The sticker price at some private colleges now tops $70,000 a year. At public universities, the published rate for in-state students averages nearly $12,000. But federal data and institutional reporting tell a consistent story: the vast majority of students are not writing checks for those amounts.

The frustrating part is that most of this discounting is done in secret - via individual financial aid awards. That makes price transparency difficult - and many families get stuck on the headline numbers. 

According to the most recent data, only about one in eight undergraduates pay the full advertised price. This aligns with The College Investor's recent study of what families actually pay for college out of pocket.

Nearly everyone else receives a discount — and for a growing share, tuition is covered entirely.

Actual Numbers Of How Many Families Get Scholarships That Discount The Costs

At private nonprofit colleges, the gap between sticker price and what students pay has never been wider.

NACUBO’s 2024 Tuition Discounting Study, found that the average discount rate reached 56.3% for full-time undergraduates in the 2024-25 academic year — a record high. That means for every dollar of published tuition, these schools returned roughly 56 cents in institutional gift aid.

In other words, if a school published a tuition rate of $50,000 per year, the actual tuition cost out of pocket would only be $21,850. Nearly 90% of incoming freshmen received some form of institutional discount.

Public four-year universities show a similar pattern, though the mechanics differ. The College Board reports that average net tuition and fees for first-time, full-time in-state students at public four-year schools fell to an estimated $2,300 for 2025-26 — compared to a published sticker price of $11,950. That is an effective discount of more than 80% on tuition alone. 

Community colleges stand out even more. Full-time students at two-year public institutions have been receiving enough average grant aid to fully cover tuition and fees since the 2009-10 academic year, according to the College Board. 

With more than 30 states now operating some form of free community college program, that number makes sense.

Very Few Families Pay Full Sticker Price

Brookings Institution research by economist Phillip Levine found that only 26% of in-state public college students and 16% of private nonprofit students paid the full sticker price in the 2019-20 academic year. 

Both figures have dropped sharply over time: down from 53% and 29% respectively in 1995-96.

Even among higher-income families who do not qualify for need-based aid, the share paying full price has fallen significantly. 

At public institutions, 79% of higher-income students paid sticker price in 1995-96, but by 2019-20, that had dropped to 47%. At private schools, the decline was steeper: from 64% to 28%.

The growth of merit-based aid explains much of this shift. Colleges increasingly use institutional scholarships to attract students regardless of financial need, making discounts available across the income spectrum. 

The result: the sticker price is becoming an unreliable indicator of what college actually costs for almost everyone.

Trying To View The Full Picture: What Families Actually Pay

Tuition discounts are real, but they don’t tell the whole story of college affordability. As we reported in our analysis of what families really pay for college out of pocket, most households end up spending between $25,000 and $100,000 over the course of a degree once room, board, fees, transportation, and other living costs are factored in.

Only about 1.35% of bachelor’s degree students receive grants and scholarships that fully cover the entire cost of attendance, according to the National Postsecondary Student Aid Study.

In other words, a student who pays zero in tuition may still face tens of thousands of dollars in housing, meal plan, and living expenses that are not covered by grants. 

This gap between “tuition is free” and “college is free” is where many families get caught off guard. A $0 tuition bill at a state university still comes with a $10,000-$15,000 annual tab for housing and food alone.

This is also where families can get themselves in financial trouble, and need to separate out the value of the degree vs. the value of the experience. 

Sticker Shock Deters Families From Even Applying

If most students are not paying sticker price, why does it matter? Because the published number still shapes decisions. Research consistently shows that lower-income students are more likely to rule out schools based on the advertised price without investigating the net cost.

A 2025 EducationDynamics survey (PDF File) found that 46% of students considered tuition cost the most important factor in their college decision, yet fewer than half found it easy to locate actual pricing information on college websites.

Some colleges have responded with “tuition resets,” dropping published prices closer to what students actually pay. Others have expanded net price calculators and financial aid messaging. But the broader system still relies on a high-sticker, high-discount model that rewards families who know how to navigate it and penalizes those who don’t.

What Families Should Do

Never eliminate a school based on sticker price alone. The published cost is the ceiling, not the floor. Run the school’s net price calculator before making any assumptions about affordability.

