Guide to Finding the Best CD Rates & CD Account Rates in the US

Certificates of deposit, also known as CDs, are fixed-term deposits that accumulate a predetermined amount of interest. It is a safe place to park your money.

CD account rates allow consumers to potentially earn more than they would if they put that money in a savings account, but even the best CD rates will not give consumers a tremendous amount of return.

Certificates of deposit are best used for parking large amounts of cash you do not plan to use immediately but wish to set aside in a place where you cannot spend it. A lump sum of cash meant for a down payment on a house is a good example.

Naturally, getting the best CD rate is a priority so that people can capitalize as much as possible on this investment.

This article will provide information and tips on how to find the best CDs with the best CD rates. Finding the best CD rate can be as simple as looking outside of your current financial institution. It could also be a matter of familiarizing yourself with CDs and learning more about this investment product.  

See Also: Best Money Market Rates | Money Market Accounts with High Rates

1. Purchase a Long-Term CD for Higher Returns on CD Account Rates

There is a way to entirely bypass finding the best CD rates. If you choose a long-term certificate of deposit, your money will be tied up for a longer amount of time and, therefore, spend more time accumulating interest.

While having an attractive CD account rate would still be beneficial, you could still make some money even if you do not have the best CD rate.

The convenient thing about certificates of deposit is that you can purchase them for a wide range of terms and at varying CD account interest rates.

You can get a certificate of deposit for as short as several days or for as long as a decade, although financial institutions may vary on which lengths they offer, and the best CD rates are usually limited to longer term certificates of deposit.

Do not forget that even though you will benefit from the CD account interest rates by locking your money away for a long time, you face early withdrawal penalties if you decide to take the money back before the date of maturity. So, be certain that you can go without the money you put in a certificate of deposit, at least until the date of maturity.

Make sure you still have a decent cash flow left over if you plan on buying a long-term certificate of deposit, since early withdrawal penalty payments will have a detrimental effect on the rewards of even the best CD rates.

2. Consider Economic Forecasting to Ensure You Get and Keep the Best CD Rates

Certificates of deposit come with a fixed CD account interest rate, which is both a good thing and a bad thing. Interest rates fluctuate, so you should have one ear tuned to the direction interest rates will be going in to determine the length of your CD. This long-term view can ensure you have the best CD for both the present and future.

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How can you prepare yourself for fluctuations in the market? Technically, nobody can predict what precisely will happen, but you can get a good idea of the direction things are going in by paying attention to the state of the economy. If inflation is rising, then interest rates will go up as a result. In this case, the best CD is a short-term certificate of deposit.

How will this help you get the best CD rates? If interest rates are due to go up, whatever numbers are considered the best CD rates in the USA at the moment will not be considered the best CD rates in a year or more. Buy a short-term certificate of deposit so that your money can be safely parked (and benefit from the best CD rates available at the moment).

When interest rates begin to go up, your certificate of deposit will have reached its date of maturity (or will soon meet its date of maturity). As a result, you can benefit from the new best CD rates in the USA and buy a new certificate of deposit with the new best CD rates available.

If, for some reason, the best CD rates in the USA stay the same, you can simply buy a new certificate of deposit for the best CD rates available.

On the other hand, if you suspect interest rates are going to dip, you should use the reverse strategy when purchasing certificates of deposit. If the state of the economy suggests there will be a decrease in the interest rate, purchase a long-term certificate of deposit to lock in the present CD best rates.

If you have the best CD rate and lock it in for, say, five years or more, you are guaranteed the best CD rates no matter what changes there are to the general interest rate.

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3. Stagger Your Certificate of Deposit Purchases to Benefit from Fluctuations in CD Best Rates

The CD best rates of today are not necessarily the best CD rates of tomorrow. Somebody who carefully studies interest rates and economic forecasting may be able to use some degree of predictive power to determine whether they should purchase a short-term certificate of deposit or a long-term certificate of deposit.

However, if you are not entirely sure what the top approach to securing the best CD rate would be, you can try staggering your certificates of deposit.

Staggering your certificates of deposit creates what is known as a certificate of deposit ladder and, as a result, a best CD rates ladder. Instead of parking one lump sum into one certificate of deposit, you break it up into different sums that are put into several certificates of deposit with varying maturity dates and varying CD account interest rates, allowing you to have multiple shots and safeguards for the best CD rate.

You would purchase a number of certificates of deposit with different maturity dates: let’s say three months, six months, one year, and two years.

When the three-month certificate of deposit matures, you can take the earnings from that and reinvest it into a new certificate of deposit with a longer maturity date and, if you are lucky, a higher best CD rate than when you first invested. You keep doing this as your other bonds mature as well.

This creates a system that ensures you get the best CD rates, diversify your risk, and increase the liquidity of your investments. If you reach the date of maturity of one of your certificates of deposit and realize you need the cash, you can spend the money without the risk of paying a penalty for an early withdrawal.

