How to Rate a Bank CD
If you have some extra income that you want to put away but want to earn a higher interest rate than the average savings account provides, you may want to look into putting your money into a CD. A CD, or certificate of deposit, is an FDIC insured account that holds onto your money for a set time period. It, essentially, is a loan to the bank, and the bank agrees to pay you a specific amount of money in return for the loan. However, you need to keep the money in the bank for the set time period. If you don't, you can be hit with large penalty fees. All over the country there are hundreds of different CDs you can invest in, so it is best to rate the CDs to see which offer is the best.
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Instructions
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Look at the minimum deposit needed to open the CD with the bank. Some banks do not require you to have a minimum amount of money, which may be favorable if you only have a few hundred dollars to invest. However, larger buy ins typically mean a higher interest rate.
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Compare the interest rate of the different banks. The higher the interest rate you can receive the more money is going to be paid back to you for the CD.
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Check into how long you must invest the money. Some CDs only need to remain untouched for one year while others need to stay untouched for upwards of five years. Do note, however, that the longer your investment is left untouched, the higher the interest rate, which means the greater return.
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Determine how much money you can actually go without and for how long. Although you are not actually losing the money, it is income you are going to lose for the set time.
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Tips & Warnings
Because the CDs are FDIC insured, even if the bank goes under or files for bankruptcy you are not going to lose any money because of the federal government's insurance on them. CDs are actually one of the safest forms of investment you can make without any fear of losing money.
