Money CD Rates, Strategies for Choosing

By: EconomyWatch Content Team   Date: 3 March 2010

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The right strategies for choosing money CD rates will help you choose what will take your hard-earned money and provide you with the best return on investment possible.  While money is needed to pay bills, buy groceries, go to the doctor, and so on, CDs are needed to save long-term so you can send your child to college, purchase a home, and have a nicer retirement.  Although purchasing CDs means tying up some of your money, it also means allowing that money to work for you.  Obviously, the goal is to find money CD rates that are the highest so the amount of money earned is high.

Today, money CD rates for short-term investments are at record lows so you might be asking how you can make any money on a savings account such as this.  The key is not to look at Certificates of Deposit as short-term investments but instead to see them as long-term investments.  If you want a small investment account, one that could build a little money short term and that would give you access, then you want a good savings account through your bank but for long-term goals, you want to look for the best money CD rates.

To benefit, even from low money CD rates, you have to invest the most money you can afford and leave it locked into the CD for years.  For this, you would choose a determined amount of money to invest and then determine if you want to take out a Certificate of Deposit with your bank or any bank, or perhaps a credit union.  Now, for long-term investments, especially those of significant money, you always want a bank since they protect your investment with FDIC insurance whereas a credit union does not.

Typically, the way you will get the most out of your investment, even if money CD rates are low is by keeping the money locked for five years or more.  Keep in mind that each bank has a maximum time allowed for a Certificate of Deposit.  Therefore, just as you want to shop around for the highest interest and APY (Annual Percentage Yield) rates, you also want to find the bank that offers the longest periods.

Remember, while there is no guarantee the money CD rates are going to increase, they could but even if they remain low, you would still make a nice profit at the end of the term.  The current economy has impact interest rates and while most experts agree we still have one to two years of tough times, bank experts agree that after that time, things will begin to improve.  Therefore, you may not make the most from your investment in the next two years but as money CD rates climb, you would begin to see a nice return.

Additionally, new government rules that that any Certificate of Deposit maturing prior to December 31, 2013 will have FDIC protection for as much as $250,000, which will then drop to $100,000.  If you want to invest more than $250,000 or you have CDs that will mature after the 2013 date, you can always set up Certificates of Deposit accounts with multiple banks.  Since banks are highly competitive, just look for those that provide the highest money CD rates being offered.
 


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