File the FAFSA regardless of income. Merit aid, state grants, and institutional discounts often require a FAFSA on file. Skipping it can cost you money you would have qualified for.

Budget for the full cost of attendance, not just tuition. Room, board, and living expenses routinely add $10,000-$20,000 per year on top of tuition. A school with free tuition is not the same as a school with free college.

Compare net prices across school types. A private school with a $45,000 sticker price and a 56% discount may cost the same as a public school at full in-state rates. Use tools like TuitionFit to compare your financial aid award and see how it compares to others.

Consider the community college pathway. With 30+ states offering free tuition programs, starting at a community college and transferring can cut total degree costs nearly in half.

Don't Miss These Other Stories:

1. Abe℠ Student Loans - Abe offers private student loans to a undergraduate, graduate, and post-bachelor graduate certificate students, with flexible repayment options and no origination, late payment, or forbearance fees. Rates start as low as 2.65% APR. Read our full Abe Student Loans review.

2. Ascent - Ascent Student Loans is a solid choice as a private lender - as they offer both cosigner and non-cosigner loans for undergraduate and graduate students. Rates start as low as 2.69% APR. Read our full Ascent Student Loans Review.

3. College Ave - College Ave Student Loans offers some of the lowest fixed rates on student loans on the market today. They are one of the largest private student loan lenders, and have highly competitive rates on their loans. Rates start as low as 2.84% APR. Read our full College Ave Student Loans review.

4. Sallie Mae - Sallie Mae is probably one of the most well-known lenders on this list. They are the nation's largest private student loan lender by loan volume. As a result, they also offer some of the most competitive private student loans and parent loans out there. Rates start as low as 2.89% APR. Read our full Sallie Mae review.

5. Student Choice - Student Choice is a service that works with a huge network of credit unions nationwide to match you with low cost student loans offered by credit unions. They currently have some of the lowest variable rate student loans on the market. Rates start as low as 2.99% APR for fixed rates and 3.03% APR for variable rate loans. Read our full Student Choice Student Loans review.

Federal Loans: Remember, the federal student loan interest rates are fixed. They won't change again until the next academic year.

• Undergraduate Direct: 6.39%
• Graduate Direct: 7.94%
• Parent PLUS Loans: 8.94%

You can find a full list of the best private student loans here >>

Fixed vs. Variable Rates: Which Should You Choose?

There's a lot of uncertainty that borrowers don't like with variable rates, which can make sense, but in a declining rate environment, it also opens the potential for future savings. Here's what to know:

• Fixed rates stay the same for the life of the loan, offering predictable monthly payments. They’re better for borrowers who plan to repay over many years.
• Variable rates can change with market conditions, starting lower but carrying risk if the Fed raises rates again. They can make sense for borrowers who expect to pay off loans quickly.

Most private lenders allow you to check rates without affecting your credit score. Always compare both options before signing.

What To Know Before Borrowing

Before taking out a private student loan, make sure you understand exactly what you're signing up for.

• Cosigner rules: Most undergraduates need a cosigner - which is someone (usually a parent) that is just as legally responsible for the loan. Check for early cosigner release after consistent on-time payments.
• Repayment flexibility: Look for lenders offering in-school deferment, interest-only options, or income-based repayment.
• Discounts: Many lenders provide 0.25% off for autopay.
• Fees: Compared to federal loans, private loans offer fewer fees - including no origination fees.
• Safety: Federal loans offer loan forgiveness and income-driven repayment plans. Exhaust federal options before turning to private loans.

For most families, borrowing federal student loans first makes the most sense. However, for parents looking at parent PLUS vs. private loans, private loans can make more sense.

How We Track And Verify Student Loan Rates

At The College Investor, our editorial team reviews student loan rates daily from more than a dozen major lenders. We verify data using official lender disclosures, regulatory filings, and real-time rate sheets.

We only include lenders offering loans to U.S. citizens and permanent residents. All rates are updated regularly and represent the lowest available APRs with autopay discounts applied.

Our coverage is independent and not influenced by compensation. While we may earn a referral fee when you open a loan through certain links, this never affects our editorial recommendations. Our goal is simple: to help you find the most affordable path to borrow responsibly.

FAQs

How often do private student loan rates change?

