Discover CD Rates: Pros, Cons, and Current Rates

Business Insider's personal finance team compared Discover® CD rates to the best CD rates and found it to be a standard offering.

Discover® Bank (Member FDIC) has CD rates that are higher than what many brick-and-mortar banks offer, but you can find higher rates at other online banks. It offers IRA CDs and standard CDs with term lengths of up to 10 years; most banks and credit unions don't offer CDs with term lengths that long. It also has a $0 minimum opening deposit for its CDs, which is rare.

Discover CD Rates Today

The bank offers two types of CDs: standard CDs and IRA CDs. The two types of CD pay similar interest rates and have the same minimum deposit requirements. Here are the current Discover Bank CD rates and Discover IRA CD rates:

Overview of Discover CDs

This bank might be a solid choice if you're looking for a bank that offers a variety of CD terms or if you're interested in a CD that doesn't require a minimum opening deposit. Usually, banks offer CDs ranging from six months to five years. But this bank also has 3-month, 7-year, and 10-year terms.

Additionally, Discover IRA CD rates are quite high compared to other IRA CD rates. If you're interested in opening an IRA account, these CDs might be a good fit for you.

This bank is an online bank, which means it doesn't have any physical branches. If you want to bank in person, you'll likely want to go with another financial institution.

Discover CD Pros and Cons

Discover CD Pros

• Higher interest rates than the average CD
• Low minimum opening deposit
• Variety of CD terms
• Interest compounded daily

Discover CD Cons

• High early withdrawal penalties
• Online-only bank with no physical branches

Discover CD Alternatives

Discover CD Rates vs. American Express CD Rates

American Express® CD rates are lower than most Discover CD rates, with rates ranging from 3.50% to 4.00% APY. American Express National Bank also doesn't require a minimum opening deposit.

American Express National Bank (Member FDIC) doesn't offer a 7-year or 10-year term. If you're interested in these specific terms, Discover will be your default option out of the two banks.

American Express National Bank Review

Discover CD Rates vs. Barclays CD Rates

Barclays Online CDs have similar rates to Discover Bank CD rates, with Barclays CDs ranging from 3.00% to 4.00%.

Barclays CDs can have term lengths as long as five years, while Discover has CDs as long as 10 years.

Barclays Bank Review

Discover CDs: What You Need to Know

Online Banking Experience

You'll have to manage your bank accounts using online and mobile banking. To speak with a banker, you'll need to call or use live chat. Customer support is available 24/7, though.

If you prefer banking with an institution with physical branches, brick-and-mortar banks will likely be a better fit.

Early Withdrawal Penalties

This bank's CDs have the following early withdrawal penalties:

• 3 months of simple interest for a term of less than 1 year
• 6 months of simple interest for terms between 1 year and less than 4 years
• 9 months of simple interest for terms between 4 years and less than 5 years
• 18 months of simple interest for terms between 5 years and less than 7 years
• 24 months of simple interest for terms between 7 years and 10 years

These penalties are higher than competitors' CDs. Some of the best banks may also have CDs that do not charge any penalties.

The best no-penalty CDs also pay well above average CD rates, so you can find good offerings to fit your preferences.

How Discover CD Earnings are Determined

The interest you'll earn on a CD with this bank can vary depending on the term chosen and the money deposited. External factors can also determine whether a CD is the best place to keep your money. Economic conditions can determine bank account interest rates, so there are times when CD rates are more competitive savings options or less competitive.

Market Fluctuations

Your bank can choose to change bank account interest rates at any time. That said, savings, money market, and CD rates are often impacted by the Federal Reserve's decisions. Rates on these accounts typically go up when the Fed raises rates and drop when the Fed cuts rates. Staying up to date with the next Fed meetings can you help keep track of potential rate fluctuations.

As a reminder, CD rates will stay the same while an account is open. If the bank decides to change rates during the year, you won't be impacted until your CD matures. At CD maturity, experts recommend comparing rates from other banks and terms instead of automatically renewing your CD. That way, you can see if there are more competitive offerings available.

CD Term

Each of the bank's CD terms have a different interest rate. The bank's most competitive CDs are its 6-month, 9-month, 1-year, and 18-month terms. The bank's short-term CDs are paying higher rates than long-term CDs because of the current economic environment.

When you're opening a CD, you want to pay attention to more than which one has the highest interest rate. Experts recommend assigning a specific purpose to your goals and matching your need with a certain term. For example, if you plan to save money to buy a car in three years, it's worthwhile to open a 3-year CD. There might be shorter terms with higher rates, but the 3-year CD will allow you to earn interest for a longer period of time without worrying about rate fluctuations.

CD Opening Deposit

CDs earn interest because you're keeping money in an account for a specified time. Hence, the bigger your opening deposit, the more interest you'll earn. You want to avoid paying early withdrawal penalties, though, because that can eat away at your earnings. Only deposit what you can keep in your CD for the full term.

Opening a Discover CD

Funding a CD

Opening a CD with this bank is similar to the process of how to open a CD account in general; you'll fill out an online application with what CD you want, as well as personal information such as your name, your Social Security number, and your physical address. You'll also need to fund your account, which you can either do immediately or wait until later.

You can fund your account by transferring money from an existing account with the bank. You can also make an ACH transfer or a wire transfer from an external bank account. You can also mail a check directly to the bank if other options don't work for you. Since this is an online-only account, you can't fund the CD with cash.

Discover CD Laddering Strategies

If you're worried about the lack of liquidity that comes with CDs, opening a CD ladder might be a good choice for you. You can open a CD ladder by opening multiple CDs with different term lengths using the money you were originally planning on investing in just one.

For example, if you want to open a 1-year CD with $30,000 for a short-term goal, you could instead open a 6-month, 1-year, and 18-month CD with $10,000 apiece. This way, you'll have access to some of your money earlier than you would otherwise in case of an emergency. You'll also lock in a good rate for longer, which could make a difference if CD rates drop.

CD ladders don't need to be made up of CDs that are all from the same bank, but if you prefer the simplicity of only using one bank to make your CD ladder, this bank could be a good option. The bank has CDs with a larger range of term lengths than many banks, which makes it easier to make a CD ladder for longer-term goals using 5-year CDs, 7-year CDs, or 10-year CDs.

Discover CD Maturity and Automatic Renewal

When a CD reaches the end of its term length, it matures. At this point, you can withdraw money from the CD without paying early withdrawal penalties. But many CDs, including those at this bank, automatically renew into a CD with the same term length (but not the same interest rate) after a short grace period. In this case, that grace period is 9 days long. So, if you had a 2-year CD, you would have 9 days after the CD matures before the CD would automatically renew into another 2-year CD at whatever the current interest rate is.

If you don't tell the bank that you don't want the CD to renew either before or during the grace period, you won't be able to withdraw your money without penalty after that grace period is up. Make sure you know when your CD matures so you don't miss the grace period and end up locked into a CD for longer than you were planning.

Why You Should Trust Us: How We Reviewed Discover CDs

We used Business Insider's certificate of deposit methodology to review these CDs. We rate bank accounts on a scale of one to five stars. We look at interest rates, minimum opening deposits, early withdrawal penalties, CD term variety, ethics, security, miscellaneous features, customer support, and the mobile app.

We use a weighted average to get our star rating, which means we weigh certain features, like interest rates and fees, at a higher weight percentage than others. We understand that these areas can more heavily impact a person's overall banking experience.

Discover CD FAQs