate is a closer guide to what you are earning than the rankings are.

National rate cap

The national rate cap is a regulatory ceiling, not a market forecast. Under the FDIC’s brokered deposit and interest rate restrictions, a bank that is less than well capitalized generally may not pay deposit rates significantly above prevailing market rates. The national rate cap is the FDIC’s published measure of that limit. Well-capitalized banks are not bound by it.

For CDs and other time deposits, the cap is set at the higher of:

1. the national rate for that maturity plus 0.75 percentage point, or
2. 120% of the yield on U.S. Treasury obligations of similar maturity, plus 0.75 percentage point.

An example: if the comparable Treasury yield were 4.00%, the second formula would give 4.00% × 1.20 + 0.75% = 5.55%. When Treasury yields are well above the deposit-weighted national rate, the Treasury formula produces the higher number and becomes the cap.

For a saver, the cap is mainly a reference point. An advertised 1-year APY close to or above the cap is far out of line with the deposit market and the Treasury market for that maturity. Some local and regional institutions do post promotional rates at that level. When one does, the terms attached to it (deposit limits, relationship requirements, geographic eligibility or penalty structure) deserve more attention than usual.

Treasury yield

The Treasury column is the market benchmark for each maturity. For the 12-month CD, it is the yield on Treasury securities maturing in about a year. For savings, interest checking and money market accounts, which have no fixed maturity, the same short-term figure appears on all three rows, and their rate caps follow it plus 0.75 point.

This column is the most useful comparison for anyone choosing between a CD and a Treasury bill, because both lock in a rate for a known period. The Treasury yield is not an APY. Treasury bills are sold at a discount and their yields are quoted on a different convention, so the comparison is close but not exact.

The $10,000 earnings comparison

Running the same $10,000 × rate calculation at three reference points (the national average, the Treasury yield and the rate cap) shows the dollar range between a typical deposit-weighted CD, the market rate on government debt, and the regulatory ceiling. A top-ranked 1-year CD will normally fall somewhere between the national average and the cap. Where it sits relative to the Treasury figure tells you whether you are being paid a premium or a discount compared with lending to the federal government for the same period.

Reading the term structure

The full national table also lets you compare maturities. Normally a lender expects more for tying money up longer, so rates rise with the term. When the national averages or the top offers show 24- or 36-month CDs paying less than 12-month CDs, banks are signaling that they expect rates to be lower in the future and do not want to lock in today’s rate for long. The reverse pattern, with longer terms paying clearly more, signals the opposite. Neither pattern guarantees what rates will do, but it shows how banks are pricing that risk.

What Makes a Good 1-Year CD Rate?

A “good” CD rate is relative. Four comparisons cover most decisions.

Against the national average. Because the national rate is deposit-weighted toward large banks, beating it is a low bar. A CD paying several times the national average is common among nationally available offers from online banks and credit unions. It does not mean the rate is exceptional by market standards.

Against the comparable Treasury yield. This is the stricter test. If a 1-year CD pays clearly more than a 1-year Treasury, the bank is paying you a premium for a federally insured deposit. If it pays less, a Treasury bill may earn more, especially after state taxes, as shown below.

Against inflation. The real return is roughly the APY minus inflation. More precisely, real return = (1 + APY) ÷ (1 + inflation) − 1. With a hypothetical 4.50% APY and 3.00% inflation, the real return is 1.045 ÷ 1.03 − 1 ≈ 1.46%. A CD that pays less than inflation still grows in dollars but loses purchasing power. The U.S. inflation rate by year shows how wide that gap has been historically.

After tax. CD interest is taxed as ordinary income at the federal level and, in states with an income tax, at the state level. After-tax yield = APY × (1 − combined marginal tax rate). With a hypothetical 4.50% APY and a 22% federal plus 5% state rate, the after-tax yield is 4.50% × (1 − 0.27) ≈ 3.29%. Treasury interest is exempt from state and local income tax, so a hypothetical 4.40% Treasury yield taxed only at 22% leaves 4.40% × 0.78 ≈ 3.43%. In that example, the lower headline rate keeps more after tax.

What Is a 1-Year CD and How Does It Work?

A certificate of deposit is a time deposit. You agree to leave a fixed sum with a bank or credit union until a set maturity date, and in return the institution pays a fixed rate for that period. A 1-year CD matures about 12 months after it is funded. Comparison lists often include nearby terms of 10, 11, 13 or 14 months as 1-year equivalents, because institutions use odd terms for promotional rates.

