Uninsured Banks Have High CD Rates

A Certificate of Deposit, commonly known as CD is a financial product at a banking institution whereby money once deposited cannot be withdrawn over a certain term or period of time. When the term is over, the money can be withdrawn along with the interests accrued or it can be held on for another term. The longer the term, the higher the yield on the cash! High CD rates guarantee the investors get the best yield or interest value possible at the given time.

Rates change by the day, the week or even the month depending on the financial institution that you choose as well as the type of CD. This means that before you make your investment, you need to shop around so that you can know what CDs are on offer and which ones will give you high CD rates.

There are some recommended ways of going about this:

1. Look for a federally backed or uninsured bank. These usually offer higher CD rates than those that are insured. This may be risky of course, but if the bank is doing well and has been for a long time, it’s a risk worth taking.

2. Larger sums get high CD rates. Deposit a large sum. You’ll need to know how the CD rates increase from amount to amount, and even $500 or $1000 more can change your CD rate to a higher one.

3. You might want to look around small banks before big ones – they tend to offer higher CD rates.

4. When getting your CD account, consider opening it as a personal one as opposed to a business one. They offer higher CD rates.

5. The longer the period of investment, the higher the chances of a high CD rate. Choose the longest period that you can handle. A CD can be invested for a minimum of 6 months, 1 year, 5 years or more.

6. Check credit card companies as well. In an aim to attract investors, they tend to offer higher, more competitive rates.

7. Deposit brokers are also able to offer high CD rates. These are independent salespeople who negotiate with institutions to bring them a certain amount in deposits and through this are able to negotiate higher interest rates which 

they can then pass off to investors.

Advantages of CDs

1. Of all the high yield accounts, they are the ones with the least risk. In addition to that they are protected by the Federal Deposit Insurance Corporation (FDIC).

2. You can sway the development dates of your accounts and have access to a portion of your money.

3. CD’s can be bought directly from the bank without a commission or any other extra changes.

4. CD’s earn more interest than the traditional money savings account hence enabling your money to grow faster.

Disadvantages

1. If for some reason you need your money before the term is over you will incur very serious penalties for withdrawing your money early.

2. If you choose to hold your CD through a stockbroker you will have to pay fees for products other than the ones they sell.

3. There is an element of risk, especially if you are going for a high CD rate because you’ll get them in uninsured banks only.

There are other risks with CD’s that you ought to consider before you go in. The issuing bank may decide to terminate, or call the CD after a certain period especially if interest rates drop. 

They do this to cut their losses. On the other hand, should rates rise, you are still stuck at the rate which you invested in.

Despite all these factors, if you are looking for a low risk investment instrument, and don’t want to go to either the capital or stock markets, get yourself a CD. They are rather easier to manage than other investment instruments and are an almost sure thing. The one thing in your interest to do is invest in CD’s with high CD rates – make your comparisons before you invest!