How Are CD Interest Rates Determined?

Overall, the longer the CD term, the higher the interest rate. Learn more now.

A Certificate of Deposit (CD) is essentially an agreement between you and your bank. You agree to deposit your money for a fixed amount of time and, in return, the bank guarantees you a specific CD interest rate. Of course, Discover Bank understands that your financial needs may be complex and subject to change, so we offer a wide range of CDs with terms and interest rates designed to help you succeed. Whether you use a single Discover CD to pursue your goals or several of them, you’ll find the flexibility, liquidity, and great rates your situation demands.

A CD is an agreement between you and your bank--they guarantee growth and you agree to deposit your funds for a fixed amount of time

CD interest rates are typically determined by three factors:

  1. The length of time until your CD matures (typically, anywhere from 3 months to 10 years).
  2. The current interest rate environment (e.g., how much other banks are willing to pay on deposits).
  3. The expected rate of return (how much your bank anticipates it can earn with the money you have deposited.

Getting Higher Interest Rates

In most cases, you’ll receive higher CD interest rates if you increase the length of time your funds remain on deposit or increase the amount of your deposit. When you save with Discover CDs, those rates are always guaranteed, regardless of your account balance or term.

Here are some basic guidelines to follow when choosing the term of your CD:

  • Determine how long you are willing to leave your money untouched. Look for the best CD interest rates available within this time frame.
  • If interest rates are expected to rise in the near future, consider a shorter-term CD so that you’re not locked into low yields while rates increase.
  • If CD interest rates are flat or expected to decline, consider choosing a longer-term CD to lock in a better rate.

Be Aware of Penalties

CDs typically come with early withdrawal penalties, which can wipe out returns on even the best CD interest rates if you need to take the money out before the term is up. So, make sure the maturities you select work with your cash needs. With Discover CDs, that’s easy to do. And don’t forget that Discover Money Market and Online Savings Accounts also make saving for the future easy and affordable. Their low initial deposit requirements, easy access, and highly competitive rates make either type of Discover account a smart choice for a variety of important savings goals.

CDs offer guaranteed growth, but there are penalties to be aware of


In addition to offering CDs, Money Market and an Online Savings Account, Discover also offers IRA CDs to help you grow your retirement savings. Open an account online in minutes or call our 24-hour U.S.-based Customer Service at 1-800-347-7000.

The article and information provided herein are for informational purposes only and are not intended as a substitute for professional advice.

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