2017 Guide: Finding the Best CD Interest Rates & Top CD Bank Rates
So you have some money sitting around, but it is not making much interest sitting in your regular savings account.
If you are not interested in doing any risky investments, you may want to consider moving that money into a certificate of deposit (CD) and earn some high-yield CD rates.
If you are interested in opening up a CD account at a bank, this guide is just for you. We are here to help you find the best CD interest rates you possibly can. You will be able to make money simply by depositing it for a particular term length.
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We will also be answering questions about CD accounts and CD bank rates such as:
- What is a CD?
- What are the average interest rates on CDs?
- How do I make money with CD interest rates?
- Are there any tips to get the best CD rates?
- Are high-yield CD rates right for me?
We will offer you six tips on ways to help you make sure that you get the best CD interest rates you possibly can.
What Is a CD?
A CD is the shorthand term for a certificate of deposit, an investment account offered by banks and credit unions. CDs are timed deposits—in other words, you deposit a certain amount of money for a certain amount of time to earn CD interest rates.
Banks offer these interest rates for CDs in return for the use of your money.
The more money you give to the bank for your CD, the higher interest rates for CDs they will offer you. Also, if you allow the bank to keep that money for a longer period of time, they will offer some of the best interest rates for CD investments.
Typical bank accounts—like checking accounts or savings accounts—are extremely useful and necessary, but they do not offer you much interest, if they offer any at all, for making your money grow throughout the years.
On the other hand, there are plenty of investment opportunities out there that can make you money, but these often come with a high risk. Sure, you could gain, but you could also lose. Bank CD rates are the happy medium between the two.
Current Average CD Bank Rates
CDs are not a fast way to get rich, however. Even with the best interest rates for CD accounts, you will never have the potential to make as much as other risky investment opportunities. But you will definitely make more with CD interest rates than you would with regular savings account interest rates.
Your goal, then, is to find high-yield CD rates in comparison with other CD rates. That way, when the CD matures (the term length is done), you are left with more money.
There are many factors going into determining exact interest rates on CDs, but here are a few samples of some current interest rates for CDs as of 2016. You can use these as a general average, but know there are many more financial institutions offering CD interest rates.
$3,000 deposit for 1 year:
$10,000 deposit for 2 years:
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How to Find the Best CD Interest Rates
There are many factors to keep in mind when it comes to finding the best interest rates on CDs. And when it comes to your hard-earned money, you will want the most high-yield interest rates as possible.
Here are six helpful tips that will guide you toward making sure you are getting the best interest rates for CD accounts that you possibly can.
1. Compare CD Rates
One of the most important steps in finding the best CD interest rates is to compare CD rates from bank to bank. Since you are essentially letting some of your money go for a certain period of time—possibly even years—it is important that the best bank CD rates are making you money.
Take the time to do your research and truly compare CD rates everywhere. No bank CD rates are ever the same.
Undoubtedly, the bank you already go to will want to convince you to open a CD with them. While that may be a great option, you will first need to ensure they have the CD interest rates you want to see.
Online Resources to Compare CD Rates
In order to start your research on the best bank CD rates with the highest yield, we have gathered some online resources that do a large amount of the homework for you. These lists will show you at a glance which banks are offering the best interest rates for CD accounts.
- NerdWallet: Here you will find a comprehensive list of bank CD rates depending upon your zip code, your desired minimum deposit, and the deposit term. This is a great place to start.
- BankRate: This website offers CD bank rates from a long list of banks within the United States. They offer information on the annual percentage yield (APY), rate, minimum deposit, and a “learn more” option.
- MoneyRates: This is a convenient search tool that helps you find great CD interest rates for your needs. Learn information about individual CD rates, term lengths, and more.
2. Deposit More for Better CD Rates
One of the most influential factors in landing the best CD bank rates is figuring out how much money you are willing to deposit.
Banks will typically have a minimum deposit requirement in order to start earning interest rates on CDs, though a few do not. These minimum deposit requirements are sometimes as low as a few hundred dollars and sometimes as high as thousands of dollars. But this is just a starting point.
The more money you put into your CD initially, they higher your CD interest rates. Not only will you make money at a higher interest rate, you will make those higher CD rates on more money.
There is a limit, however. Do know that the Federal Deposit Insurance Corporation (FDIC) will insure bank CD rates up to $250,000 per certificate of deposit account. This means that this sum of money will be the max you want to put into any CD.
3. Don’t Be Afraid of Commitment
There is simply no doubt about it—the longer you leave your money with the bank, the higher the interest rate for CDs will be. In essence, the banks will compensate you with higher bank CD rates because you are leaving your money with them for longer.
Lower interest rates on CDs come with term lengths around three or six months, for example. As you venture into year-long term lengths or longer, you will end up with the best CD interest rates.
Remember, you are promising that money to the bank for the term length. This means if you pull out early, you will be penalized. So choose your term length wisely. If you know that time commitment could be an issue, make sure to pay close attention to the next two tips.
4. Pay Attention to Early Withdrawal Penalties
Since the entire point of a CD is to essentially “hand over” your money to a bank for an agreed amount of time, there will be penalties to your CD interest rates if you pull it out early.
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According to BankRate, when you have CD rates based on a term length of a year or more, you can expect to lose at least six months’ worth of interest payouts if you pull out early.
Even if you have found the best interest rates on CDs, you will be out of luck when you pull out early. You may as well have kept the money in a savings account, even though they do not earn as much as high-yield CD rates.
Paying attention to what the early withdrawal penalties are for each CD account is definitely an important part of determining the best overall bank CD rates.
5. Don’t Put All Your CD Rates in One Basket
At the end of the day, we can never predict what the future holds. If you put all of your money into one CD and end up needing to pull it out—you lose the earnings from the CD interest rates on all your money.
A possibility for preventing this huge disappointment is the same advice you hear all throughout the finance industry: diversify. Put your money in multiple CDs earning the best interest rates for CD investments.
Multiple accounts is also necessary if you have money you would like to have earning high-yield CD rates that is higher than the FDIC insured $250,000 per account.
For more strategies on diversifying your CDs in order to make better CD interest rates, read the strategies below.
6. Understand Strategies for High-Yield CD Rates
There is more than meets the eye when it comes to earning money through the best interest rates on CDs. Financial advisors and banking experts have devised a few strategies to get the most out of your CD rates.
Here are two strategies that will help you get the best CD interest rates and yields out of your investment.
- CD Laddering: With CD laddering, you put money in multiple CDs. Ideally, one short-term, one mid-term, and one long-term. As the CD fully matures, you pull the money from the shorter term CDs, along with the bank CD rates you gained, and dump them into the longer-term CDs. This encourages you to save, and it is a safeguard against early withdrawal penalties.
- CD Barbell: This is a similar strategy, but you eliminate any mid-term length CDs. Thus the “barbell” imagery: say $5,000 in a short-term and $5,000 in a long-term. This also allows you benefit from bank CD rates of long-term CDs without much risk.
Are These CD Rates Right for You?
When it comes to investing your money to earn money, it is important to take the time to research CD interest rates and strategies. Then when it is time to start the process of opening your own CD, decisions can be made to determine what level of bank CD rates and yields you are looking at. Decide:
- How much money you have to invest
- How long you are willing to be parted from that money
These two factors will ultimately have the biggest impact on getting you wonderful CD rates you will be happy with. Make sure to keep all six of these tips in mind and land yourself the best interest rates on CDs.
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