Before the proliferation of the internet, finding the best CD rates was simple and straightforward. You just had to see the CD rates at a few banks, compare these prices and purchase the certificate of deposit that gave you the highest yield. Today, however, you need to strategize and deliberate as you will find plenty of options with meager rates.
When you are looking for some of the best CD rates online, you need to consider three important features. First, rates are higher for longer CD terms. For instance, a CD term that is five years will have a much greater yield than say a one-year CD. Second, if you close a CD before it attains maturity, you will incur an early withdrawal penalty. This penalty differs with banks as well as CD terms. Third, you cannot make a partial withdrawal of a certificate of deposit. You must withdraw all or nothing, unlike a savings account.
Below are a few strategies you can use to find the best CD rates that will give you the highest yield on your certificate of deposit.
- Open a CD with online Banks and Credit Unions
- Online banks and credit unions offer competitive CD rates. It is also easy to open a CD with an online bank as they are available across the country. Credit unions also offer high yielding CD rates. The only disadvantage with opening a certificate of deposit with a credit union is that you must first qualify to become its member
- Open several CDs
- You can also open multiple CDs to reduce the impact of early withdrawal penalties. Having many CDs will offer you with the flexibility of withdrawing money whenever you need it
- Look at longer CD terms
- Longer CD terms mean higher yields. However, longer terms also mean that you cannot withdraw earlier due to the early withdrawal penalty. It is therefore advised that you look for CDs that are long term but at the same time have lower withdrawal penalties.