If you do not need the money, you can simply reinvest it knowing that you have another certificate of deposit with a relatively close maturity date if any unexpected expenses come up.

The more liquid you need your certificates of deposit to be, the closer the maturity dates of the certificates of deposit in your ladder should be. This also works if you are unsure about what the best CD rates will be in a given amount of time in the future.

This strategy for increasing the liquidity of your certificates of deposit and ensuring you get the best CD rates is also a strategy that is used for other fixed investments like bonds.

Related: Finding the Best High-Interest Checking Accounts & High-Interest Online Savings Accounts

4. Know That the APR and APY are Vital for Securing the Best CD Rates

When you are searching for the best CD rates for your certificate of deposit, it is important to know the APR and the APY. Just what do those two acronyms stand for, and what do they have to do with finding the best CD rate?

The APR is the annual percentage rate or annual interest rate that the bank or credit union you are purchasing your CD from is offering you. CD account rates are provided in an annual number, so it is important to understand how to apply this is if you are getting a certificate of deposit for less than a year.

The APY is the annual percentage yield. This is an important number to know since the amount of money you make using your best CD rate each year will change. If you buy a certificate of deposit for $10,000 with an interest rate of 5%, at the end of the first year, you will make $500. The interest is then compounded, allowing you to earn more from the best CD rates. So, after the second year of your certificate of deposit, you will earn 5% on $10,500, which is $525.

The annual percentage yield will let you know what the multi-year earnings of your certificate of deposit and your best CD rate will be.

5. Consider Purchasing a “Bump-up” Certificate of Deposit to Always Get the Best CD Rate

If you still feel anxious about rising interest rates potentially diminishing the value of the best CD rate you can find, consider purchasing what is known as a bump-up certificate of deposit.

If you buy a certificate of deposit with what was, at the time, the best CD rate, and in a few months or even a year (depending on the term length of your certificate of deposit), interest rates go up, a bump-up certificate of deposit lets your CD account rates reflect this new interest rate. Keep in mind that you are only able to bump up once over the course of the certificate of deposit’s term.

There are certificates of deposit that also address other anxieties. For instance, you may think you do not need access to your certificate of deposit’s funds. However, if something unexpected happens, that certificate of deposit may be a source of cash that you need to tap into.

To mitigate the effects of an early withdrawal penalty, consumers can purchase what is known as a liquid certificate of deposit that allows them to withdraw a certain amount of funds from their certificate of deposit without any penalty. Remember, however, that you will not get the best CD rates when purchasing this kind of deposit. Its value is simply in the fact that it is a better place to park your money than a regular savings account.

6. Consider a Zero-Coupon or Callable CD to Secure Some of the Best CD Rates

One option for securing the best CD rates is to purchase a zero-coupon certificate of deposit. Instead of paying out interest to you at the end of the year, this payment is reinvested into the certificate of deposit, meaning you earn interest on a higher balance.

Due to this arrangement, banks typically offer a higher interest rate, giving those willing to reinvest the earnings from their certificate of deposit access to the best CD rates they can get.

best cd rate

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A callable certificate of deposit is another kind of certificate of deposit that offers one of the best CD rates. A callable certificate of deposit can be recalled by the bank before the term date, and the bank then returns the principal balance in addition to any interest earned to date. Banks recall a certificate of deposit if interest rates fall significantly below your CD account rates. In other words, it is a way for the bank to back out if they start giving away more money than they have to.

Naturally, the only way people are going to buy such a product is if there is some incentive. So, banks offer some of the best CD rates for callable certificates of deposit. These higher CD account interest rates serve as the bait.

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7. Browse Certificates of Deposit Offered by Online Banks for the Best CD Rates and High-Interest CD Accounts

Online banks save on administrative costs. They do not have the same maintenance costs that brick-and-mortar banks have. This allows them to pass the savings on to their customers in the form of lower fees and higher interest rates on savings accounts and fixed deposits like high-interest CD accounts. Naturally, this means you can find a few of the best CD rates through online banks.

8. Find the Best Local CD Rates and Best CD Rates Through Credit Unions

If you have a neighborhood credit union that serves your community, you may have access to some of the best local CD rates.

Credit unions do their best to stay local, and they do not answer to shareholders and investors the way typical, for-profit banks do. As a result, credit unions can pass on their savings and earnings from financial products to their customers.

This structure allows credit unions to offer high-interest CD accounts. Access to a credit union’s financial products requires membership.

You can gain membership to credit unions in a number of different ways. Some require you to be a part of a certain trade organization or an active or former member of the military.

Others require a donation to a specific cause. In some cases, simply being part of a certain organization gains you access to a credit union and the best local CD rates.

If you are married or closely related (e.g., grandparent/grandchild, child or parent) to somebody who is a member of a credit union, you are likely eligible for membership as well. Start your search with a Credit Union Locator to join and get access to the best local CD rates.

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