Best 2-Year CD Rates for January 2024

When asked in December if they were choosing more or less of certain investments during recent market events, 28% of Investopedia readers said they were leaning into CDs—just one percentage point behind the leading choice of money market funds. Additionally, 11% of readers said they would open a CD if they had an extra $10,000 to invest, in third place behind individual stocks and ETFs.

While a 2-year CD can be a great investment in certain situations, one of the alternatives may suit certain savers and circumstances better.

Certificates of deposit exist in all variety of term lengths. Though the most common terms range from 3 months to 5 years and follow standard increments, you'll also see CDs with odd terms, like 13 months or 22 months.

Deciding the right CD term for you depends on two things: your personal financial situation (when will you need the money) and where you think interest rates are headed. When interest rates are rising, you may want to choose a short CD now so that you can use the funds to open one with a better rate in the future. Conversely, if rates are declining, you're generally better off locking in a current rate for as long as you comfortably can, since future CD rates will be lower.

Even if you know you'd like a CD of a certain length, it's worth shopping around in case you find one that offers a better APY if you stretch just a little longer than your planned duration. Or perhaps you'll decide to open two CDs of different durations to hedge your bets by locking in different rates, but allowing you to access the funds of one CD earlier than the other.

Accounts with free access to your funds are called liquid accounts, meaning you can add or withdraw funds as you like. Examples of these are savings, money market, and brokerage cash accounts. (Checking accounts are also liquid, but they are not considered an alternative to a CD since they generally pay no interest.)

Just as with CDs, it's critical you shop around when opening a savings or money market account, as the rates vary widely, with some banks paying close to zero while others pay 12 times the national average. You can find the top-paying options in our daily rankings of the best high-yield savings accounts and the best money market accounts.

Instead of holding money in the bank, you can also invest your funds in various types of bonds. Examples include:

Certificates of deposit allow savers to earn a higher interest rate by agreeing to keep their funds in a special bank account for an agreed upon time period. In essence, banks are willing to pay more on CDs than savings and money market accounts because your CD balance represents money they can count on and that incurs little administration costs since there is almost no activity on CD accounts.

What the consumer trades off for higher earnings is a written commitment to keep the funds on deposit for the CD's full term. This means just one deposit is made at the outset, and no withdrawals are made until the CD matures.

Of course, there is an escape hatch should you find you desperately need early access to the money. But exercising this option will cost you an early withdrawal penalty, and you might pay dearly.

CD terms can range from a week to 10 years, but the most common terms run from three months to five years, with 2-year certificates being a popular choice.

In theory, financial institutions are willing to pay a higher interest rate on longer-term CDs, because they can count on the money for a longer period. However, sometimes shorter-term CDs pay a better rate than longer ones, such as when banks and credit unions expect interest rates to drop in the future.

Your savings goals and your available funds will help determine whether you should open a CD, and if so, what term you should choose.

Two-year CDs represent a mid-range length. While shorter CDs are great when you think you might need the money within a year, and long terms like five years are a good way to lock in a high interest rate when it seems interest rates will be declining, 2-year certificates represent a balance between duration and accessibility.

If you're saving for a large purchase like a house, car, or boat—or maybe even a big trip—or will be making tuition payments for your child in the next couple of years, 2-year CDs are a good choice. They include a safeguard against you accessing the funds willy-nilly, while not keeping your funds locked up for too many years.

Two-year CDs may also be appealing when the future of interest rates is uncertain. Interest rates are impossible to predict, but sometimes their direction is widely expected. When the rate environment is very uncertain, however, 2-year CDs strike a balance between knowing you'll have a good rate for the foreseeable future and getting access to your funds thereafter if rates go up or you need your money for something else.

Lastly, many CD ladders involve a 2-year CD. CD laddering is a strategy that enables savers to capitalize on the higher rates offered by long-term certificates but with access to some of your funds sooner (often, once every year). To complete a 5-year CD ladder, you will need at least one 2-year certificate.

Certificates of deposit have long been a staple of traditional brick-and-mortar banks. And in times past, the only place a customer would consider opening a CD was where they already banked.

But the internet has changed all that, with savers now able to open a CD online at hundreds of banks and credit unions. You can now research rates much more easily by going online.

As a result, traditional banks have been given a run for their money on CDs, with online-only banks and credit unions often offering the best-paying certificates. The reason credit unions often pay better than banks is due to their nonprofit nature and consequent desire to pass benefits onto their member customers.

