Your guide to investing in certificate of deposits
Savings banks 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. Also, the amount deposited into savings can be withdrawn from time to time without any limit on the number of withdrawals. A certificate of deposit (CD), on the other hand, is a type of savings account but 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 However, amounts once deposited in a CD account cannot be withdrawn during the tenure of the CD, which ranges anywhere from three months to five years. Also, longer the tenure of the certificate of deposit, higher will be the rate of return on your investment.
Here are a few points to consider while investing in a CD.
What do you mean by the term variable rate certificate of deposit?
- The variable interest rate will change depending on financial factors and influences like prime interest rate, treasury bills, the market index rate among many others.
- Long-term benefit of opening a variable certificate of deposit account includes a better rate of interest anticipating future gains from the 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 for a better rate of return in the future.
Can you withdraw amounts deposited in a certificate of deposit before its tenure of maturity?
- The basic purpose of any certificate of deposit is to provide a higher rate of return on any investment made which is why early withdrawals are not allowed in standard CD accounts.
- However, an exception can be made when it comes to opening an early withdrawal CD account offered by very few financial institutions for a low or no penalty clause for withdrawal before tenure.
Why is a callable certificate of deposit different from the standard option?
- Callable certificate of deposits are a bit uncertain to invest in even if banks are offering a high rate of interest.
- In such cases, the bank retains the option of altering the terms of the CD or even terminate the account for a number of reasons.
- It is advisable to read the fine print carefully before venturing into a callable CD option, tempted by the high return on investment.
Are Jumbo and IRA certificate of deposits a profitable investment?
- The amount to be deposited in a Jumbo certificate of deposit will be quite high, owing to the single reason of a higher rate of return.
- Higher the deposit, higher will be the rate of return secured for a lengthy tenure. You will find 10 best CD rates for this deposit, due to the inherent terms and conditions.
- Your retirement account can also be linked to a certificate of deposit, to be held in the IRA accounts name to avail certain tax benefits.
Which are the banking and financial institutions that provide 10 best cd rates?
- Goldman Sachs Bank – For a $500 minimum balance for APY (Annual percentage yield), you may avail an interest rate of 2.4% for a period of 5 years with this institution.
- Synchrony Bank – Synchrony requires a higher APY balance at $25000 for 5 years at 2.35% rate of return.
- Barclays Bank – This bank offers the best option when it comes to comparing the 10 best CD rates currently trending with a minimum APY balance of $1 invested for 5 years at 2.3% rate.
- Ally Bank – Similar to Barclays, maintain just a dollar APY for 2.25% rate for 5 years.
- Bank of Internet USA – Maintain a $1000 minimum invested for 5 years at 2.25% rate of return.
- Discover Bank – Minimum balance to be kept is $2500 invested for 5 years at 2.25% rate.
- EverBank – For 4 years, minimum APY $5000 and a 2.16% rate of return.
- First Internet Bank – Maintain $1000 minimum balance at 2.02% for 4 years.
- Barclays Online CD – $1 minimum to be kept for 4 years at 2.16% rate.
- Synchrony Bank – Minimum balance at $2000 for 5 years at 2.30% rate of return.