Lenders can adjust daily based on bond market movements and Federal Reserve actions, as well as their own competitive goals.

Are private student loans fixed or variable?

You can choose either. Fixed rates offer stability, while variable rates change with the market.

Do private student loans qualify for forgiveness?

No. Only federal student loans are eligible for forgiveness programs like PSLF or IBR.

Is a cosigner always required?

Not always, but most undergraduate borrowers will need one to qualify.

Can I refinance later if rates drop?

Yes. Refinancing can reduce your rate and monthly payment, though you’ll lose federal benefits if you refinance federal loans.

If the name "Trump Account" makes you hesitate (or, alternatively, makes you more enthusiastic) you should know that these children's investment accounts have a perfectly neutral alternative name: 530A accounts. 

The One Big Beautiful Bill Act and the section of the Internal Revenue Code it created officially refer to these children's investment accounts as "Trump accounts." To sidestep the political overtones, companies, lawyers, and policy groups have started calling them 530A accounts, referencing the tax code section that defines them. 

The 530A name started catching on with tax professionals who already work in a world of number-based account names that go by the tax code — 401(k)s, 403(b)s, 529s — making "530A" a natural fit.

The naming history is worth noting. These accounts were originally called "Invest America accounts," then renamed "MAGA accounts" (a backronym for "Money Accounts for Growth and Advancement") before being renamed to Trump accounts as the bill was finalized. 

However, the Trump branding may discourage people from applying. Just look at the comments on this Reddit thread.

That's a problem, because regardless of your politics, the account itself offers something real, even if it's not always the best option.

What A 530(a) Account Actually Does

A 530A account is a type of IRA for children under 18 with a Social Security number, created under the OBBBA. Contributions from individuals are capped at $5,000 per year (after-tax), and will be adjusted for inflation. The funds must be invested in low-cost U.S. equity index funds with fees no higher than 0.10%.

For children born between January 1, 2025, and December 31, 2028, the U.S. Treasury will deposit a one-time $1,000 contribution. Additional contributions can begin July 4, 2026, and no withdrawals are permitted before the child turns 18. After that, the account converts into a traditional IRA.

That means growth is tax-deferred, not tax-free — and distributions are taxed as ordinary income, not at the lower capital gains rate.

529 Plans Still Win For Education Savings

If you're saving for college or K-12 expenses, a 529 plan remains the stronger option in almost every way.

529 plans offer tax-free growth and tax-free withdrawals for qualified education expenses. Trump accounts only offer tax deferral, and withdrawals are taxed as ordinary income with a potential 10% penalty before age 59½.

The contribution limits aren't even close. You can contribute up to $95,000 in a single year to a 529 plan (or $190,000 if married) using five-year gift front-loading, compared to the 530A's $5,000 annual cap.

529 plans also offer broader investment choices, the ability to transfer funds to other family members, and a recent provision allowing up to $35,000 in lifetime rollovers to a Roth IRA.

Trump accounts basically follow traditional IRA rules with no education-specific tax breaks. See our full comparison of Trump Accounts vs. 529 Plans.

So When Does A 530(a) Account Make Sense?

The strongest use case is simple: take the free money. If your child was born between 2025 and 2028, the $1,000 federal "baby bonus" is essentially free and there's no reason to leave it on the table.

Beyond that, 530A accounts work best as a supplement rather than a primary vehicle. For discretionary family contributions, you'll generally get better tax treatment and more flexibility from a 529 (for education) or a UGMA/UTMA (for general investing).

The account is real, the benefits are real, and so is the $1,000. Don't let the name :whichever one you use) get in the way of evaluating it on the merits. And it appears that 4 million families have already enrolled!

Don't Miss These Other Stories:

1. Varo - Varo is a bank that offers up to 5.00% APY on the first $5,000 with qualifying direct deposits. Read our full Varo review.

2. Consumers Credit Union - CCU offers up to 5.00% APY on your checking account for the first $10,000. The requirements to earn are tiered. Read our full Consumers Credit Union Review.

3. PiBank - PiBank is the online brand of Intercredit Bank, N.A and offers 4.60% APY with no monthly maintenance fees and no minimum balance requirements. Read our full Pibank review.

