Best CD Rates (Certificate of Deposit Rates) Updated June, 2010

Best CD rates (certificate of deposit rates) changes like the weather. One minute it’s up, and another it’s down. I get so many requests about which company offers the best CD rates that I’ve decided to put up a page to direct people who are interested. Below, you will find some of the banks that offer some of the best CD rates in the country, along with when the information was last updated.

Whether you agree with putting money into certificate of deposits or not, you can’t deny that CDs are many people’s only source of investment. I remember my grandparents had nothing but online savings accounts and CDs, yet they turned out fine because they would never lose money! The best cd rates can provide:

• Ultimate Safety (CDs from most U.S. Banks, and certainly all options below are FDIC insured up to $250,000 until 2013)
• Away from Emotions – While liquidity is most people’s grudge about CDs, the fact that you cannot touch with penalty is actually an advantage of some.
• Good Rates – While it’s never going to make you rich overnight, the lack of volatility and relatively high rates can keep you sleeping soundly at night.

Finding the best cd rates available from a bank is on many people’s mind and a question that I get asked often. So, I decided to continually update this page to help everyone establish a page with updated and consolidated information. If you are looking for a good place to store your savings and already decided that certificate of deposits are right for you, read on.

Note that this is not a cd rates comparison, because different year CDs are presented from different institutions (if it was, I would be comparing apples to oranges). This is a collection of the best rates from each recommended bank, so click over to the bank to see which year works for you.

Best Bank CD Rates

Best CD Rates Updated on June 2, 2010

Bank	Yield (APY)	Product	Min. Deposit	Sign Up
Ally Bank	1.94%	2 Year-CD	$0	Click Here
EverBank	2.05%	2 Year-CD	$1,500	Click Here
HSBC Direct	1.25%	1 Year-CD	$1,000	Click Here
ING Direct	1.75%	1 Year-CD	$1	Click Here

Best CD Rates Don’t Last but Auto Renews

When you find the best CD rates, you will likely sign up for an account and be on your way. However, take note of the due dates and monitor your account because all these CDs have a clause where they will automatically renew unless you notify the institution that you want to withdraw your money. Some will let you tell them in advance, while others need the CD to mature before you left them know. Furthermore, you have to tell them within something like ten business days of it maturing or it’s equivalent to withdrawing early (read: penalty).

As the best CD rates will probably lie elsewhere when your CD matures, it’s best to search for better rates every time your CD matures so make sure you remember to notify the bank that you don’t want it to automatically renew.

What is a Certificate of Deposit?

The answer to the question of what is a certificate of deposit is relatively simple. A certificates of deposit, also known as a CD, is similar to a savings account but is sold by banks as risk-free investments that require you to invest your money for a certain time or duration.

CDs are marked with a fixed duration ranging from a few months, to a year, up to ten years or more. CDs pay you interest on your money during the time it is invested. The interest rate is usually also fixed as well. When you purchase a CD, it should be your intention to hold the CD until it reaches maturity, at which time the initial investment or money earned may be withdrawn with the accumulated interest. The bank offering the CD pays investors a rate that is slightly higher than what you would have normally earned in a checking account or the money market.

Why Invest in a Certificate of Deposit

If you have money to spare and are looking for a safe place to keep it while maximizing your interest, CDs can be a great investment choice. You’ll know the interest rate beforehand, and you are guaranteed to receive all of the money that you put in, along with the pre-determined amount of interest when your CDs mature. Your deposit is also insured by the FDIC, (Federal Deposit Insurance Corporation) so you’re completely taken care of.

The rate of interest, while hire then a standard savings account, is lower then stocks or other investments. However, the money is guaranteed so there is virtually no risk associated with a CD. If you know you are going to need the money within a given time frame and/or that time frame is five years or less away, a CD may be a wiser investment choice then stocks.

Types of Certificate of Deposits

There are several kinds of CDs to choose from.

