Certificate of deposit (CD) rates are a type of savings account that offers a higher interest rate than traditional savings accounts. In exchange for the higher interest rate, you agree to leave your money in the account for a specified period of time. This commitment to keeping your funds untouched allows financial institutions to offer more attractive rates, making CDs a popular choice for conservative investors looking to grow their savings with minimal risk.
Certificate of Deposit Accounts Explained
When you open a CD, you deposit a certain amount of money into the account and agree to leave it there for a specified term. The interest rate on your CD is fixed when you open the account and will not change for the life of the term. At the end of the term, you will receive your original deposit back, plus the interest that has accrued.
CDs are a good option for people who want to save money for a specific goal, such as a down payment on a house or a new car. They can also be used to generate income in retirement. Because the interest rate on a CD is fixed, you can be sure of how much money you will earn over the life of the term.
Benefits and Advantages Over Savings Accounts
There are several benefits to opening a CD, including:
- Higher interest rates: CDs offer higher interest rates than traditional savings accounts. This means that you can earn more money on your savings over time.
- Fixed interest rates: The interest rate on a CD is fixed when you open the account and will not change for the life of the term. This means that you can be sure of how much money you will earn over the life of the term.
- Safety: CDs are insured by the Federal Deposit Insurance Corporation (FDIC). This means that your money is safe even if the bank fails.1
- Variety of terms: CDs come with a variety of terms, so you can choose the one that best fits your needs. Terms typically range from a few months to several years.
CDs offer several advantages over traditional savings accounts, including:
- Higher interest rates: CDs offer higher interest rates than traditional savings accounts. This means that you can earn more money on your savings over time.
- Fixed interest rates: The interest rate on a CD is fixed when you open the account and will not change for the life of the term. This means that you can be sure of how much money you will earn over the life of the term.
- FDIC insurance: CDs are insured by the FDIC up to $250,000 per depositor, per insured bank. This means that your money is safe even if the bank fails.
How to Score Top Certificate of Deposit (CD) Rates
If you are looking for the best CD rates, there are a few things you can do:
- Shop around: Compare CD rates from multiple financial institutions before you open an account. You can use a CD rate comparison tool to make this process easier.2
- Consider the term: The longer the term of the CD, the higher the interest rate you will typically earn. However, you should only choose a term that you are comfortable with. If you need to access your money before the end of the term, you may have to pay a penalty.
- Look for special offers: Some financial institutions offer special CD rates for new customers or for customers who meet certain criteria, such as having a certain amount of money in other accounts at the institution.
- Open a jumbo CD: Jumbo CDs are CDs that require a larger deposit, typically $100,000 or more. Jumbo CDs often offer higher interest rates than regular CDs.
Why You Should Learn More About Certificate of Deposit Rates
Certificate of deposit rates are an important consideration when saving money. By understanding how CD rates work and how to find the best rates, you can maximize your earnings and reach your financial goals sooner. To learn more about CD rates, talk to your financial advisor or visit the websites of several financial institutions.