4. Axos Bank - Axos ONE Savings offers a boosted rate of 4.21% when you receive qualifying monthly direct deposits totaling at least $1,500 and maintain an average daily balance of $1,500 in your Axos ONE® Checking account. Read our full Axos Bank review.

5. CIT Bank - CIT Platinum Savings a two-tiered savings account. 

Open an account with promo code CITBoost and you’ll earn 4.10% APY* on balances of $5,000 or more for the first six months* — that’s 10x the national average savings rate.

After 6 months, you'll return to the regular rate of 3.75% APY* with a $5,000 minimum balance. Otherwise you'll earn 0.25% APY. See website for full details. Read our full CIT Bank review.

You can find a full list of the best high yield savings accounts here >>

How High Yield Savings Accounts Work And Why Rates Matter?

High-yield savings accounts function just like traditional savings accounts, but they pay a much higher annual percentage yield (APY) — often 10 to 15 times more. You can see how these rates compare to the savings rates at the 10 largest banks in America - and these rates put them to shame.

"While interest rates have been holding steady, we are seeing more banks offer promotional offers or bonus rates to entice customers to switch. - Robert Farrington

The banks and credit unions on this list typically always have above-average rates, so even if the Federal Reserve lowers rates and these accounts lower their rates, you'll still be head. 

For example, a $10,000 balance earning 4.00% APY will generate about $400 in interest per year, compared with less than $20 at a big-bank rate of 0.20%. That gap makes it worth tracking rate changes regularly and switching institutions if your current bank stops staying competitive.

However, we expect more rates to dip below that 4.00% level in the coming weeks.

What To Know Before Opening An Account

Before opening a new account, review the key details that determine how much you’ll earn — and how easily you can access your funds.

• Watch For Intro Or Promo Rates: APYs can rise or fall at any time. But a strong introductory rate doesn’t guarantee long-term performance. None of the rates listed here are introductory, but some referral codes may only be temporary rates.
• Transfer Limits: Federal rules no longer cap savings withdrawals at six per month, but many banks still impose limits.
• Safety: Confirm that the institution is FDIC- or NCUA-insured, which protects up to $250,000 per depositor, per bank or credit union.
• Access: Many top-yield accounts are online-only. Make sure you can deposit via mobile app and link external accounts for easy transfers.

These details help you separate truly high-performing savings options from accounts that look appealing but may include hidden limitations or slower rate adjustments.

How We Track And Verify Rates

At The College Investor, our goal is to help you make smart, confident decisions about your money. To create this list, our editorial team reviews savings account rates daily across more than 50 banks, credit unions, and fintechs. We verify data using each institution’s official website, rate disclosures, and regulatory filings.

Only accounts available to U.S. consumers and insured by the FDIC or NCUA are included.

Our coverage is independent and editorially driven - we never rank accounts based on compensation. While we may earn a referral fee when you open an account through certain links, this does not influence our recommendations or reviews. Our opinions are our own, based on a consistent evaluation of usability, fees, yields, and customer experience.

FAQs

How often do savings account rates change?

Banks can adjust rates daily or weekly based on market conditions.

Are online banks safe?

Yes — as long as they’re FDIC-insured. Verify coverage on the FDIC’s BankFind site.

Is interest on savings accounts taxable?

Yes. You’ll receive a 1099-INT if you earn $10 or more in interest.

Should I move my money if rates drop?

It depends on the difference in APY and your transfer limits, and frequent rate chasing can reduce returns if transfers take time.

Looking for the best 12-month CDs in April 2026? With interest rates still at multi-decade highs, short-term CDs are paying yields that rival (and sometimes beat) high-yield savings accounts. If you want to lock in a guaranteed return without tying up your money for years, a 1-year CD is one of the safest ways to grow your savings.

Right now, the top 12-month CD rates are paying over 4.00% APY — far above the national average of just 1.55%, according to the FDIC. That makes 12-month CDs an attractive option for savers who want:

• Guaranteed returns without market risk
• FDIC or NCUA insurance (up to $250,000)
• A short-term commitment before deciding where rates move next

We track APYs daily and highlight the most competitive options below.

Our Top Picks for the Best 12-Month CD Rates Right Now

We've taken the time to review your best options for CDs, bringing you the top options for 12-month CDs.