1. With Traditional CDs you get an interest rate that is fixed, covering a particular term or duration. After the term expires, you may then withdraw the money invested or re-invest it into a new CD. Take note however that withdrawing before the investment matures will trigger a penalty.
2. Bump-Up CDs will allow you to trade your current CD interest rate with one that is higher should the rates on the newer CD of similar terms increase during your investment’s duration.
3. Liquid CDs on the other hand will allow you to withdraw a portion of your investment without having to pay any penalties. This is due to the slightly lower interest rate of a liquid CD compared to that of the other types of CDs. However, rates are still typically higher than those rates from other accounts such as checking or money market accounts.
4. The Zero-Coupon CD does not have an annual interest payout but instead, will re-invest those payments thus allowing you to earn interest on a larger deposit in total. A Zero-coupon CDs interest rate is higher when compared to other types of CDs but you will have to pay taxes for the re-investment.
5. Callable CDs can be recalled by the bank after a certain period of time. Your deposit plus the interest earned up to the time the CD is called will be paid if and when the bank recalls the CD. This usually happens when interest rates plunge below the initial rate offered. To sell these CDs, banks will usually offer higher interest rates in order to appeal to its clients since the guarantee on the return is a bit riskier then other forms of CDs. Brokers often sell callable CDs as well.
6. A Brokered CD, as the term connotes, is offered by a brokerage. This type of CD has a higher interest rate then the CDs offered by local or online banks due to the fact that brokerages compete nationwide for investments and also offer other more lucrative investments such as stocks and bonds. You’ll have to pay a fee, however, to purchase a CD through a brokerage account.

Buying a CD

How do you buy a CD? Banks usually require a certain minimum deposit and may even give you higher interest rates if you deposit a much larger sum of money. Upon opening a CD account, you will typically receive your own passbook or certificate. Interest rates are paid according to the terms of the CD and can be directly deposited into a bank account or paid in another manner that you elect. You may be charged tax on interest depending on your tax bracket and other relevant terms and conditions.
Always make sure that you buy CDs from a well-known, FDIC insured bank or broker. Read the fine print before purchasing a CD and make sure you understand how long you will have to hold the CD for, what interest you will be paid, and any other relevant terms and conditions. It is also a good idea to know what the penalties are for early withdrawal in case of an emergency, but remember, you typically should not invest money in a CD that you believe you will need before the CD matures as you can end up losing money.

You can compare interest rates for CDs online, and by visiting your local bank or credit union. Be sure when comparing interest rates that you compare CDs with similar terms in order to get an accurate comparison. Online sites provide side-by-side comparisons of different CD offerings form various banks, and online banks generally tend to pay a higher interest rate on CDs then your local bank or credit union, so it might be a good idea to do your online research first.

Now that you understand what a certificate of deposit is, you should be able to make a wise investment decision and to understand what funds, if any, should be used to allocate a CD. Remember, if you have money that you will need within less then five years, you are wise to invest it in something safe with a guaranteed rate of return, even if that rate of return is somewhat smaller then you would get if you invested in a riskier investment.

What are No-Penalty CDs

Some banks are letting their customers withdraw funds from their CDs penalty free in what is known as the no-penalty CD. For example, Discover has a 1-year product where an account holder who involuntarily loses his/her job can make partial (or full) withdrawals without any interests penalties. Details are as follows:

The Discover Bank “No Penalty CD” benefit applies to a 12-month CD and 12-month IRA CDs. The accountholder must be employed full time when the CD was opened and for 30 days afterward, left the job involuntarily and provide proof to Discover Bank of unemployment.

Since you have to sign and mail the proof of unemployment and will likely have other hassles, this seems more like a marketing gimmick than anything.

Alternatively, Ally Bank has a 9-month CD where a customer can withdrawal for any reason without penalty. In these circumstances, all interest incurred are kept by the customer. Therefore, it is recommended to go with a no-penalty CD whenever the yield is highest. If you look carefully, you might even find that these CDs carry a higher rate than the online savings accounts from the same company, making them the Best CD rates available.

Why Best CDs Rates are from Online Banks

For first time investors and those just beginning to learn about certificates of deposit, one common question that keeps popping up is why CDs from online banks are better. There are a number of potential upsides to purchasing a CD from an online bank, most of which involve the interest rate associated with the CD. Before you can begin to understand the benefits of online CDs, however, you need to understand what CDs are and how to compare them.

What are CDs?

