The Best CD Rates - What Major Banks Don't Want You to Know

The Best CD Rates - What Major Banks Don't Want You to Know

Where to find the best CD rates on a certificate of deposit and how CD rates are different from other investments.

A certificate of deposit is a financial package that you can purchase from a bank in order to earn a fairly significant return without the risks involved in the stock market and other speculative environments. The interest rate is much higher than in most savings accounts, and they are insured by the federal government for at least $250,000. CD rates tend to be better than other low-risk investments. At times, they can be comparable to a US treasury bill, but if you find the best CD rates you will typically earn more. Here are some of the best places to look.

If you want to find CD rates that beat the competition, one option is to set up a certificate of deposit with a bank that is currently under some form of financial stress. This sounds somewhat counterintuitive, of course. Common sense says not to invest in an institution that is having financial problems. In the case of a CD, however, the

investment is completely insured by the federal government, so there is no risk that the funds will be lost.

Why look for a bank in financial stress? The answer is that these banks need money now rather than later. A certificate of deposit gives them unbridled access to your funds for a specific period of time. In return, they pay it back plus interest. The more they need the money, the more they will encourage customers to buy a certificate of deposit by raising their interest rates.

If you are looking for the best CD rates, you will typically have the best luck looking online if there are no troubled banks in your area. The internet offers two advantages when looking at CD rates. First of all, it is simply much easier to compare interest rates. There are a great deal of comparison sites available that you can use in order to compare CDs side by side, without having to call each bank individually.

The other reason that the internet is advantageous for CD investors is the fact that there are online banks available. Online banks have fewer operating costs than traditional banks. They don't need to employ bank tellers, or pay rent and utilities on a large number of physical banks. This reduction in costs allows them to offer higher interest rates to their investors. For this reason, the best CD rates can typically be found online.

A final consideration is the fact that there are different types of CDs. Most CDs have a fixed interest rate, and these are often considered to be the lowest risk option. Today, however, there are also variable rate CDs. The interest rate on this type of CD changes based on certain criteria. In some cases, the interest rate may change according to a preset schedule. In this case, it is really just a fixed rate CD in disguise. In other cases, the interest rate may be tied to the stock market or another economic indicator. If the economy is expected to improve, this can be a better decision than fixed rate CDs.

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