How to find the best Certified of Deposit

Understand what is Certified of Deposit

If you have some money in savings that you know you won’t need to spend soon, a Certificate of Deposit (“CD”) might be a good savings option. With a CD you are committing to give your money to the bank for a set period of time and not touch it. Generally, the longer you agree to leave your money in the bank, the higher the interest rate you’ll earn. Like a savings accounts, CDs are a safe, FDIC insured way to help you grow your savings. Money saved in a CD with your bank is deposited for a certain amount of time, and earns interest until it matures. 

Understand How CD Interest work

Like savings accounts, CDs can earn compound interest as interest accumulates in the CD. This means that, although the interest rate percentage remains constant, the dollar amount of interest added increases each period. As an alternative to allowing the interest to stay in the CD, the CD purchaser can usually arrange to have the interest periodically mailed as a check or transferred into a checking or savings account. This reduces the total interest earned because there is no compounding. When shopping around for a CD, look for the Annual Percentage Yield (APY), which is the rate of return your CD will earn in a year, accounting for compounded interest. APY is different from Annual Percentage Rate (APR), which is the simple interest rate applied to every calculation of interest during the term of the CD. 

Understand CD Rates and Length of Term

Different interest rates will apply depending on the going rates at the bank you purchase from, and the length of the CD term. Generally, the longer you are willing to commit to leaving your money in a CD, the better the interest rate you will be able to get. For example, you might only get 1.0% interest for a one-year CD term, while the same bank also offers 3.0% interest on a five-year CD. Weigh the pros and cons of having your money tied up for a longer period of time, versus earning the additional interest. 

Understand how Certified of Deposit Mature

When your Certified of Deposit “matures” or comes to the end of its original term, you usually have a window of time to decide what to do next (10-15 days in many cases). In some cases, banks can automatically reinvest the money into a new CD if you don’t give alternate instructions. Make sure you tell your bank what you’d like to do with the funds, unless you want the money rolled into a new Certified of Deposit. 

Invest in Certified of Deposit

Bankrate.com always has your best interest at heart, providing competitive interest rates on all our online banking products, including high yield CDs. CD’s  are an easy, safe way to lock in a great interest rate for a given period of time and enjoy the rewards with guaranteed earnings. Unlike other accounts where your interest rate fluctuates, with a Certificate of Deposit, you know upfront exactly how much interest your CD will provide for the time period you select. . Simply choose the terms that are best for you and watch your initial investment earn some of the best interest around. Interest rates on CDs vary from bank to bank. It pays to shop around for the best rate possible on a term length you are comfortable with.

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