How to find the best CD rates

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How you decide the CD rates? Do you compare the CD interest rates of different banks and then decide a bank that gives the highest number of interest on CDs? Yes, this is the common approach followed by many people when it comes to finding the best CD interest rates. People compare the CD interest rates offered by a number of banks and then they go for the bank that offers the highest CD interest rates, so that they can maximize their savings. 

First of all, let me tell you that CD is actually an acronym for Certificate of Deposit. These are a kind of savings through which you can save your money. The interest rates that you receive on Certificate of Deposit are known as CD rates. And, depending on these rates, which are different for different financial institutions and banks, you decide as to which CD you can go for. 

But, the common approach followed by people for deciding the best CD rates is no longer applicable or right. Since, CD interest rates are going low day by day, you should rather think strategically before you go for a particular issuer’s Certificate of Deposit. 

In this article, you will get to know about some of the smart strategies and tips through which you can get the best returns on your Certificate of Deposit. Although, CD rates are changeable with time and according to different issuers, still you can choose the best Certificate of Deposit for yourself by following these simple and easy tips and strategies regarding interest rates offered on CDs. 

Tips to get the best CD rates

The following tips can help you to find the best CD interest rates for yourself.

  1. Compare

    Image courtesy: Pixabay
    Image courtesy: Pixabay

The first step is very obvious. When you start looking for Certificate of Deposits, you will find that there are a number of CDs in the market, which are offered by different credit unions and banks at different interest rates. However, before you choose any of the CDs among them, you must do a bit of research on the internet in order to get the best deal in CD rates. For your benefit, let me tell you that online credit unions and banks offer better CD interest rates on savings accounts as compared to their traditional competitors, as they do not have that much overhead. 

The CDs from online credit unions and banks have many advantages, such as they can be easily opened, have higher interest rates as compared to traditional brick and mortar financial institutions, and are available nationwide. Also, online banks usually give a better and smoother mobile and web experience to customers as opposed to the local banks. However, you must know that in order to invest in a CD offered by a credit union, you need to qualify as its member, which can be difficult in some cases. 

  1. Invest for a longer time period

Usually, long term CDs come with higher interest rates.  For instance, a CD of 5 years will have a considerably higher interest rate than a CD that is of only 6 months. However, the demerit of such types of CDs is that you cannot acquire your money very fast and even if you do, you will have to pay the early withdrawal penalty on it. 

One way of investing in long term CDs is to find the one that charges a modest early withdrawal penalty. This way you can get a higher interest rate on a long term CD and if by any chance you have to withdraw your money, then you can do it by paying a modest early withdrawal penalty. 

  1. Search for special deals

There are some banks that occasionally offer attractive CD rates due to special circumstances. It can be because they urgently require some cash or else they want to differ from other banks or financial institutions. You can look for such specials deals and take advantage of them. You can also visit the bank in person and ask the bank authorities if they can lower the rates. 

  1. Look for other options than traditional Certificate of Deposits

    Image courtesy: Flickr
    Image courtesy: Flickr

CD interest rates are getting low day by day. However, many experts say that this will change in a few months time. CDs, like bump-up CDs and liquid CDs, will help you to benefit from the rising interest rates of Certificate of Deposits, if you can accept a little bit lower interest rate on your CD. However, these types of CDs have some risk attached to them. Therefore, they may not appeal to those people who are looking for lower risks on CDs. 

  1. Do not close your CD prior to its maturity

You should not opt to close your Certificate of Deposit before it matures. This is because if you do this you will have to pay an early withdrawal penalty. And, this penalty amount can differ as per different CD issuers and banks, according to their different term CDs. 

  1. Open several CDs

You can open multiple CD accounts in order to reduce the early withdrawal penalties. This is because when you want only some money, then also you have to cash the whole CD and then start all over again. So, if you have 5 different CD accounts, you will have the flexibility like traditional CD laddering. 

  1. Construct a CD ladder

One of the ways to get higher interest rates on CDs, without the blow of early withdrawal penalties is constructing a CD ladder. In this, you need to own several long term CD accounts with only one Certificate Of Deposit maturing each year. For instance, a CD ladder of 5 years will be structured in a way that every CD matures after every one year for five continuous years. 

Image courtesy: Citi.com - Citibank
Image courtesy: Citi.com – Citibank

You can easily construct a CD ladder, but it will take some time. You can start by purchasing 5 CDs that have terms of 1, 2, 3, 4, and 5 years. As every Certificate Of Deposit matures, you can roll back its money into a CD of 5 years, assuming that you do not need the money. 

Get started to get the best CD rates

Now that you know how you can get the best CD interest rates, you can start your research on the internet by comparing the different CD interest rates offered by different financial institutions. With the help of the above mentioned strategies and tips, you can easily and quickly find the best CD rates to invest your money in. 

Additionally, for your information, let me tell you that you usually cannot withdraw partially from a Certificate of Deposit, unlike a savings account. You can either withdraw everything or nothing. Also, remember to double check the CD term lengths and their minimum deposit amounts in order to be aware of the time period that you have to lock cash and what amount of it.

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