Banks pay more on CDs than on savings accounts because CD money is predictable. A savings or checking balance can leave at any time, while CD funds are expected to stay until maturity. That stability lets the bank use the money for lending with more confidence, and the higher rate is the price of the commitment.

The mechanics are simple:

• Opening: you choose a term, deposit at least the minimum, and the rate is fixed when the CD is funded (or at application, if the institution offers a rate-lock window).
• During the term: interest accrues and is credited on the schedule in the agreement, often monthly or quarterly. Most CDs do not accept additional deposits after funding. Withdrawing principal before maturity triggers an early withdrawal penalty.
• At maturity: you can withdraw the principal and interest, move them elsewhere, or let the CD renew. Many CDs renew automatically into a new CD of the same or similar term at whatever rate the institution is then paying.

The date the term ends is the maturity date, and the agreement states it. Banks offer CD terms ranging from about one month to ten years. The 12-month term is one of the most widely offered, and it is a standard maturity in the FDIC’s national rate table.

APY, Compounding and Odd Terms

Interest rate vs. APY

A CD agreement may show two figures: the interest rate (the nominal annual rate) and the APY. The APY includes the effect of compounding, interest earning interest, over a year. Under the federal Truth in Savings Act and its implementing rule, Regulation DD, banks must disclose the APY on deposit accounts so savers can compare offers on one basis.

The conversion is:

APY = (1 + r ÷ n)^n − 1

where r is the nominal annual rate and n is the number of compounding periods per year.

Example with a 4.50% nominal rate:

On $10,000, the gap between annual and daily compounding at that rate is about $10 over a year. Compounding frequency moves the result a little. The rate itself moves it far more. Since the APY already reflects compounding, two CDs with the same APY earn the same over a year regardless of how often each compounds, as long as interest stays in the account.

Earnings on terms that are not exactly 12 months

An 11-month or 13-month CD quoted with an APY earns a proportional share of that annual yield. To estimate interest over the actual term:

Interest = Deposit × [(1 + APY)^(months ÷ 12) − 1]

Examples on $10,000 at a 4.50% APY:

• 11-month term: 10,000 × [(1.045)^(11/12) − 1] ≈ $411.70
• 12-month term: 10,000 × 0.045 = $450.00
• 13-month term: 10,000 × [(1.045)^(13/12) − 1] ≈ $488.40

A 13-month CD at the same APY earns more dollars only because the money stays in longer. When comparing an 11-month special against a 12-month CD, compare the APYs. Then decide whether the shorter or longer lock-up fits your timeline.

When interest is paid out instead of compounded

Some CDs let you have interest paid monthly or quarterly to a checking or savings account instead of adding it to the CD balance. Brokered CDs commonly work this way. If interest is paid out, the CD earns simple interest at the nominal rate rather than the APY. The cash still earns whatever the receiving account pays. The difference is small over one year, but it explains why a CD can show an APY slightly above its interest rate.

Early Withdrawal Penalties

The early withdrawal penalty (EWP) is the main cost of a CD, and it varies more than APYs do. Federal rules set only a floor. Under Regulation D, a time deposit must impose a penalty of at least seven days’ simple interest on withdrawals made within the first six days after the deposit. Beyond that, each institution sets its own penalty and must disclose it in the account terms.

Common penalty formats

On 1-year CDs, penalties are most often stated as a number of months of interest. Three months and six months both appear frequently among nationally available offers, and shorter or longer penalties exist. Other formats you may see include:

• A fixed number of months of interest, for example 1, 2, 3, 6 or 9 months.
• All interest earned, sometimes with a minimum number of months, so the penalty applies even very early in the term.
• All earned interest up to a cap, such as up to six months.
• A percentage of the balance, such as 2% of the amount withdrawn, which does not depend on the rate at all.
• No penalty, on no-penalty (liquid) CDs, which usually pay less than the best fixed-term CDs in exchange for the exit option.

How the penalty is calculated

An example on a $10,000 CD with a 4.50% interest rate, using simple interest for clarity:

• One month of interest is about $10,000 × 0.045 ÷ 12 = $37.50.
• A 3-month penalty is about $112.50.
• A 6-month penalty is about $225.00.
• A 2%-of-balance penalty is $200, whatever the rate.

