Quote from Savings Beagle on June 3, 2020, 10:55 am

A certificate of deposit (CD) is a financial product that provides a higher interest rate on deposited money when those funds are left untouched for a predetermined period of time.

Most banks and credit unions offer a variety of CDs, typically ranging from a 3-month deposit period up to a number of years, with higher interest rates being paid the longer the term is.

OPENING A CD

Opening a CD is very much like opening a regular bank account.

Once you’ve selected the CD you want to open, funding and finalizing the process will ensure the following things.

Interest Rate: Upon completion of a CD purchase, the interest rate of the CD you’ve selected is locked in.

Term: The term is the period of time associated with the CD you’ve selected. Once opened, you’ve agreed to leave your deposited funds untouched until the term ends. The term ends on the “maturity date,” at which time you can withdraw your funds without penalty.

Principal: This is the amount you agree to deposit when you open the CD.

Financial Institution: The bank or credit union with which you open the CD will administer your CD and determines specific terms related to the CD, such as early withdrawal penalties, reinvestment of the CD upon maturation, etc.

Interest earned on your CD will, normally, be deposited on a quarterly basis onto the balance of your CD, allowing for the compounding of interest.

WHY A CD

A certificate of deposit is a savings vehicle, similar to high yield savings accounts, that allows consumers to grow their money safely and at an increased rate of return when compared to traditional bank savings accounts.

Most financial institutions from which CDs can be purchased are federally insured, meaning total deposits are safe up to $250,000.

No matter how much money you want to put into a CD, it’s best to always do so at a bank or credit union that is FDIC insured.

And, of course, the increased rate of return CDs provide will grow your money more quickly than leaving your funds in an account that pays no interest or a traditional savings account that pays almost no interest.

CD INTEREST RATES

Now, let me be clear, the interest rate you’ll receive on a CD is not huge.

Unfortunately, this is common, not only for CDs, but also for most traditional savings vehicles, due to the Federal Reserve Bank keeping interest rates so low for roughly a decade now.

Yes, CD rates are better than other, similar, savings vehicles, but most CDs will still be paying in the 0.50% – 1.50% range, with the higher amounts requiring you to leave your money untouched for multiple years.

So, to grab the best interest rates, you have to know you won’t need that money for multiple years…for some, that might be okay, for most, that’s giving up a lot of flexibility for only a little more return.

Which is why you might want to consider CDs that mature in a year or less. You’ll still make a bit more interest, but accessing the money, should the need arise, will be easier.

INTRODUCTORY RATES

Many financial institutions will offer higher-than-normal interest rates on first-time CD purchases.

Often these intro rates can be a great way to boost your earnings. Just be aware, the increased rates are usually for a short period of time – 3-months or 6-months – and will revert to currently available rates once the promo period ends.

And, these introductory rates are very bank, and even location, dependent. Not everyone will have these higher-rate options available.

Be sure to read all the fine print associated with an introductory rate before making the purchase.

A LISTING OF HIGH YIELD CDS

We’ve compiled a small listing of high yield CD offerings to provide a starting point for your CD research and consideration. You can view our list at the link below.

HIGH YIELD CERTIFICATES OF DEPOSIT

These are online financial institutions, available to interested consumers throughout the U.S.

At the time of publication, all the listed banks were FDIC insured. If you decide to purchase a CD through one of those financial institutions, double check that it is FDIC insured before moving forward.

We also list minimum deposit amounts and current interest rates for the lower term CDs for each financial institution.

Higher term interest rates can be found on an individual bank’s CD page.

We’ll do our best to keep this information updated.

If you see outdated information, or you know of a bank or credit union offering CDs that may be of interest to readers, let us know in the comment section below or on the High Yield Certificates of Deposit page.