CD Account Rate Considerations

By: EconomyWatch Content Team   Date: 9 March 2010

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When looking at investing your hard-earned money into a certificate of deposit or CD, you will quickly learn that all of the various factors involved are important.  One of these is the CD account rate and while everything that a CD consists of should be taken serious, the rate is probably one of the more important considerations.  In fact, the CD account rate is typically the primary deciding factor when choosing this type of investment.

For one thing, a CD is a kind of investment with a fixed rate of return.  That means you deposit a certain amount of money, which could be based on your decision or a minimum requirement of the bank, and while the money is locked into the account for a predetermined amount of time, it accrues interest.  This is the CD account rate so if interest is low, you would not make as much as if the interest were high.

You could say that the CD account rate is without doubt a significant consideration.  After all, if you are going to take $1,000, $5,000, $10,000, or more of your money and hand it over to a bank, then you want to know the amount of return on that investment is going to be worth being without the money.  Therefore, choosing a bank that offers the highest CD account rate is one of the key elements for this investment type.

Of course, you have a variety of other savings options but without doubt, the certificate of deposit is considered one of the safest and most profitable.  For instance, you could choose to put your money in a regular savings account, choose an IRA, consider stocks and bonds, or you might look into a money market account.  While all of these options are decent, none of them pays the interest that you would get on a certificate of deposit.  Because CD account rate options are typically higher, an investment of this kind has become increasingly popular.

One of the hardest things for many people is to leave the money alone.  When setting up the certificate of deposit, consumers know the time in which the money cannot be touched but for some reason, knowing the money is there makes it very tempting to withdraw.  However, doing this before the term matures would mean losing money.  The entire premise of a savings such as this is to allow the high CD account rate to make money on the money investment.

The great thing is that locking your money into with a high CD account rate has great potential.  Additionally, an investment up to $100,000 would be protected by the federal government with FDIC.  However, through the end of December 2013, the government has increased the amount of protection to $250,000 as a way of luring people to invest greater quantities of money.  Just remember, FDIC insurance is only provided by banks, not brokers, or credit unions.


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