Your Guide to Investing in Certificate of Deposits
Savings bank accounts are the most popular and secure way of building your nest egg to be used in the future. The amount deposited in a savings bank account will generate a reasonable rate of return in the form of periodic interest during the tenure of the account. Additionally, the amount deposited into savings can be withdrawn from time to time without any limit on the number of withdrawals. On the other hand, a certificate of deposit (CD) is a type of savings account that provides a higher rate of return on your investment. However, amounts once deposited in a CD account cannot be withdrawn during the tenure of the CD, which ranges anywhere from three months to five years. Furthermore, the longer the tenure of the certificate of deposit, the higher the rate of return on your investment.
Here are a few points to consider when investing in a CD.
What is a Variable Rate Certificate of Deposit?
- The variable interest rate will change depending on financial factors and influences such as the prime interest rate, treasury bills, and the market index rate.
- The long-term benefit of opening a variable certificate of deposit account includes a better rate of interest anticipating future gains from these various influences.
- Even the 10 best CD rates offered by top financial institutions and credit unions will depend on these factors when it comes to a variable rate CD.
- You can search for the 10 best CD rates for variable deposits to potentially increase your rate of return in the future.
Can You Withdraw Deposits Before the CD Maturity?
- The basic purpose of any certificate of deposit is to provide a higher rate of return on an investment, which is why early withdrawals are generally not allowed in standard CD accounts.
- However, some financial institutions offer early withdrawal CD accounts with a low or no penalty clause for withdrawals before the designated tenure.
How is a Callable Certificate of Deposit Different?
- Callable certificates of deposit can be uncertain investments, even if banks offer a high rate of interest.
- In such cases, the bank retains the option to alter the terms of the CD or even terminate the account for various reasons.
- It is advisable to carefully read the fine print before considering a callable CD option, despite the allure of high returns on investment.
Are Jumbo and IRA Certificates of Deposits Profitable Investments?
- The amount required to be deposited in a Jumbo certificate of deposit is typically high, as it offers a higher rate of return.
- The higher the deposit, the higher the secured rate of return for an extended tenure. There are often 10 best CD rates available for this type of deposit, due to the inherent terms and conditions.
- Your retirement account can also be linked to a certificate of deposit held in an IRA account to potentially receive certain tax benefits.
Which Banking and Financial Institutions Provide the 10 Best CD Rates?
- Goldman Sachs Bank - For a minimum balance of $500 for APY (Annual Percentage Yield), you can receive an interest rate of 2.4% for a period of 5 years with this institution.
- Synchrony Bank - Synchrony requires a higher APY balance of $25,000 for 5 years at a 2.35% rate of return.
- Barclays Bank - This bank offers the best option when comparing the 10 best CD rates currently trending, with a minimum APY balance of $1 invested for 5 years at a 2.3% rate.
- Ally Bank - Similar to Barclays, maintain just a dollar APY for a 2.25% rate for 5 years.
- Bank of Internet USA - Maintain a minimum investment of $1,000 for 5 years at a 2.25% rate of return.
- Discover Bank - Minimum balance to be kept is $2,500 invested for 5 years at a 2.25% rate.
- EverBank - For 4 years, maintain a minimum APY of $5,000 with a 2.16% rate of return.
- First Internet Bank - Maintain a minimum balance of $1,000 at a 2.02% rate for 4 years.
- Barclays Online CD - Minimum of $1 to be kept for 4 years at a 2.16% rate.
- Synchrony Bank - Minimum balance of $2,000 for 5 years at a 2.30% rate of return.