Current CD rates in California
California’s best CD rates are currently around 5% APY, with terms ranging from six months to two years. These rates are comparable to the best CD rates found in the rest of the country and are typically the highest for 12-month CDs.
Compared to the national average rates, which, according to the FDIC, currently stand at 1.85% for 12-month CDs, the best CD rates in California are significantly higher. They range from 2.8 to 3.5 percentage points more than the average rates for each CD term length.
How to find the best CD rates in California
If you plan to invest in a CD, finding a bank or credit union that offers the highest APY for your desired term length is essential. Here are some things to consider when comparing your options.
APY
A CD’s annual percentage yield (APY) refers to how much interest it earns in a year and includes the effect of compounding. It’s best to choose a bank or credit union that offers the highest APY for the term you’re looking for. Some banks, including a few of our top picks, offer CDs with 5% APY. Although rare, a few credit unions and other financial institutions even provide CD rates of 6%.
Term length
A CD’s term length is how long you agree to leave your deposit in the account. CDs are illiquid, which means you generally can only access your funds once it matures. If you withdraw money before your CD reaches its maturity date, you’ll likely be assessed an early withdrawal penalty and forfeit some or all of the interest your money earns.
Minimum deposit
Many banks and credit unions require a minimum deposit to open a CD. However, some do not, which makes their CDs accessible to more investors. For accounts with no minimum deposit requirement, you’ll need to deposit funds within a few days of opening the account to keep it activated.
Early withdrawal penalties
All banks and credit unions must assess an early withdrawal penalty of seven days’ interest if you withdraw funds from a CD within 15 days of opening it. While the government sets a minimum penalty, many institutions impose higher ones. The amounts can differ based on the CD’s term length and the institution.
For CDs with terms of less than one year, the penalties are typically three months’ interest. With some institutions, you’ll forfeit all of the interest you earned for the CD’s entire term length. Ensure you understand a CD’s early withdrawal penalties and avoid investing in a CD if you need to access your funds before the term ends.
Deposit insurance
CDs offered by FDIC-insured banks provide security if the bank fails. Credit unions can insure accounts with the National Credit Union Association (NCUA). In both cases, deposit insurance covers up to $250,000 per account. This assures that your money will be safe and is an important consideration when you evaluate your CD options.
Short-term vs. long-term CDs in California
Short-term CDs have terms of less than a year, such as three-month and six-month CDs, while long-term CDs mature in a year or longer. Typically, long-term CDs pay higher APYs than short-term CDs, but short-term CDs now offer competitive rates. The term you choose should depend on your financial goals and your particular situation.
A short-term CD is the better choice if any of the following applies to your situation:
- You are unwilling to tie up funds for an extended period
- You are saving for a short-term goal, such as a vacation or purchasing new furniture
- You believe that the CD rates will increase soon
- You believe you may need to access your funds in the near future want to avoid early withdrawal penalties
A long-term CD might be the better choice if any of the following applies:
- You already have a sizeable emergency fund for short-term emergencies
- You believe that CD rates won’t rise and may decrease soon
- You want to securely and safely keep your savings until you need them, such as when you plan to retire
CD laddering
Some people choose to open both short- and long-term CDs to create what is called a CD ladder. You can use this strategy to spread a sizeable lump sum across several CDs with varying terms. This allows you to take advantage of the higher rates offered by long-term CDs while freeing up cash at short-term intervals.
When each CD matures, you can re-invest the money into a CD with the longest term. A typical CD ladder has five accounts with varying terms. These may range from a one-year CD to a five-year CD. With this strategy, when your five-year CD matures, you’ll then have five-year CDs maturing each year.
Jumbo CDs in California
A jumbo CD is a savings product offered by some banks that typically offers the highest APY available for certificates of deposit. These accounts usually require a large minimum deposit amount, around $100,000.
California’s best jumbo CD rates are reserved for the largest amounts and longest terms. For example, Alliant Credit Union offers 4.80% APY on their 12-month Jumbo CD, compared to the 4.75% APY for their regular CD.
A jumbo CD can be a good choice if you have a sizeable investment portfolio, want to reduce your market risk and know that you won’t need access to your money for the term’s length. As long as your jumbo CD is less than $250,000, your money will be safe.