If you’ve considered investing your money somewhere but are not too much of a risk-taker, you might want to start with Certificates of Deposit or CDs from banks. CDs are a relatively low-risk investment and are considered one of the safest ways to invest and make a profit.

CDs allow you to invest your money for a set period of time and receive a pre-declared return on your investment. As long as you leave the money in the CD for the term of the CD, you are guaranteed to get back your principle as well as the declared interest rate.

There are several different types of CDs, including fixed rate CDs, bump up CDs, liquid CDs, zero-coupon CDs, callable CDs and Brokered CDs. A traditional fixed rate CD guarantees your interest for the term of the CD. Bump-up CD’s allow you to trade in your current CD should interest rates go higher. Liquid CDs give you more ready access to your cash. Zero-coupon CDs reinvest interest payments, maximizing your earnings. Callable CDs can be recalled by the bank if interest rates drop. Brokered CDs are offered by brokerages and tend to have higher interest rates but also higher fees.

Be sure to thoroughly research CD options before making your purchasing selection. Generally, all of these different types of CDs can be purchased online from online banks or brokerages houses, but make sure that the bank you choose offers a wide selection of options of the type of CD you wish to buy.

Interest Rates of the Best CDs

Finding the highest interest rates when you purchase a CD can help you to earn more for your money, without taking additional risks. You can check your local banks for the best CD rates but often, you’ll find that the rates at online banks are significantly higher.

Online banks are able to offer their clients these higher interest rates due to the huge savings they achieve from their substantially lower overhead spending. Unlike brick and mortar banks, online counterparts have no building structures to maintain, no employees, no electric bills, and no other physical costs associated with running a standard customer oriented business.

Since maintaining a website is so much cheaper than maintaining an actual bank, most online banks are able to transfer these savings to clients in the form of higher interest rates, both for online savings accounts and for online CDs.

Be diligent when searching for an online bank. Compare the CD rates for numerous banks, and choose the one that best meets your needs. Be sure that the FDIC insures the virtual institution and read customer reviews to determine whether the bank is reliable and a sound financial institution.

Other Advantages of Online CDs

Aside from higher interest rates, there are other relevant advantages to having an online account or doing online banking. First, an online bank is accessible anytime, anywhere. Regardless of what continent or time zone you are in, all you need is Internet access to do bank transactions.

Since everything is done with just a few clicks of a button, online banking is quick and easy. Purchasing CDs, opening IRAs, paying bills, checking account status and credits, and requesting money transfers can all be done from the comfort of your home. Receipts and statements may even be stored via email.

Online banking may also save you money as there is no need to travel to banks or post offices, nor for letter writing, envelopes and stamps…almost 100% of your bank transactions can now be done electronically.

Another advantage to being electronically connected is that you can easily receive SMS or email alerts that update you regarding your accounts, CD interest rates, and other bank-related matters.

Buying CDs Online

Buying bank CDs through online banks is very simple. The first thing you have to do is to search for an online bank that offers CDs. Many banks do, and a quick search from your favorite search engine should provide you with a list. Ensure that you can purchase the CD directly from the online bank’s website, and that they have a wide selection of CDs to meet your needs.

Next, select the term you prefer for your CD. Terms or durations can range from a few months to 10 years. Remember, you cannot take the money out until the end of the term or you may lose your interest and/or have to pay penalties. Typically, the longer the term is the higher the return.

After selecting the terms, sign up and apply for your CD purchase. This application will involve providing your background information and financial information such as your occupation/source of income, social security number, and contact information. This is a pre-requisite before being cleared to purchase a CD.

Finally, wait for the approval. Once your application has been approved, you can then do an online deposit in order to officially buy your CD. In order to make the actual purchase, you will have to transfer the money from a separate bank account to your CD account. You can easily manage this process via the bank’s online banking tools.

With any CD, whether purchased from a traditional or online bank, you are guaranteed to receive your principal payment plus its accumulated interest when your deposit has reached maturity. The interest rate will be clearly stated up front before you make the CD purchase, so in most cases you will know exactly what you will earn. Be sure to look around online banks for the best CD deals in order to find the highest interest rates to maximize your gains.