How to Compare CD Rates at Banks
CDs, or certificates or deposit, are offered by banks. With a CD, you agree to leave your money in the account for a specified period of time at a set rate of interest. In exchange, the bank typically pays a higher interest rate on the money as compared to savings accounts. When you are considering a CD, you need to be aware of the interest rates offered, the early-withdrawal penalties and the features of different types of CDs.
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Instructions
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Use an online database of CD rates to find the highest rates in your area or across the country. Two reputable databases are listed in resources.
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Earn a higher interest rate for committing to a longer term for the CD. Generally, the longer you commit, the higher the interest rate the bank will pay on the CD. However, you should compare how much higher the rate is at different banks because some will offer larger rate increases.
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Receive a higher interest rate if you put a larger amount in the CD. Many banks offer a higher interest rate if you put a larger amount in the CD, so you should compare the rate increases if you are able to put in a larger sum.
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Compare the early-withdrawal penalties imposed by different banks. The penalties can be significant, so finding a CD with a lower penalty can save you money if you have to withdraw the money early. However, if you are certain you will not need the money, you may be willing to have a higher potential early-withdrawal penalty if you can get a higher interest rate.
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Compare the features offered by each CD so you can select a CD best-suited to your needs. Special CDs include bump-up CDs, which allow you to adjust the interest rate to the market rate once over the life of the CD, and liquid CDs, which allow you to withdraw a portion of your CD before the maturity date without penalty.
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Tips & Warnings
Be cautions of callable CDs. Once the CD becomes callable, the bank can require you to cash it in early at any time, which it will do if interest rates have fallen.
References
Resources
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