When a penalty can reach principal

If you withdraw before you have earned as much interest as the penalty, the shortfall can come out of principal unless the agreement says otherwise. In the example above, two months in you would have earned about $75. A 3-month penalty of $112.50 would leave you with about $10,000 + $75 − $112.50 = $9,962.50. Read whether the penalty is charged only against earned interest or can reduce principal.

Should you break a CD to chase a higher rate?

Breaking a CD to reinvest elsewhere pays off only if the extra interest over the remaining term exceeds the penalty:

Gain from switching ≈ Principal × (new rate − old rate) × (months remaining ÷ 12) − penalty

An example: $10,000 in a CD paying 4.00% with six months left, a new CD paying 5.00%, and a 3-month penalty at the old rate (about $100). The extra interest is about $10,000 × 0.01 × 0.5 = $50. Switching would cost about $50 net. With twelve months left and the same penalty, the extra interest would be about $100 and the switch would roughly break even.

Waivers and partial withdrawals

Some agreements waive the penalty in specific situations, such as the death of the owner or a court-declared incapacity, and some IRA CDs allow required distributions without a penalty. Some CDs allow partial early withdrawals with a penalty only on the amount taken. Others require closing the whole certificate. These provisions are in the account disclosure, not in rate tables, so a penalty comparison should come from each institution’s terms.

Bank CDs vs. Brokered (Investment) CDs

“Investment CDs” usually means brokered CDs: certificates issued by banks but bought and held in a brokerage account. Brokerages that sell CDs typically offer certificates from many issuing banks, which lets you hold CDs from several banks in one account. A brokerage listing in the rankings may be selling brokered CDs rather than its own deposits. The structure differs from a CD opened directly with a bank in several ways.

Insurance. A brokered CD is FDIC-insured through the issuing bank, provided the bank is FDIC-insured and the brokerage keeps records that identify you as the owner. The $250,000 limit applies per issuing bank. If you already hold deposits at the bank that issued your brokered CD, the two balances count together toward that limit.

Getting out early. Brokered CDs generally cannot be redeemed early with the issuing bank for a penalty the way a bank CD can. To get your money before maturity, you sell the CD on the secondary market through the brokerage. The price you receive depends on current rates:

• If rates have risen since you bought, buyers will pay less than face value, because they could buy a new CD paying more.
• If rates have fallen, you may receive more than face value.

A rough example: a $10,000 CD paying 4.00% with six months left, sold when comparable six-month CDs pay 5.00%. A buyer would want about 1% × 0.5 = 0.5% compensation, so the sale price would be near $9,950 before any trading costs. Held to maturity, the CD returns its full face value plus interest no matter what rates do in between.

Some brokered CDs include a survivor’s option, which lets an estate redeem the CD at face value after the owner’s death. This is a feature of specific issues, not a general rule.

Interest payments. Brokered CDs often pay simple interest to the brokerage cash account on a set schedule instead of compounding inside the CD. Their quoted yield may therefore be a coupon or yield-to-maturity rather than an APY calculated with compounding.

Callable CDs. Some brokered CDs are callable: the issuing bank can redeem them before maturity, typically when rates fall, which ends the high rate when you would most want to keep it. A callable CD usually advertises a higher yield than a comparable non-callable one to compensate. On a 1-year term the call risk is shorter-lived than on longer CDs, but the listing will show whether the CD is callable.

Opening and minimums. Brokered CDs are bought in increments, often $1,000 of face value, and new issues are typically bought at face value with no commission at many brokerages. Secondary-market purchases may carry a markup.

For a saver who will certainly hold to maturity, a brokered 1-year CD and a bank 1-year CD at the same yield produce similar results. For a saver who might need the money, the bank CD’s known penalty and the brokered CD’s market-price exit carry different risks: one is a fixed cost, the other depends on where rates go.

What Drives 1-Year CD Rates

The federal funds rate

The Federal Reserve sets a target range for the federal funds rate, the rate banks charge each other for overnight loans. It anchors short-term rates throughout the economy. When the Fed raises its target, banks’ funding costs and the yields on short-term Treasuries rise, and CD rates tend to follow. When the Fed cuts, CD rates tend to fall. A 1-year CD is short enough that its rate moves closely with expectations for the federal funds rate over the next year.