For online banks, it's their low overhead expenses—they don't need to operate, staff, and maintain physical branches—that allow them to pay higher deposit rates to attract customers.

There is also a third category of CD institution, and that is the brick-and-mortar bank that also offers banking products online to customers anywhere. Some do so from their existing website, while other banks start up separate online-only subsidiaries, sometimes even with a completely different name and brand.

Fortunately for CD shoppers, it doesn't matter too much whether the top-paying CD you just found is from a bank or credit union, or from a traditional vs. online bank. So long as you ensure that the bank is FDIC-insured (or the credit union is NCUA-insured), your protection as a consumer will be the same. Though a bank may operate only online, carrying the FDIC logo indicates it meets all the same regulatory standards as a physical bank.

As for credit unions, it's good to be open-minded to these as well, as their rates are often among the top-ranking in any CD term, and especially long terms. The one caveat with opening a credit union CD is that you must first become a member of the credit union. This is generally easy and fast. But it may sometimes involve making a donation to an affiliated nonprofit.

When a bank or credit union has a special certificate they want to offer for a limited time, they will often release it as an odd-term product. What "odd-term" refers to is a duration that differs from the conventional terms, such as 1-year, 2-year, 3-year, etc.

Instead, you might see an 11-month CD or even a 29-month CD, for instance. All that's happening here is the institution is trying to differentiate this CD from its regular menu of standard CDs, both as a marketing tool to make the CD stand out and perhaps also as an internal signal to its staff that this is a limited-time CD.

It's wise to pay just as much attention to odd-term CDs as conventional ones because these promotional certificates often offer much higher interest rates. That's also what helps them stand out and draw customers.

Even when you make the most careful financial plans, you can run into something unexpected that challenges your budget and savings goals. While it's true that CDs involve a lock of sorts, prohibiting you from simply withdrawing the funds at will, every CD institution offers an option to access your funds prematurely. This is called an early withdrawal penalty.

Essentially, the penalty is the price you can opt to pay the bank in exchange for cashing in your CD early. While some banks allow you to take out just some of your funds, others require you to remove them all and close the CD.

In either case, the bank or credit unions should spell out how the early withdrawal penalties are calculated. The most common method is to deduct a certain number of months' of interest from your balance before the remaining funds are paid to you. Typically, the longer the original CD term, the more months of interest you'll pay as a penalty.

But buyer beware: Penalty policies vary quite widely, with some even allowing for the penalty to eat into your principal. Even with the best intentions to keep a CD fully funded for the entire term, it's smart to investigate the early withdrawal penalty in advance of committing to any CD, and then only choosing a certificate with a potential penalty you can stomach.

Federal law requires that all banks and credit unions disclose their early withdrawal penalty policy to you before you open a certificate account. If you can't find early withdrawal information on the institution's website, call or chat with a customer service representative to ask what their policy is for the CD term you're considering. Don't choose a particular CD until you have that information.

Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs to customers nationwide, and determines daily rankings of the top-paying certificates in every major term. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the CD's minimum initial deposit must not exceed $25,000.

Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.

Best 2% Cash-Back Cards Of January 2024

Forbes Advisor combed through the profiles of dozens of 2% cash-back credit cards to find those outperforming other cards. We focused on major banks and standout credit cards at lesser known banks with online accessibility.

Our data scoring system accounts for many factors, including a comprehensive weighting of card information relevant to our readers including:

Forbes Advisor rates cards both as stand-alone products (the card rating on the review) and compared to others in a specific use case. Sometimes, cards with average stand-alone ratings may still rank highly on a particular list according to how a person looking for a card in that category may value certain card features.

For instance, a card that might be considered mediocre overall could be the top card on a list of rewards cards with no annual fee. That’s because the card might offer limited features compared to other rewards cards, but after we remove cards that charge an annual fee, it’s the best card that remains.

Forbes Advisor uses data from multiple government agencies to determine how much a typical cardholder might spend. We use the same numbers for cards in the same category to make sure we are comparing cards the same way. The bonus categories for spending included with each card are factored into our determination of how many rewards a cardholder could expect to earn if they use the card as a consumer normally would.

To learn more about our rating and review methodology and editorial process, check out our guide on How Forbes Advisor Rates Credit Cards.

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