Investing in Certificates of Deposit and Finding the Best CD Rates

Certificates of deposit are time deposit accounts that investors open at banks, credit unions, brokerage houses and thrifts. Certificates of deposit rates are usually better than savings account rates, money market rates and checking account rates. 

Search and compare bank CD rates at CDRates.MonitorBankRates. You can find the highest CD rates from national banks and local banks.

When you open a certificate of deposit account you invest your money for a fixed period of time. Most banks offer certificate of deposit terms between 30 days and 5 years. There are certificates of deposit available with terms longer than 5 years.

The longest term certificates of deposit opened with the highest deposit amounts will probably have the best CD rates. You'd be surprised how much rates differ between financial institutions that offer the same certificate of deposit terms. That is why you should compare CD rates at banks like you would comparison shop any item you buy.

When you invest your monies in a certificate of deposit your money is "locked up" for the certificate of deposit term. You can have access to some or your entire principal before the maturity date but you pay a penalty for this privilege. When you compare rates make sure to also see what the early withdrawal penalties are.

This point is probably the most important point, when you're looking at rates make sure the financial institutions certificates of deposit are insured by the Federal Deposit Insurance Corporation (FDIC). Accounts insured by the FDIC are insured for up to $250,000 per depositor, per account.

If you open a certificate or share certificate at a credit union make sure the credit union's deposits are insured by the National Credit Union Administration (NCUA). Accounts insured by the NCUA are insured for up to $250,000 per deposit, per account.

 Following is a check list you should have when searching for CD rates and opening an account..

  • What certificate of deposit term is best for my needs? Basically when will you need the money you're investing?
  • When does the certificate of deposit mature?
  • Is the certificate of deposit callable? A callable certificate of deposit can be canceled by the financial institution at anytime.
  • Is the CD rate on the account fixed or variable? Fixed rates stay the same and variable rate change.
  • How is CD interest compounded? Daily, weekly, monthly, quarterly or annually. The more frequent interest is compounded the higher the annual percentage yield will be.
  • What are the early withdrawal penalties if I cash in the certificate of deposit before the maturity date?

There are many resources online that you can use to find the highest rates. has one of the more extensive rate tables you can use to get the best rates.

Author: Robert Till
May 13th, 2011

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