How To Find The Best CD Rates In Different States
If you have cash and looking for ways to earn more unlike a standard savings account by saving it for some time, certificates of deposit or CDs should be the right choice for you. CDs are popular with people who don’t want to risk their money in the stock market yet want higher returns compared to an ordinary savings account.
However, banks with a national presence would want to know more about your home state and region in particular. That’s because the CD rate will vary depending on where you live. So, for people living in a state with lower CD rates doesn’t seem fair to someone living in a place with higher rates. So, how to find out the best CD rates? Read on to find out more about it.
WHAT IS CONSIDERED THE BEST RATE FOR A CD?
CDs are an attractive investment tool not because they have a good return and have a risk-free nature. That way, when you choose a CD, you know how much you will earn. Besides, some specialty CDs come with a guaranteed rate locked for that duration.
It means you can predict your return. Like credit unions and other bank deposit products, CDs are federally insured as well. Depending on the type of financial institution that offers you CDs, they could be either insured by National Credit Union Administration or Federal Deposit Insurance Corporation.
There is no shortage of minimum deposits for CDs and you can find a wide range of products ranging between $250 and $500. Moreover, you can find plenty of options that start with a minimum amount as low as $1000. When it comes to durations, most CDs carry terms of 6 months to 5 years.
However, both longer and shorter certificates exist at certain banks. You can earn higher interest rates with longer terms and larger deposits. Also, the interest rates that you find on the best CD rates fall in line with the prevalent inflation as well. So, if the rate is high, it could be the best deal. Oftentimes, credit unions and online banks offer you the best CD rates.
WHAT IS THE BEST WAY TO MAXIMIZE YOUR RETURN ON YOUR CD DEPOSIT?
The best way to earn more from a CD investment is to shop diligently around searching for the top rates. Next, the most important strategy is to ensure that the funds are invested for the full term of the CD. Keep in mind that withdrawing the amount early might attract a penalty.
As such, it will reduce your earnings as well. While it is true that unfortunate events might stick you at any moment in life, you will have no way out but to cash in the CD early. Because it is a possibility that can’t’ be ignored, you can resolve the issue by paying close attention to early withdrawal penalties.
Especially, the penalties associated with different types of CDs that you are considering before making that final commitment. Besides, it is always useful to compare the rates of two CDs that are quite similar. The interest is calculated and compounded regularly adds more over time.
Hence, it’s a great advantage. However, you should avoid CDs that provide you with an annual compound interest only. Although CDs are considered fixed-rate investments, certain types of variable-rate CDs are available. If you believe that interest rates are likely to rise high, you can benefit from a CD whose interest rates are adjusted throughout the term. These kinds of CDs are typically called tep up’ or aise your rate’ CDs.
HOW TO FIND THE BEST CD RATES
Because CD rates greatly differ from one state to another and bank to bank, you must make an informed plan about the best CDs available for you. While you may believe that you have got the right CD, something better might be a click or bank away. So, keep these tips in mind when buying a certificate.
1. CHOOSE AN ONLINE BANK OR CREDIT UNION
There is no denying the underlying challenge that a conventional brick-and-mortar has. Besides, you and your family are aware of that while doing business with them for many years. The overhead costs, operating expenses, employee salaries, and electricity bills make it hard for banks to provide their customers with a higher rate.
On the other hand, because of their presence virtually, online banks deliver great services even without having physical branches. They don’t have recurring operational costs and can deliver attractive CD rates. Besides, they provide you with higher returns regardless of where you live.
However, if you still prefer an in-person service, you can consider investing money with a credit union. Different from banks, a credit union isn’t for profits because they have no shareholders to please. The revenues that credit unions earn from deposits and loans are returned to you in the form of high interest rates.
2. CHOOSE CDS WITH LONGER TERMS
CDs are one of the best tools for investment and provide good things to customers who tend to wait for a long. CDs with longer maturity terms tend to have higher CD rates. It means, that when you deposit into a 4-year CD compared to a 1-year one, the funds are locked away for 3 years extra.
However, the sacrifice means that you will benefit from a higher interest rate. The longer you keep the money deposited, the better interest rate will it accumulate. Here is an example of a CD from an online bank.
* 0.75% APY on a 3-month CD
* 1.00% APY on a 6-month CD
* 1.25% APY on a 9-month CD
* 2.40% APY on a 12-month CD
* 2.40% APY on an 18-month CD
* 2.50% APY on a 24-month CD
* 2.55% APY on a 36-month CD
* 2.65% APY on a 48-month CD
* 2.85% APY on a 60-month CD
3. LEVERAGE DIFFERENT CD STRATEGIES
Sometimes it isn’t about getting the highest returns but maximizing your potential when saving with CDs. Open several CDs of various terms and roll earnings including the interest into a new CD whenever one reaches maturity. That way, you can afford CDs that carry higher APYs and need a large minimum deposit like $50,000.