History shows how wide that range can be. The Fed cut its target to 0% to 0.25% in March 2020, and 1-year CD rates fell to low levels. Beginning in March 2022, the Fed raised the target repeatedly, reaching 5.25% to 5.50% in July 2023, and the top nationally available CD rates rose with it. Since then, Fed decisions have continued to shift deposit rates from one meeting to the next.

Expectations, not just today’s rate

Banks price a 1-year CD based on where they expect rates to be over the coming year. If markets expect cuts, a bank may lower its 1-year APY before the Fed acts, because it does not want to pay today’s rate for a full year while its other funding gets cheaper. If markets expect increases, 1-year rates can rise early. The 1-year Treasury yield reflects those expectations, which is why it is a better benchmark than the overnight rate alone.

Each bank’s need for deposits

Within the market range, individual banks set rates according to how much funding they need. A bank growing its loan book, replacing other funding, or entering the consumer deposit market may post a high CD rate to attract money quickly. A bank with plenty of deposits may leave its rates well below the market. This is why the top of the rankings can change while the federal funds rate stays the same.

Business model and competition

Online banks have no branch networks to fund and compete for deposits nationally, and many credit unions return earnings to members through higher rates. Both groups often appear near the top of 1-year CD rankings. Large national banks frequently post low standard CD rates and rely on convenience and existing customer relationships. Some offer higher “special” or relationship rates on specific terms.

Are 1-year CD rates going up or down?

No published table can answer that for the year ahead, but three indicators show the direction banks are leaning:

1. The Fed’s recent decisions and stated outlook. Rate increases or signals of more to come push CD rates up. Cuts or signals of cuts push them down.
2. The 1-year Treasury yield relative to the federal funds rate. A 1-year yield below the overnight rate suggests the market expects cuts. A yield above it suggests expected increases.
3. The shape of CD rates across terms. Longer CDs paying less than 1-year CDs indicates banks expect lower rates ahead.

When is the best time to open a 1-year CD?

The ideal moment is just before rates fall, because you lock in the higher rate for the full year. Nobody can reliably time that. A practical approach is to open a CD when you have money that will not be needed for a year and a rate that clears your benchmarks. If you want to hedge against rates moving either way, split the deposit across terms, as described under laddering below.

Pros and Cons of a 1-Year CD

Pros

• Fixed rate for the full term. The APY does not change if the Fed cuts rates or banks lower savings yields. That protects your earnings when rates fall.
• Higher yield than most liquid bank accounts. Top 1-year CDs generally pay more than standard savings, checking and money market accounts, and national averages show the same pattern.
• Predictable outcome. You know the maturity date and the interest you will earn on day one, which makes CDs useful for a known expense.
• Federal insurance. Deposits at an FDIC-insured bank or NCUA-insured credit union are protected up to the insurance limits, even if the institution fails.
• A barrier to spending. The penalty discourages dipping into money set aside for a goal.

Cons

• Early withdrawal penalty. Needing the money early costs interest, and possibly some principal.
• No additional deposits. Most CDs accept one deposit at opening. New savings need a new CD or another account.
• Missed increases. If rates rise during the year, your rate stays fixed until maturity.
• Short protection. If rates fall, the high rate lasts only 12 months. A longer CD would have kept it longer.
• Inflation and taxes. Interest is taxable each year, and after inflation the real return can be small or negative.

Who a 1-Year CD Fits

A 1-year CD fits money with a known purpose and a timeline of about a year. Typical examples are a down payment you plan to make next year, tuition due in twelve months, a tax bill, or a planned large purchase. It also suits savers who want a guaranteed return on part of their cash and do not want stock market exposure for money they will need soon.

It is a weaker fit in three situations:

• Emergency funds. Money you may need without warning belongs in a liquid account, where a withdrawal costs nothing. A high-yield savings account keeps the money accessible while still paying a competitive variable rate.
• Long-term goals. For retirement savings measured in decades, stocks have historically returned more than CDs over long periods, at the cost of price swings. A CD can still serve as the low-risk portion of a portfolio, especially as a goal date approaches.
• Uncertain timelines. If you are not sure the money can stay put for a year, a shorter term or a no-penalty CD may be the better choice.

