Banking » Compare Banks » 6-Month CD vs 1-Year CD: Compare Rates
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6-Month CD vs 1-Year CD: Compare Rates

Both 6-month and 1-year CD offer the highest CD rates among most terms. Compare bank rates, minimum deposit, and early withdrawal rates.
Author: Baruch Mann (Silvermann)
Baruch Mann (Silvermann)

Writer, Contributor

Experience

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
Interest Rates Last Update: April 15, 2024
The banking product interest rates, including savings, CDs, and money market, are accurate as of this date.
Author: Baruch Mann (Silvermann)
Baruch Mann (Silvermann)

Writer, Contributor

Experience

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
Interest Rates Last Update: April 15, 2024

The banking product interest rates, including savings, CDs, and money market, are accurate as of this date.

We earn a commission from our partner links on this page. It doesn't affect the integrity of our unbiased, independent editorial staff. Transparency is a core value for us, read our advertiser disclosure and how we make money.

When it comes to saving money, certificates of deposit (CDs) are a popular choice for many people. CDs offer a higher interest rate than traditional savings accounts, and they are considered to be low-risk investments. However, choosing the right CD term length can be a bit confusing, especially when trying to decide between a 6-month CD and a 1-year CD.

In this article, we will compare the interest rates and early withdrawal fees of both CD types and help you determine which option is better suited for your savings goals.

Compare 6-Month vs. 1-Year CD Rates

The principle guiding certificates of deposit (CDs) is that investors should expect higher yields for longer-term commitments, but with less flexibility. As a result, 1-year CDs usually offer higher interest rates compared to 6-month CDs, given the longer commitment required.

This difference in rates is most noticeable at financial institutions like Capital One, Discover, TIAA, PenFed credit union, and Chase Bank.

However, there are other institutions, such as Merrick Bank, Marcus, Bethpage credit union, and Synchrony bank, where the difference between the interest rates for 1-year and 6-month CDs is not significant.

The good point is that $1,000 will probably meet the minimum deposit threshold for most financial institutions.

Financial Institution
6-Month APY
1-Year APY
Min Deposit
5.15%
4.80%
$0
4.35%
4.90%
$0
4.25%
4.95%
$2,500
3.00%
4.20%
$1,000
N/A
5.01% – 5.06%
$5,000
4.80%
4.95%
$2,500
4.00%
5.00%
$1,000
5.25%
5.30%
$1,000
5.35%
5.40%
$1,000
5.32%
5.00%
$1,000
4.80%
5.00%
$2,500
5.00%
5.15%
$2,500
4.40%
4.50%
$0
4.80%
4.90%
$500
5.25%
4.95%
$25,000
4.75%
2.00% – 3.00%
$500
0.03%
4.30% (13 months)
$1,000
3.00%
2.00%
$1,000
N/A
4.00%
$0
5.15%
5.20%
$1,000
0.65%
4.55% (11 months)
$250
4.00%
4.00%
$50
5.30%
5.15%
$1,000

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Compare 6-Month vs. 1-Year Early Withdrawal Fees

In the event of an early withdrawal from a CD, a bank or financial institution may impose an early withdrawal fee as a penalty. Although 6-month and 1-year CDs are typically considered short-term investments, it's crucial to review the early withdrawal fees to avoid any unforeseen costs.

Generally, the early withdrawal penalty is consistent across most banks and credit unions. However, certain financial institutions may have variations in their early withdrawal fees, such as Discover (3 vs. 6 months of interest), Marcus, and Bank of America (90 vs. 180 days of interest).

It's important to note that the penalty for early withdrawal typically does not exceed the interest earned on the CD. For example, if the penalty is equivalent to 180 days of interest, but you withdraw your funds after only 70 days, the penalty will typically be limited to 70 days of interest in most financial institutions.

Financial Institution
6-Month CD
1-Year CD
90 days of interest
90 days of interest
3 months interest
3 months interest
3 months interest
6 months interest
90 days of dividends
365 days / 30% of dividends (The lower)
N/A
90 days of dividends
90 days of interest
90 days of interest
25% of total interest earned
25% of total interest earned
Fees, based on the amount
Fees, based on the amount
Fees, based on the amount
Fees, based on the amount
Fees, based on the amount
Fees, based on the amount
90 days of interest
90 days of interest
100% of interest earned
100% of interest earned
60 days of interest
60 days of interest
90 days interest
180 days interest
90 days of interest
180 days of interest
90 days of interest
90 days of interest
90 days of interest
180 days of interest
180 days of interest
180 days of interest
N/A
270 days interest
90 days of interest
90 days of interest
60 days of interest
60 days of interest
90 days of dividends
90 days of dividends

Should I Consider a 6-Month or 1-Year CD?

Deciding between a 6-month CD or 1-year CD depends on your financial situation and investment goals. Here are some reasons why a 1-year CD may be the right choice:

If you anticipate interest rates will decrease and you want to secure your money in a higher interest rate, a 1-year CD may be the best choice as we can see in the table above. This can lead to higher earnings over the long-term, which can help grow your savings.

However, if interest rates increase during your CD term, you may miss out on earning higher interest rates. By choosing a 6-month CD, you have the flexibility to reinvest your funds in a higher-rate CD when the term ends.

In conclusion, choosing between a 1-year CD and a 6-month CD depends on your priorities, financial goals, and needs. It's essential to consider each option's advantages and disadvantages before deciding.

FAQs

The penalty for early withdrawal on a 6-month CD varies between banks, but it is typically equivalent to 90 to 180 days' worth of interest.

No, once a CD account is opened, you cannot add more funds to it.

The interest rate on a CD is fixed, meaning it stays the same throughout the term of the CD.

Yes, some banks offer automatic renewal of CD accounts, but interest rates may be different.

On the surfacem, the interest rate on a CD is generally lower than other investment options that offer higher risk and potentially higher returns. However, it doesn't set in stone and depends on on the year – for example in 2022, the S&P lost about 22%.

Compare CD Rates

Picture of Baruch Mann (Silvermann)

Baruch Mann (Silvermann)

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
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