Now is an excellent time to invest in a certificate of deposit (CD) because rates are high and may drop in 2024, thanks to a series of interest rate cuts that the Federal Reserve signaled in its December meeting. Finding a CD with an annual percentage yield (APY) over 6.00% is difficult and no nationwide bank or credit union is offering one right now.
Just one credit union is offering CDs with an APY of 6.00% or higher right now, and the offer is limited to a select number of people. But even if you don’t qualify for membership, the best CD rates available nationwide are around or above 5.00%.
We’ve done the research to find the best 6% CD rates available now.
Financial Partners Credit Union
What to know
California-based Financial Partners Credit Union (FPCU) got its start 80-plus years ago and today boasts more than $2 billion in assets, 85,000 members and branch locations from South San Francisco to San Diego. To become a member, you must live, work or go to school in Orange County, San Diego County, Riverside County, Los Angeles County, the city of South San Francisco or the city of Alameda.
FPCU is offering a very high 6.00% APY special rate on an 8-month regular share certificate that is available to new members with a $1,000 minimum deposit and $5,000 maximum deposit. The special rate isn’t available on jumbo certificates.
Regular certificate APYs range from 1.75% to 5.25% and have a $1,000 minimum deposit. Customers have many maturity choices on certificates, ranging from three months to 60 months. Jumbo certificates require a $100,000 minimum deposit.
Who should use it
FPCU is restricted to Californians in six counties or cities, so it’s designed for them. The credit union offers a full lineup of banking products, but it works best for customers with enough money to take advantage of the highest savings rates.
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What are certificates of deposits (CDs)?
Certificates of deposit are a popular savings option for bank and credit union customers because they let you lock in a fixed rate of interest for a fixed period. They’re an excellent option when interest rates are high (like now) because you still get the best CD rates no matter the broader rate environment. If you buy a CD when rates are low, however, you’re stuck with that rate for the length of the term.
CDs and other bank deposits are insured by the Federal Deposit Insurance Corp. (FDIC) up to at least $250,000 per depositor, per FDIC-insured bank, per ownership category. If you do your banking at a credit union, you’ll get share certificates rather than CDs, but they’re essentially the same thing. Share certificates are insured up to $250,000 by the National Credit Union Administration (NCUA).
CDs typically come in terms ranging from three months to five years. When interest rates are low, you can usually get better APYs on long-term CDs because the bank wants to lock you in before the overall rate environment moves higher again. That means you could be stuck with low long-term CD rates for years. Another downside is that your money is not accessible until the end of the term unless you are willing to pay an early withdrawal penalty.
Are 6% CD rates good?
According to the FDIC, the average rate for a 12-month CD is 1.85% as of December 2023. So, yes, 6% CD rates are excellent. If you can get reliable 6% CD rates over a long period, then you should lock the rate in as long as possible.
For context, consider this: The last time average 3-month CD rates were in the neighborhood of 6% was back in the late 1990s and early 2000s, according to Federal Reserve data. CD rates peaked above 13% in the early 1980s, stayed fairly high over the next couple of decades, then crashed hard at the end of the 2000s to an average of less than 1%. Rates in 2023 are the highest in decades.
Can you get 6% on a CD?
There are still 6.00% CDs out there, but they are getting harder to find. If you do find one, it will likely be a short-term CD and you’ll probably have to join a credit union to get it.
If you find a 6.00% CD that works for you, you’ll want to jump on it since rates have been dropping since the Federal Reserve announced it will not be raising rates at this time. It will likely be worth it to lock in that high rate, even if it’s just for a few months.
If you are having trouble finding a 6.00% CD, you can consider a high-yield savings account, some of which are currently paying over 5.00% APY.
How to get 6% on a CD
If you find a CD that is offering 6.00% there are a few details you’ll want to check before you open the account.
First, you’ll want to make note of the minimum opening deposit. It’s not unusual for CDs to have a $500 or $1,000 minimum balance requirement. Next, you’ll want to ensure you are comfortable with the term of the CD — many 6.00% CDs have terms of less than one year. If you have to break the CD early, there is likely a penalty, defeating the purpose of having a high APY on the CD.