How to Choose a 1-Year CD

1. Set the amount and the date you need the money. This determines which minimums you meet and whether a 10-, 12- or 13-month term fits.
2. Filter by minimum deposit. Remove any CD whose minimum is above what you plan to deposit.
3. Compare APYs on the remaining offers. Use the APY rather than the interest rate, and check it against the national average and the 1-year Treasury yield.
4. Compare early withdrawal penalties. When two APYs are close, the milder penalty is usually the better choice, because it lowers the cost if your plans change.
5. Check eligibility. Credit unions require membership. Many with nationwide field-of-membership options let anyone join through an affiliated association, a small donation or a minimum savings balance. Some banks limit offers to residents of certain states.
6. Confirm insurance. Check that the bank is FDIC-insured or the credit union is NCUA-insured. For a brokered CD, identify the issuing bank.
7. Read the renewal terms. Find out whether the CD renews automatically, into what term, and how long the grace period lasts.
8. Check the maximum deposit and funding method. Some CDs cap the deposit. Some limit how much you can transfer in electronically at once, which matters for large deposits.

How to Open a 1-Year CD

Opening a CD is similar to opening a savings account and can often be done online.

1. Apply. Provide your name, address, date of birth, Social Security number and a government ID, as with any U.S. bank account. Credit unions add a membership step.
2. Choose the term and amount. Select the 1-year (or nearby) term and enter the deposit, at or above the minimum.
3. Fund the CD. Common methods are an electronic transfer from another bank, an internal transfer, a check or a wire. The funding date may determine the rate you lock in and when interest starts.
4. Review the agreement. It states the rate and APY, the maturity date, how often interest is credited and compounded, the penalty formula, and what happens at maturity. Keep a copy.
5. Set a reminder for maturity. The institution will send notice, but your own reminder ensures you decide before any automatic renewal.

What Happens When a 1-Year CD Matures

At maturity, you typically have a grace period, a short window set by the institution, to withdraw the funds, change the term or add money without penalty. If you do nothing, an automatically renewing CD rolls into a new certificate at the institution’s rate on that date. That rate may be much lower than the one you started with, and it may be far below the top offers in the rankings.

Regulation DD requires institutions to send advance notice before an automatically renewing CD with a term longer than one month matures, so you will have time to compare. At maturity your choices are:

• Renew with the same institution if its new rate is competitive.
• Move the money to a higher-paying CD elsewhere.
• Shift it to a liquid account if you will need it soon.
• Spend it on the goal it was saved for.

A CD that is not renewing may convert to a savings account or be paid out. That is also stated in the agreement.

Using 1-year CDs in a ladder

A CD ladder spreads money across staggered maturities, so part of it becomes available at regular intervals and you never lock everything in at one rate. An example with $20,000:

• Put $5,000 each into CDs maturing in 3, 6, 9 and 12 months.
• As each matures, reinvest it in a new 12-month CD.
• After the first year, one CD matures every quarter, and every rung earns a 12-month rate.

The same structure works with longer rungs, such as 1-, 2-, 3-, 4- and 5-year CDs, in which case the 1-year CD is the first rung. Ladders reduce the risk of locking all your money in just before rates rise and improve access, at the cost of managing several certificates.

Deposit Insurance and Large Balances

CDs at FDIC-insured banks and NCUA-insured credit unions are protected up to $250,000 per depositor, per insured institution, for each ownership category. Insurance covers principal and accrued interest up to the limit. It applies at the institution level, not the account level, so all your deposits in the same ownership category at one bank count together.

Ownership categories separate coverage. A single account, a joint account and a retirement account (such as an IRA CD) at the same bank are insured separately. In a joint account, each co-owner’s share is insured up to $250,000, so a two-person joint CD can carry up to $500,000 of coverage at one bank.

For a balance above the limit, such as $1 million in 1-year CDs, the common approaches are:

• Spread the money across several insured institutions, keeping each below $250,000 including expected interest.
• Use different ownership categories at the same institution.
• Hold brokered CDs from several issuing banks in one brokerage account, tracking the total at each issuing bank.

Leave room for interest. A $250,000 CD at a 4.50% APY would grow to $261,250 at maturity, so the last $11,250 would sit above the single-ownership limit. Some depositors keep each CD below the limit by the amount of expected interest.

Both FDIC and NCUA insurance protect against institution failure. Neither protects against an early withdrawal penalty or against a loss when selling a brokered CD below face value.

