Best CD Rates – Find the Highest Current Certificate of Deposit Rates


24 May,2011

Right now, we are experiencing a financial climate that makes it quite difficult to find high yields on cash products. However, there are some ways to earn a little more from your cash. If you don’t mind locking it away for a set period of time, you can consider CDs. CDs often have higher rates than traditional savings accounts, and some CDs offer better yields than even high yield savings accounts.

What Influences Rates?

Of course, the Fed Funds rate is very important to CD rates. As the Fed Funds rate drops, so, too, does the yields on cash products. (The opposite is also true; as the Fed raises the benchmark your CD yields will rise.) But there are other factors involved in CD yields. Individual financial institutions can set their own rates, and that is why there is a difference in the rates you see as you begin comparison-shopping. Individual financial institutions set their own CD rates based on the following factors:

  • Minimum requirement: Some CDs have a minimum deposit. You can’t get a better interest yield unless you are willing to commit more money to the CD. There are CDs with no minimum requirement, but some of these also come with comparatively low rates. A CD with a $250, $500 or $1,000 minimum is likely to offer a better rate.
  • How much you put in: Even if you don’t see a minimum to open a CD account, some financial institutions will give you a yield boost if you put more money in the CD. If you are willing to open a CD with $2,500, $5,000 or $7,500 you could see very competitive yields. This is because money in a CD can be used by the financial institution as it makes loans to others. When more money is guaranteed at the disposal of a credit union or bank, it can give you a higher yield because it will make more as it loans the money to others.
  • CD maturity: The longer the maturity on a CD, the higher the yield. A five-year CD offers a more attractive yield than a one-year or two-year CD. You can often get an even better yield on a seven- or ten-year CD. Because the bank or credit union knows that it can lend your money over and over again, since you are committing to a long-term deposit, you are rewarded with a higher yield.
  • Special programs and perks: Some financial institutions offer flexible CDs. If you can withdraw money from your CD without paying the penalty that often comes with such a decision, chances are that you will not receive a very high yield. Other banks offer CD programs that pay a very high yield initially, but reserves the right to recall your CD after a certain period has passed, forcing you to roll your deposit into a CD with a lower rate. There are a number of special programs, promotions and incentives that can change later, so make sure you understand the terms of your CD before you commit.
  • Financial institution overhead: In a number of cases, the financial institution has to account for its own costs. If a financial institution has a higher overhead, it may not offer very high yields on its CD accounts. This is why many Internet banks pay higher interest on CDs than their brick and mortar counterparts: They have fewer costs to worry about.

Where you choose to open a CD account, along with how much you are putting into the CD – and how long you plan to leave it there – have a big impact on the yield you ultimately receive.

Comparing CD Yields

As you look for the highest CD rate for your own financial needs, it’s important to make sure you are comparing apples to apples. Be sure that you are comparing similar deposit amounts, as well as the same term length. You won’t get an accurate comparison if you compare the rate on a three-year $2,000 CD to the rate on a six-year $2,500 CD.

There are a number of aggregators online that make it easy to see, at a glance, where the best certificate of deposit rates can be found. You can use these rates as a useful starting point. Some financial institutions, if you talk to them about what others are offering, will give you the same deal if you are a loyal customer. In some cases, you might also find that calling a financial institution and asking for the best rate will get you something better than what is “advertised” online. Before committing to a rate you found online, make a couple of calls to see if you can snag an even better rate.

Choosing a Financial Institution

While high yields are nice, you should also consider the financial institution. If you don’t anticipate needing to do much business with the bank or credit union, customer service might not be as important. Others, though, like to know that their financial institution will be there for them. Decide what is important to you, and then choose a bank or credit union that fits your needs.

You should also consider the health of the financial institution. While CDs are protected by the FDIC and the NCUA, you could find your money inaccessible if the bank or credit fails. In those cases, you won’t be earning interest on your CD while the issue is sorted out. Instead, the account might be closed and you may have to wait for a check. When that happens, it won’t matter how high your CD rate is. Paying attention to the health of your financial institution can ensure that you can earn a competitive yield, without having to worry that things will change.

In the end, finding the best CD rates is about figuring out how much you want to put in a CD, and how long you can afford to have it locked up. Once you know that, you can begin comparing rates at different financial institutions.