Another important thing to check is the availability of the account. Many of the 6.00% CDs you will find are with credit unions, which tend to have membership requirements. For example, Financial Partners Credit Union is only available to those who live, work or go to school in a few select counties in California.
If the CD is available to you, and you are comfortable with the term and deposit requirements, then you can go ahead and open the CD. Some banks will allow you to open the account online, while others will require you to call or visit in person.
Different banks may require different documents when opening an account, but you’ll likely need your ID, proof of address, Social Security number and account information to fund the CD.
Finding reliable 6% CD rates
You can find 6% CD rates at a few financial institutions, but chances are those rates are only available on CDs with maturities of 12 months or less. Financial institutions offer high rates to compete for business, but they don’t want to pay customers ultra-high rates over many years. For terms ranging from five to 10 years, you are more likely to find CD rates closer to 3.00%.
The main factor influencing CD rates is the federal funds rate controlled by the Federal Reserve. When the Fed raises rates, your CD rates move higher as well. When the Fed lowers rates, CD rates decrease.
Benefits of investing in 6% CD rates
The main and most obvious benefit of investing in 6% CD rates is that you get a very good return on your money — especially compared with traditional savings accounts with brick-and-mortar banks that often pay APYs of 0.05% or lower. With a 6% CD rate, you can grow your earnings quickly with little or no risk as long as your financial institution is federally insured so your deposits are insured by the FDIC or NCUA.
Risk factors in 6% CD rates investments
There’s no real financial “risk” to CDs in terms of losing money, the way you might with a stock or business investment. As long as your CD deposit is covered by the FDIC or NCUA, you won’t lose any money if you don’t cash the CD in until the end of its term. If you access the money before the CD matures, you will likely face an early withdrawal penalty. These differ by bank and maturity but usually involve deducting interest and even principal from your account.
The main risk in a 6% CD rate is that you could earn an even higher return on another type of investment. This doesn’t mean you lose money, but you do lose the potential for bigger gains.
Alternatives to 6% CDs
It’s difficult to earn a guaranteed 6% on your savings. The benefit of CDs is that they are FDIC or NCUA-insured, so your money is very safe. If you want to maintain the same level of safety for your money, one good alternative is Orion Federal Credit Union.
Orion FCU is based in Memphis, Tenn., and is open to people who live, work or go to school in the surrounding area. It offers 6.00% APY with its Premium Checking account on balances up to $10,000.
Another alternative to 6% CDs is Digitial Federal Credit Union’s Primary Savings Account, which currently offers a 6.17% APY on the first $1,000 in the account. DCU is open to anyone in the U.S. who donates at least $10 to one of five organizations.
What’s especially nice about these accounts is that they are regular savings accounts, so your money isn’t locked up like in a CD — but the high APY is limited to a maximum balance so your earnings are limited.
Treasury bonds are another investment you may want to look into. While they aren’t paying 6.00% right now, short-term Treasury bonds are paying above 5.00%.
If you are willing to take more risk, the stock market historically has returned more than 6% in annual returns over the long term. However, there is a risk to investing, and it’s not comparable to CDs or savings accounts.
Frequently asked questions (FAQs)
Because 6% CD rates are so high, you’re not likely to find maturities longer than 12 months or so.
Eligibility requirements for CDs with a 6% APY are no different than other CDs, except credit unions currently offering those rates have strict eligibility requirements based on where you live or work. Beyond that, the usual eligibility requirements apply. For example, you must usually be at least 18 years old to open up any kind of bank account in your own name, and you might also face eligibility rules governing your U.S. residency status.
The interest you earn on a CD or share certificate is taxable as regular income unless you’ve opened a tax-advantaged account like an IRA CD.
You’ll almost always face an early withdrawal penalty for withdrawing money before the CD matures unless you invested in a no-penalty CD. Federal law sets a minimum penalty on early withdrawals from CDs, but there’s no maximum penalty. If you withdraw money within the first six days after deposit, the penalty is at least seven days’ simple interest. Review your account agreement for policies specific to your bank and your account.
Additional reporting by Ashley Barnett