Daily rates change, but the banks and credit unions below consistently offer solid rates and good features.

Live Oak Bank - 3.90% APY

Live Oak Bank offers short term and long term CDs with competitive APYs. 

Right now you can get 3.90% APY on a 12-month CD option! It does require a $2,500 minimum to open.

Plus, their CD has no monthly fees, and easy funds transfers!

Read our full Live Oak Bank review here.

Navy Federal Credit Union - 3.80% APY

Navy Federal Credit Unions offers CDs, called share certificates at the credit union. They have some great promotional CDs, as well as standard term ones.

Right now you can get up to 3.80% APY on a 12-month CD option, with a minimum $100,000 deposit. Otherwise you'll earn 3.75% APY.

Their CD have a $1,000 minimum deposit requirement, no maximum deposit, no monthly fees, and easy funds transfers!

Read our full Navy Federal Credit Union review.

Alliant Credit Union - 3.75% APY

Alliant Credit Union offers short term and long term CDs with competitive APYs. 

Right now you can get 3.75% APY on a 12-month CD option!

Their CD have a $1,000 minimum deposit requirement, no maximium deposit, no monthly fees, and easy funds transfers!

Read our full Alliant Credit Union review.

American First Credit Union - 3.75% APY

American First Credit Union is a credit union that has partnered with Raisin to offer solid CD rates nationwide.

Right now you can get 3.75% APY on a 12-month CD option!  There's only a $1 minimum to open an account!

Check out American First here >>

Barclays Bank - 3.25% APY

Barclays Bank offers short term and long term CDs with competitive APYs. 

Right now you can get 3.25% APY on a 12-month CD option!

Plus, their CD has no minimum balance requirements, no monthly fees, and easy funds transfers!

Read our full Barclays review here.

Quontic - 3.00% APY

Quontic Bank is a leader in online banking and one of the few Community Development Financial Institutions that work directly with the public.

Quontic has great rates on savings accounts, a competitive high-yield checking account, and they offer a full ranges of high-yield CDs.

Right now you can get 3.00% APY on a 12-month CD option!

Read our full Quontic Bank review here.

Other 12 Month CD Options

What Is a 12-Month CD?

A CD, which is short for certificate of deposit, can pay higher savings rates than a regular savings account.

In exchange for the higher interest rate, you agree to leave your money alone for a specific period of time.

A 12-month CD, of course, then ties up your money for a full year.

During those 12 months, your money can grow at a higher rate compared to a high-yield or money market savings account.

You can buy CDs that mature in as little as three months. You can also buy 5-year CDs.

For many young investors, a 12-month CD offers a nice in-between: It’s long enough to generate decent interest but not so long you’re tying up money indefinitely.

12-Month CDs and Momentum

The higher interest yield on your savings makes a 12-month CD attractive, but it has other benefits, too.

Since you typically have to pay a fee negating some of your earned interest when you withdraw from a CD before it matures, a 12-month CD offers a nice incentive to leave your money alone.

Yes, life is unpredictable. Sometimes emergencies happen and you have to withdraw early from your CD. In a true emergency, you probably wouldn’t be too worried about losing the interest.

Under normal circumstances, though, placing an extra speed bump between you and your savings helps you leave it where it is.

You can’t just open your banking app and make a quick, free transfer as you could with a regular savings account.

Leaving your money alone keeps you from spending it, allowing your money grow.

For example, a $2,000 CD at 2.75 percent would have a $2,055 balance at the end of 12 months. No, earning $55 in interest a year won’t finance your retirement.

But savings is all about momentum:

• Leave the money alone for another year, and it could become $2,111.
• In five years, you’d have $2,290.
• After 10 years your $2,000 would be $2,623.

Still not impressed? Let’s introduce the third dimension: If you could buy a new $2,000 CD every year, you’d be adding exponentially to your potential for savings growth. You could get to a point at which the interest alone coming off your CDs could fund new CDs.

Talk about momentum!

