Find the Best CD (Certificate of Deposit)
If you are seeking the best low-risk, higher than norm interest rate yield on your money, you might consider the CD (Certificates of Deposit). A Certificate of Deposit is very similar to a savings account. The difference is that this type of savings or investment account brings with it an additional set of rules to govern the transactional deposit. In addition, the rapid evolution in banking and financial processes has made it easier for smaller institutions to compete on an international scale.
Advantages of CD Accounts
There are many advantages to CD accounts versus money market or high yield interest rates for investors. However, even experienced leaders in the banking industry prefer the security offered by this low-risk option. Yet, a quick spin around the Internet search engines Google being the best around will return a number and variety of responses when using the query “Certificate of Deposit. Many of them claiming to offer the best CD rates. How does one decide which is stating a factual offer and which are not? Two places you likely have not thought to check are credit unions and government websites.
CD Rates at Credit Unions
Credit Unions are non-profit organizations and because of this, they tend to offer better rates than commercial institutions and banks. They also tend to have more personalized service than their larger counterparts, which are banks.
CD Accounts MUST be FDIC & NCUA Insured
For example, in the United States, the federal government insures bank accounts to a maximum of $100,000. The specific agency, which oversees the banking industry, is the Federal Deposit Insurance Corporation (FDIC). On this particular web site, it offers many solutions to would-be investors and urges care before depositing your money anywhere.
You are urged to pay special attention to such things as the date of maturity, which is the time that the transaction agreement expires. Remember many banks and financial institutions will assess a penalty for early withdrawal of the funds. Sometimes this can be substantial. Be sure to read the fine print and ask any questions you have up front before depositing rather than after when it is too late.
Advantages & Disadvantages of CD Accounts
Certificates of Deposit are one of the safest investments you can make. First, they are the least risk of all higher yield accounts and they are insured by the FDIC just like any other bank account. Moreover, using the CD Ladder strategy you can stagger the maturity dates of your accounts and always have access to at least a portion of your money.
Sounds good, doesn’t it? Well, there are some serious disadvantages of CD investing. The most obvious being that if by chance you need your money sooner than the maturity dates you will incur a substantial penalty for early withdrawal. That should be your utmost concern. Be certain to ask questions such as how much of a penalty is involved, and how serious that will reduce your interest rate in the end.
If you have not already compared rates between banks and credit unions, you are urged to do so before locking your funds into an account for any length of time. Of course, the higher your deposit, the better interest you will generally receive. Remember, however, you never know what tomorrow might bring so be sure to plan for a rainy day by making certain your investments act as an umbrella to shield you when necessary. As with any investment, be sure to read the fine print and practice due diligence before making an investment decision.
Laddering CD Accounts
The key to becoming a savvy investor is getting the highest possible return on your investment while minimizing risk. This is why Certificate of Deposit accounts are very popular with even experienced investors. Here is a unique but widely popular strategy for CD investing that will allow you to stagger your maturity dates on various deposit accounts. This limits any potential losses due to early withdrawal penalty in the event you need your funds sooner than agreed in the account terms. Known as CD laddering, it should fit into any investment portfolio with minimal slack time between roll over. The primary point of this laddering strategy is allowing increased fluidity of funds.
It is easy to build your very own CD ladder strategy with ease. Simply select the financial institution, bank, or credit union, which offers the highest rate of interest returned and with terms that you can live with. However, instead of dumping all of your funds into a single account, you will stagger them as far as maturity dates. This is to allow for whatever tomorrow brings without worry and doubt. Once each matures, simply roll it over into a new one. Simple, isn’t it?
The reason it is called CD laddering is because the accounts are built in a stepping up of maturation dates in a manner, which resembles wrung on a conventional ladder. The main benefit, of course, is if you must withdraw one account, the remainder of your CDs can continue drawing interest without being disturbed.
There is no real trick to CD laddering. Only due diligence is required on your part in order to minimize risks. Remember to read all the fine print prior to purchasing your Certificate of Deposit accounts and soon you will see your nest egg grow.
Jumbo CD Accounts
For the individuals that prefer to invest a large lump sum of money into CD account, it would be a wise decision to do so in a jumbo CD. This particular account is set up for larger sums of money, for example a company could invest a million dollars in a jumbo account CD for a low risk. Before you place your money into a jumbo CD account, you should know the minimum amount of money that is required for the account, as well as the term and interest rate. Be sure that you fully understand exactly how often your money will have the interest compounded.
The rates on these CD accounts will vary widely. This depends mainly on the length of the CD as well as the amount of money that has been placed into the account. Typically the highest interest rate for a jumbo CD account is around 5.32%, yielding a 5.45% annually. The interest rate has risen recently, leaving behind the 5.09% that was common just recently. The rate on a jumbo CD account is generally lower than the annual yield due to the compounding of interest into the CD account.
The vast majority of financial institutions that offer jumbo CD accounts offer a compounded interest on the money on a monthly basis. However, there are also many institutions that are offering quarterly interest. The way to make the most profit of interest in your money is to have the interest compounded more frequently. The more the interest has been compounded, the larger the payoff in the end, which gives a higher yield.
CD Interest Rate Calculator
A CD rate calculator is used to determine how much interest a specific CD has incurred in dollar amount or how much it will acquire in its term. There are a few factors that will need to be calculated in order to get the correct result. The first factor in properly calculating a CD rate is the amount of money deposited into the CD account. Then the interest rate and terms need to be determined. For example, if the term is 6 months and the interest rate is 2.2% daily compounded the money placed in the account under the terms is $1,000. This would give you at the end of the 6 month term a total dollar amount of $1,011.
The initial deposit is the amount of money that was first placed into the CD account. The term or months is the time that the money will be in the CD account accumulating the percentage of interest. The interest rate is the amount agreed in percentage that will be paid on the dollar amount that has been placed into the account. Compounding interest is the interest that the CD’s interest has made.
The CD rate calculator is an effective tool that can help you in determining exactly the length of time in which you would like your money to be in the CD account through the bank. It is a wonderful way for you to be able to on your own determine exactly what you want to do, before you ever even go into the bank to set up the CD account.