Highest CD Interest Rate, Locking In Your Rate

By: EconomyWatch Content Team   Date: 8 March 2010

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Getting the highest CD interest rate will depend on a number of things such as the amount of your investment, the duration (term) of the investment, and so on.  Even the type of certificate of deposit would factor in to the amount of interest paid.  For instance, jumbo CDs are designed for major investors and thereby they usually pay well whereas a Bump Up CD or Liquid CD is a little more challenging to find and typically, rates are lower.

One option for finding the highest CD interest rates is to consider online banks.  In most cases, you would be able to secure a higher interest rate through an online financial institution than with a local bank.  The goal is to research various options so you can compare the current rates being offered.  Keep in mind that even a slight difference could have a huge impact on your invested money.

As mentioned, jumbo CDs often pay the highest CD interest rates of all but the minimum investment is $100,000.  For this reason, only certain people can invest but if you have this type of money to lock up for a few years, the return would be incredible.  One of the most important factors when investing in a jumbo CD is to make sure the bank offers FDIC insurance.  Until 12/31/2013, insurance will cover up to $250,000 but afterwards, coverage drops down to $100,000.

In addition to finding the highest CD interest rate, you can also make more on your investment by locking into a longer term.  Although there is always a slight risk that rates could fall during the term, most often the market would remain stable.  If you were to lock $10,000 into a certificate of deposit for one year, the amount of return would not be as high as locking the same amount in for three years.  Therefore, look for the highest CD interest rate and lock the money in for as long as you can.

Now, if you want to enjoy a great return on your investment. We suggest you look online for the highest CD interest rate and then consider some unique types of certificates of deposit.  As an example, you might look into a Bump Up CD, which is also referred to as a Bump Rate CD.  With this, the Annual Percentage Yield would be higher but only if interest rates increase.  To make this happen, the bank would offer a higher APY on a CD and in return, you would ask the bank to “bump up” that CD.  This means the interest would be increased but only for 12 months.

Along with the highest CD interest rate, you could also consider a Liquid CD.  Sometimes, this certificate of deposit is called a “No Penalty CD”, which would allow you to withdraw the money prior to the maturity date.  Typically, withdrawing money from a normal CD early would result in a serious penalty and forfeiture of interest accrued.  However, money could be taken out of a Liquid CD without being penalized but only if interest rates increase.  Additionally, banks can apply certain restrictions, which you would need to identify.


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