What Are High-Yield CDs?

What Is a High-Yield CD?

A high-yield CD is a type of CD that pays a higher annual percentage yield (APY) than a traditional savings account or CD. CDs are deposit accounts that pay fixed interest over a set period of time, typically ranging from a few months to several years.

High-yield CDs offer the predictability and guaranteed return of a traditional CD with significantly higher interest rates. In fact, high-rate CDs pay some of the highest APYs of any bank or credit union accounts.

How Does a High-Yield CD Work?

A high-yield CD pays a fixed amount of interest over a specific period of time. When you open a CD, you agree to keep your money in your account until the term ends. In exchange, you earn a higher interest rate than you would in a traditional savings account. Your rate is also fixed: It won't change, even if interest rates fall. When the CD matures, you get your deposit back plus any interest earned.

Tip: While you can withdraw your CD early, you'll incur an early withdrawal penalty that often outweighs any benefit from taking your money out before the term ends.

High-yield CDs are available at banks, credit unions and online banks. Compared to regular CDs, the rates on high-yield CDs are significantly better. For example, in September 2025, the best three-year CD rates were over 4%, compared to the national average of 2.1%.

When a CD matures, you can withdraw your funds or reinvest them in a new CD. Some CDs have an automatic renewal feature that rolls your funds into a new CD when your old CD expires.

Learn more: Types of CDs and How They Work

High-Yield CD vs. High-Yield Savings Account

Like high-yield CDs, the best high-yield savings accounts help you earn substantial interest on your federally insured savings. However, high-yield CDs and high-yield savings accounts work differently, and may work best in different scenarios.

Here's how high-yield CDs and high-yield savings compare:

Are High-Yield CDs Safe?

High-yield CDs are considered safe for multiple reasons:

• Your APR is fixed. The return on a high-yield CD stays the same for the life of the CD, so there's no risk of being surprised by a drop in interest rates.
• Your principal doesn't change. Unlike stock shares, your CD can't lose value (unless you withdraw from it early).
• You have deposit insurance. Depending on the financial institution, your deposit is insured against failure by either the Federal Deposit Insurance Corp. (FDIC) or the National Credit Union Association (NCUA) up to $250,000 per account owner and account type.

Tip: If you're approaching $250,000 in total deposits at a single financial institution, you may want to check your holdings. Total deposits are insured up to $250,000 per depositor, financial institution and ownership category. If you think you're close, you may want to move some money to a new bank.

Pros and Cons of High-Yield CDs

In general, a high-yield CD may be a good choice if you want a safe investment with a predictable return. On the downside, liquidity can be an issue, and you may find a higher return with other (potentially riskier) investments. Here are a few pros and cons to consider.

Learn more: The Pros and Cons of Certificates of Deposit (CDs)

How to Choose the Best High-Yield CD

Finding the best high-yield CD involves many choices—and quite a bit of comparison shopping. Follow these basic steps to uncover your best options.

1. Pick a Term

Think about how or whether you want to use your money over the next few years. Choose a shorter term if you have a specific use for your money in mind—for example, paying for your kid's first year of college next year. Or consider a longer term if you find a good rate you want to lock for as long as possible.

If you're flexible, you may want to choose based on which term has the best available rates, or consider building a CD ladder with multiple CDs (more on this below).

2. Shop for Rates

Going online is the easiest way to compare rates at different financial institutions. You may want to start with your current bank, credit union or investment brokerage, but also check out rates at online banks, or use a site that helps you compare rates at different financial institutions.

CDs with longer terms typically offer higher rates, but you may want to compare a few options. If interest rates are expected to drop, you may get a better rate on a shorter-term CD. You may also find shorter-term CDs with promotional rates at banks or credit unions trying to attract your business.

3. Review Features and Deposit Requirements

CDs come in many different types, including CDs that let you step up your interest rate, add onto your principal balance or make no-penalty withdrawals. Check minimum deposit requirements and review early withdrawal fees, which can vary from one financial institution to another. Also look for special features like automatic renewals that help you keep your money invested when it's time to renew your CD.

4. Check Your Financial Institution

Before you open a CD, use the FDIC search tool or the NCUA Find a Credit Union function to see whether your financial institution is federally insured.

5. Monitor Your Account

Your work isn't done when you've opened your CD. Keep track of your results and maturity date so you can make an active decision about where to put your money after your CD has matured. Even if your CD auto-renews, you'll have the opportunity to make a change at rollover time.

Tips for Investing in a High-Yield CD

In addition to following the steps above, think about your high-yield CD as part of a larger investment strategy. Here are a few ways to ensure high-yield CDs are helping you reach big-picture financial goals:

• Spread out your savings. Because they tie up your money, CDs don't work best as your only savings account. You may want to keep some savings in a high-yield savings or money market account so you have access to funds if you need them.
• Try laddering your CDs. Instead of putting all your funds into a single account, try splitting your money into three or four CDs with different rates and terms. For instance, if you have $6,000 to invest, you might put $2,000 into a 12-month CD, $2,000 into a two-year CD and $2,000 into a three- or five-year CD. Laddering lets you lock in a favorable rate for the long term and create a few shorter-term opportunities to renew or reinvest as interest rates change.
• Diversify your investments. CDs are a low-risk investment that can help balance out higher-risk, higher-return investments like stocks or mutual funds. If you'd like help developing a diverse portfolio of investments, consider working with a financial advisor.
• Save for retirement with an IRA CD. If you want to use your CD for retirement savings, consider opening an IRA CD. You'll enjoy tax advantages on top of a guaranteed return.

Learn more: Should I Lock in CD Rates Now?

The Bottom Line

High-yield CDs are a low-risk way to generate decent returns if you don't need ready access to your money. Though finding the best CD (or CDs) for you can require a bit of shopping, options abound. Take the time to find the best rates and terms, and to fit your high-yield CDs into a larger savings and investment strategy, to get the best results.