The Moving Parts of a 12-Month CD

A CD combines three key elements:

• Your principal: This is the amount you’re saving. A $2,000 CD has $2,000 in principal. Be sure to choose a principal amount you can afford to live without for the duration of the CD’s term.
• Your time commitment: You can find a wide variety of CD term lengths. Most common time periods are 3-month, 6-month, 12-month, 18-month, 24-month, 36-month, 48-month, and 60-month. You won’t be able to withdraw your money without penalty during the term.
• Your interest rate: You’ll usually find much higher interest rates at online banks compared to your neighborhood branch of a big national bank. Higher rates, of course, equal more growth in savings.

A CD has other key features you’ll want to know about:

• Minimum deposits: Many banks and credit unions require a minimum deposit for your CD to earn the advertised interest rate; others allow you to invest any amount.
• Yield: This is the amount in interest your deposit will earn.
• Date of maturity: A new CD has a maturity date. Before the CD matures, you typically can’t withdraw funds without penalty.
• Penalties: The fees you’d pay for early withdrawal can vary from bank to bank. Most banks will charge you at least part of the interest the CD had already earned.
• Automatic reinvestment: When they reach maturity, many CD balances will roll over into a new, identical CD unless you direct your bank otherwise. The bank should notify you about the upcoming maturity date in time to let you decide.

When You Should Get a 12-Month CD

Before buying a CD of any term, make sure you can do without the money you’re investing throughout the term.

None of us can predict the future. Unexpected expenses will arise. Some may require you to withdraw your funds early.

But you can take some precautions by controlling the controllable before you buy a 12-month CD:

• Have an emergency fund: If you don’t have a few months worth of living expenses available in a savings account, take care of that before buying a CD.
• Make sure bills are up to date: If you’re on the verge of defaulting on a student loan, or if you’re a month or two behind on a credit card, deal with those issues first. You could spend more in interest and late fees than you’ll earn with your CD.
• Consider potential expenses: When your odometer reads 125,000 miles and your mechanic has been recommending a new timing belt since you passed 90,000 miles, consider tackling that expensive repair, or at least setting aside the money, before investing in a CD.

Keep an Eye on Interest Trends

One of the key advantages of a CD is its locked-in interest rate.

No matter what the Fed decides at its next meeting, your traditional CD’s interest rate will remain fixed throughout its term.

This can work to your advantage when interest rates are on the decline. As rates fall over the next year, you’ll continue earning at today’s rates throughout the term of your CD.

On the other hand, a rising interest rate can cost you a higher yield.

In six months, your locked-in CD rate may be lower than a new CD’s rate. You may want to wait a few months before buying in or to consider a more complex CD, which we’ll go into below.

A 12-month CD is short enough to insulate you from the long-term effects of rate fluctuations.

Still, it’s something to think about as you shop and compare rates.

Right now, the average 12-month CD is yielding 1.52% APY, according to the Federal Reserve. All of the 12-Month Term CDs on our list are much higher.

More Complicated CDs

So far we’ve kept it simple:

• term lengths,
• interest rates, and
• principal investments

If this post were a course, it might be called CDs 101.

Naturally, you can do a lot more with CDs to add flexibility, growth potential, and insulation against a changing market for interest rates. And traditional banks might have more options than online banks.

But, what else is out there?

Liquid CDs

With a liquid CD you can avoid the withdrawal penalty if you cash out early, either because you need to access the principal or you found a better rate elsewhere.

These CDs won’t yield as much interest as a traditional CD, but they can help you save if you expect rates to rise significantly during the CD’s term.

Bump-Up CDs

If you buy a long-term CD and rates start to increase, a bump-up CD lets you adapt your CD to the new climate without having to start over. You can exercise your bump-up option to increase your rate.

These CDs tend to yield less interest, but they can also help you avoid missing out on rate increases down the road.

Step-Up CDs

A step-up CD’s rates increase periodically without you having to exercise an option. While this sounds like a great idea, especially with a longer-term CD, each new rate applies only to the time period between increases and not to the entire term.

Step-up CDs can start with low interest rates and end with higher rates, but the overall yield is typically comparable to a traditional CD’s.

Brokered CDs

A bank or credit union sells its own CDs, and you’ll need to open an account to start saving.

Serious savers who want a wider variety of CDs to choose from may need a broker’s help. Otherwise they may need to manage a dozen separate accounts.

If you ever go this route, make sure your broker checks whether the CD is FDIC-insured before you buy in.