How 1-Year CD Interest Is Taxed

Interest on a CD is taxable as ordinary income in the year it is credited to your account or made available to you, even if you leave it in the CD. Banks report interest of $10 or more on Form 1099-INT. A 1-year CD opened mid-year can produce taxable interest in two calendar years: what was credited in the year you opened it, and the rest in the year it matures.

An early withdrawal penalty is deductible. It is reported on the 1099-INT, and you can deduct it as an adjustment to income even if you do not itemize.

An IRA CD follows retirement account rules instead. Interest grows tax-deferred (traditional IRA) or tax-free (Roth IRA, subject to its rules). Withdrawals are governed by the IRA rules as well as the CD’s terms.

Alternatives to a 1-Year CD

1-year CD vs. shorter-term CDs

Three- and six-month CDs give you the same fixed-rate structure with a shorter commitment. They suit money needed before a year is out, or savers who expect rates to rise and want to reinvest sooner. When the term structure is flat or inverted, short CDs can pay nearly as much as 1-year CDs, or more. When it slopes upward, the 1-year term pays a premium for the extra months.

1-year CD vs. longer-term CDs

Eighteen-month, 2-year and longer CDs lock in a rate for longer. If you expect rates to fall and can leave the money alone, a longer term preserves the yield past the 12-month mark. The trade-off is less flexibility and, often, larger penalties: longer CDs frequently carry longer penalty periods. When longer terms pay less than 1-year CDs, you accept a lower rate in exchange for keeping it longer.

1-year CD vs. high-yield savings accounts

A high-yield savings account pays a variable rate with no lock-up. You can withdraw at any time, although some banks limit the number of withdrawals per month. The best high-yield savings rates are often close to the best 1-year CD rates, but they can be lowered at any time. A CD wins if rates fall during the year. Savings wins if you need the money or rates rise.

1-year CD vs. money market accounts

A money market account is a bank or credit union deposit account, federally insured, that pays a variable rate and may come with check-writing or a debit card. It offers more access than a CD and often pays more than traditional savings. Like savings, its rate can change at any time, and minimum balance requirements are common.

1-year CD vs. Treasury bills

Treasury bills are short-term U.S. government debt with maturities of up to one year, including a 52-week bill that matches a 1-year CD. They are bought at a discount and pay face value at maturity, through TreasuryDirect or a brokerage. Three differences matter:

• Taxes: T-bill interest is exempt from state and local income tax. CD interest is not.
• Liquidity: T-bills held at a brokerage can be sold before maturity on the secondary market without a set penalty, though the price may be higher or lower than you paid.
• Backing: Treasuries are backed by the U.S. government directly, with no $250,000 limit. CDs are protected by FDIC or NCUA insurance up to the limits.

In high-tax states, the state exemption can tip the balance toward T-bills even when the headline CD rate is a bit higher, as the after-tax example earlier shows.

1-year CD vs. I bonds

Series I savings bonds pay a composite rate made up of a fixed rate plus an inflation component that resets every six months, so their yield moves with inflation. They cannot be redeemed at all in the first 12 months. If redeemed before five years, you forfeit the last three months of interest. Electronic purchases are capped at $10,000 per person per calendar year. Depending on inflation, an I bond can pay more or less than a 1-year CD, and its rate can change during your first year, while a CD’s is fixed. Like Treasuries, I bond interest is exempt from state and local income tax.

1-year CD vs. money market funds and brokerage cash

A money market fund is a mutual fund that invests in short-term debt. Its yield floats with short-term rates, and you can sell shares on any business day. It is not FDIC-insured. If the fund is held at a brokerage that belongs to SIPC, SIPC protection (up to $500,000, including $250,000 for cash) applies if the brokerage itself fails. It does not cover a decline in the fund’s value. Brokerage cash sweep or cash reserve options vary widely. Some pay little, so compare the sweep rate with a CD or savings rate.

1-year CD vs. bond funds

Bond mutual funds and ETFs hold many bonds and can be bought or sold any trading day, but they have no maturity date and no guaranteed value. When rates rise, bond prices fall, so a bond fund can lose money over a year in which a CD would have paid its fixed rate. A CD held to maturity returns principal plus interest. A bond fund returns whatever the market gives.

1-year CD vs. stocks

Stocks offer higher long-term growth potential and no guarantee. The S&P 500 can fall sharply within a single year, which is the main reason money needed in twelve months usually does not belong in equities. For a short horizon, the choice is mostly between the insured and fixed-rate products above.

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