In the past 17 months, the Fed has raised its benchmark rate 11 times in an effort to tamp down on inflation, yields on everything from money market accounts to certificates of deposit (CDs) have increased. Now, you can earn more on your savings—the federal funds rate is between 5.25% and 5.50%—the highest it’s been in more than 20 years.
If you’re looking to take advantage of these high APYs but aren’t keen on locking away your funds for too long, there are many 1-year CDs boasting rates that top 5% if you want to lock in a high yield. Right now, Bread Savings is offering a 5.35% APY on a 1-year CD.
Bread Savings CD rates are at 5.35% APY on a 1-year CD
Bread Savings has a 1-year CD with a 5.35% APY, which is more than three times the national interest rate on a 12-month CD. Bread CD accounts are FDIC-insured, so your money is safe up to $250,000.
Key figures
- Minimum deposit: $1,500
- Term length: 1-year
- APY: 5.35%
- Compounding frequency: Interest is calculated daily and credited to your account monthly
- Early withdrawal penalty: 180 days worth of simple interest
In order to start investing, you’ll need at least $1,500 to open a CD. Bread Savings is an online-only bank, without brick-and-mortar locations, so you’ll have to sign-up online. When you apply, you’ll need to enter personal info like your name, address, and Social Security number before linking another bank account to fund your CD.
After your CD reaches maturity, it will automatically renew unless you opt out. Bread offers a special APY CD renewal rate for existing customers but the APY is subject to change. The current APY 5.40% on renewed 1-year CDs.
And if you withdraw your money early, you’ll be missing out on the power of compound interest. You’ll have to pay a hefty early withdrawal penalty of 180 days worth of simple interest.
Is the Bread Savings 1-year CD right for me?
While the Bread Savings CD boasts a high APY, it’s important to consider your investment time frame and your financial goals before investing. Since CDs require that you invest a fixed amount of money for a fixed period of time, you don’t want to invest money you might need before the CD reaches maturity.
For example, if you’re saving up for a vacation you’re going to book one year from now, a 1-year CD could be a solid option: It could deter you from tapping your funds early and provide you with some extra interest when it matures. However, if you want cash that’s easily accessible, say for an emergency fund, a 1-year CD is not your best bet.
4 things to consider when comparing CDs
When shopping for CDs, here are four key factors you’ll want to keep in mind.
- Minimum deposit. The minimum amount of money you need to deposit in order to open a CD. Minimum deposits may range from $0 to $25,000, so choose a CD that you have enough money to invest in.
- Term length. This tells you how long it will take for a CD to reach maturity—or when the bank will give you the principal (the amount you initially invested) and any interest you earned. Opt for a CD that aligns with your investment horizon, so you can avoid touching your money early.
- The APY or annual percentage yield. This is a percentage that expresses the amount of interest you earn in a year. Generally, CDs offer higher APYs for longer terms and lower APYs for shorter terms (think of it as a reward for tying up your money for longer) but this is not always the case.
- Early withdrawal fees. These fees are incurred when you withdraw your money before the CD reaches maturity. Typically, these fees are worth a few months of interest. Pay close attention to these fees as tapping your money early could mean forgoing some (or all) of the interest you’ve earned.
The takeaway
Bread Savings is offering a 5.53% APY for its 1-year CD which makes it a solid choice for investors who are able to lock away their funds for at least a year. For those with shorter or longer investment horizons, there’s also a variety of 6-month, 3-year, and 5-year CDs on the market that are offering APYs above 4%. And before you invest in any CD, consider any early withdrawal fees and minimum deposits too.