CD Laddering

A common technique known as CD laddering can add more flexibility to your portfolio.

If you had, say, $10,000, you could buy five separate $2,000 CDs. Each separate CD would have a different maturity date, ranging from 1 to 5 years.

By setting up this kind of a ladder, you’d have a CD reaching maturity each year, so each year you’d have the option of cashing out or reinvesting a fifth of your savings to keep the momentum going.

CDs in IRAs

Anyone legally old enough to work can open an Individual Retirement Account, or IRA, which can shelter some of your earnings from income taxes while preparing for retirement. CDs in IRAs combine the earning power of CDs with the tax savings of an IRA.

How to Shop for CDs

Next time you’re in your neighborhood bank branch, take a look at the promotional signs they have on the teller’s desk or hanging from the ceiling. There’s a good chance you’ll see the bank’s CD rates on display.

If it’s a credit union, they may call CDs “shared deposits.”

Make a mental note of the rates, but don’t ask the teller about buying a CD yet. The vast majority of the time you can find much higher yields at an online bank.

Because they don’t have to operate a nationwide network of branches and hire thousands of employees, online banks can usually give you higher rates of return on savings accounts as well as 12-month and other kinds of CDs.

Most online banks let you connect online to your traditional bank for online transfers.

If you’re happy with your current bank you can keep your checking account where it is and still open an online account for CDs.

FDIC Security Is a Must

No matter where you shop, make sure your deposit is protected by the Federal Deposit Insurance Company, or FDIC.

FDIC guarantees up to $250,000 in your deposits no matter what happens to the bank.

If you see a 12-month CD rate that’s significantly higher than all its competitors, you may want to double check about the issuing bank’s FDIC status. Banks offering the highest yields are less likely to be insured.

Look for Specials

Typically, a longer-term CD can yield a higher rate.

However, banks routinely offer special rates for shorter-term CDs. However, sometimes these specials have limits - such as $10,000 maximum.

Why would they do that? CDs benefit banks as well as depositors. Your willingness to leave your money alone gives the bank more stability.

If the bank foresees a need for stable deposits over the next two years, it may offer a higher rate on 24-month CDs to provide an incentive to customers.

Shop Around

Yes, interest rates and terms matter a lot. But you should also consider a bank’s other features before buying in.

• What is the minimum deposit? If you can’t afford it, keep shopping.
• What about transfers? Can you link the bank to your existing account? If not, consider how much you need that feature before buying.
• What about ATM access? Not all online banks have ATMs or even offer ATM access through other banks. Lack of ATM access can actually help you save, but only if you know you won’t need the money in a hurry.
• Customer service? If you needed to reach someone at your online bank, could you do so? TrustPilot or even Facebook reviews can tell you a lot about others’ experiences. The Better Business Bureau may have more refined insight.

Bottom Line: A 1 Year CDs Offer Balance

When you’re serious about saving and letting your money work for you -- rather than you working for it -- a 12-month CD gives you a great place to start. However, you also might want to simply consider a high yield savings account.

There’s essentially nothing to lose except the early withdrawal penalty if you had to access your money in a pinch.

A 12-month term is long enough to yield measurable growth yet short enough to give you an annual opportunity to access your money without penalty if needed.

Try to stick with it, though. Once you’re off and running, your 12-month CD can be the first step to a lifelong flow of savings growth.

FAQs

What’s the minimum deposit for competitive 12-month CDs?

$1,000 is the minimum opening deposit for many CDs, but some offer deposits as low as $1. 

Why consider 12-month CDs over longer terms?

A 12-month CD allows you to balance a good interest rate along with the flexibility that your funds won't be tied for longer. Depending on the interest rate environment, you may also not earn much more for longer terms either.

Are there any hidden fees associated with 12-month CDs?

No, CDs typically do not have any hidden fees or monthly service fees.

Methodology

The College Investor is dedicated to helping you make informed decisions around complex financial topics like finding the best 12-month CDs. We do this by providing unbiased reviews of the top banks for our readers, and then we aggregate those choices into this list.

We have picked certificates of deposit based on our opinions of how easy they are to use, their costs and fees, any interest rates and bonuses provided, and a variety of other factors. We believe that our list accurately reflects the best 12 month CDs in the marketplace for consumers.