What are Certificates of Deposits (CDs)?
CDs, (CD Rates) or Certificates of Deposits, are a way to save money where you agree to keep a certain amount of cash in a bank for a set time, and they pay you a guaranteed interest rate during that time. The time can be a few months to several years.
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Why pick a CD? CDs are great if you’re saving up for a specific goal like a house down payment or a car. They give you a better interest rate than regular savings accounts, helping your money grow.
How to choose a CD?
Look at the interest rate, as that’s crucial for how much you’ll earn. Decide on a term (how long you’ll keep the money there). Longer terms usually mean higher interest. Watch out for penalties if you need to take your money out early.
Best CD rates today
As of September 16, 2023, the best CD rates are available from the following banks and credit unions:
| Bank/Credit Union | Term | APY |
|---|---|---|
| Department of Commerce Federal Credit Union | 5 years | 6.00% |
| First National Bank of America | 6 years | 5.90% |
| Luana Savings Bank | 6-7 years | 5.85% |
| KS State Bank | 7 years | 5.80% |
Where can you find the best CD rates today?
Right now, some of the best rates are at the Department of Commerce Federal Credit Union, First National Bank of America, Luana Savings Bank, and KS State Bank, depending on how long you’re willing to commit your money.
To get a CD, go to a bank or credit union in person or apply online. You’ll need to provide your details and the amount you want to deposit.
In summary, CDs are a solid choice for saving towards a specific goal with a higher interest rate than regular savings accounts. When choosing one, make sure to compare interest rates, term lengths, and any penalties for early withdrawal.
Let’s talk more about CDs, including their pros and cons, how they stack up against other savings options, and tips for finding the right CD for you.
Best CD Rates Today
| TERM | APY % | MIN. DEPOSIT | WHERE TO INVEST |
|---|---|---|---|
| 6 MONTH | 5.75% | $500 | USALLIANCE Financial |
| 12 MONTH | 5.92% | $1,000 | Merchants Bank of Indiana |
| 18 MONTH | 5.60% | $500 | Limelight Bank |
| 24 MONTH | 5.92% | $1,000 | Merchants Bank of Indiana |
| 36 MONTH | 5.92% | $1,000 | Merchants Bank of Indiana |
| 48 MONTH | 4.82% | $1,000 | First Harvest Credit Union |
| 60 MONTH | 4.89% | $1,000 | First Harvest Credit Union |
Advantages of CDs:
- Better Interest Rates: CDs offer higher interest rates compared to regular savings accounts because you agree to keep your money in the account for a set period.
- Assured Returns: The returns with CDs are guaranteed, providing predictable growth for your finances and making budgeting easier.
- FDIC Insurance: Your CD deposits are FDIC insured, ensuring your money is safe up to $250,000 per depositor, per bank.
Drawbacks of CDs:
- Early Withdrawal Penalties: If you need to take your money out before the CD matures, you’ll likely face a penalty.
- Limited Access to Funds: CDs are less flexible compared to regular savings accounts; you can’t access your money until the term is over.
- Potential Rate Changes: If interest rates drop after you open a CD, you’re stuck with the initial, potentially lower, rate.
National Average CD Rates for August 2023
| TERM | RATE (APY) |
|---|---|
| 12 MONTH | 1.76% |
| 24 MONTH | 1.46% |
| 36 MONTH | 1.35% |
| 48 MONTH | 1.43% |
| 60 MONTH | 1.42% |
Comparing CDs with other savings options:
- Regular Savings Accounts: Offer lower interest rates but higher liquidity, allowing you to access your money whenever needed.
- Money Market Accounts: Provide a balance between interest rates and accessibility, with some limitations on withdrawals.
- High-Yield Savings Accounts: Offer better interest rates than regular savings accounts but may come with higher fees or minimum deposit requirements.
Tips for Choosing a CD:
- Compare Rates: Always shop around and compare interest rates from different banks or credit unions.
- Consider Term Length: Choose a term that aligns with your financial goals and when you’ll need the money.
- Check Penalties: Understand the penalties for early withdrawal, just in case you need to access your funds before the term ends.
In conclusion,
Certificates of Deposit (CDs) are a viable choice for goal-oriented savers seeking higher interest rates with a fixed-term commitment. Weigh the pros and cons, and consider how they match your financial objectives before choosing a CD.
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