A certificate of deposit (CD) works similarly to an online savings account or money market account and is completely risk-free. The difference is that the CD “locks up the money” for a certain period of time. You must pay a penalty to access the fund before the period ends.
CDs are less illiquid than regular checking or savings deposits, but you can achieve higher returns with this financial product. This is especially true if you open a CD account with a long term, such as a 60-month CD instead of a 12-month CD.
What you need to know about certificates of deposit.
If you’ve never opened a certificate of deposit before, you may be wondering how it works and why people choose this option. Here are some important factors when considering a CD account:
- CDs offer higher interest rates than other deposit products. According to recent FDIC data, the average national rate on 60-month loans is about four times the average rate on national savings accounts.
- The longer the CD, the higher the yield. Investing your money in a longer schedule can lead to a much higher yield. According to the FDIC, the average annual rate on a one-month CD is only 0.02%, not much different than a basic savings account.
- CD rates can rise or fall over time. Credit card interest rates are determined by current interest rate conditions, including the base interest rate. This means that you can get a better CD rate every time the base rate goes up.
- The larger the amount, the higher the CD fee can be. If you need to deposit more than $100,000, you can purchase a “Giant CD.” This type of CD requires a high minimum deposit, but banks are willing to pay a higher interest rate to attract more funds
Banks and credit unions that offer the best CDs pay higher rates or ratios than the national average. It also supports reasonable minimum deposit requirements and a favorable combined schedule. An excellent customer and digital experience is the norm even at these institutions. Below we take a look at the best banks and credit unions for certificates of deposit and the best CD and certificate rates by period.
The best interest rates on credit cards are usually provided by online banks. We looked at traditional banks and online banks, and we even showed some of the investment companies that offer the best loan rates we can find.
Barclays currently sells the best bank CDs along with 12-month CDs.
Get 3.05% APR when you buy a 12 month CD right now!
Plus, their CDs have no minimum balance requirements, no monthly fees, and are easy to transfer!
PNC Bank offers many popular banking products, including certificates of deposit. Its CDs require no monthly administration fees, and you can track your account at any time online or through the BBVA mobile banking app.
CD usage ranges from 1 month to 10 years, and longer CDs incur a higher fee. Please note that if you use the money early, a penalty will apply.
If you cash out a CD early for less than one year, you pay 1% of the withdrawal amount plus $25. If you cash out a long-term CD early, you pay 3% of the withdrawal amount plus $25.
Discovery Bank Find a 12-month CD.
Discovery Bank offers short- and long-term CDs at a competitive price.
Discover Bank CDs can be opened for at least $2,500, and there’s a three-month interest penalty for early withdrawals.
You can currently earn 3.00% interest per annum on a 12-month CD from Discover. That’s better than most savings account options!
CIT Bank is known for its popular high-yield savings account known as the Savings Builder, but it also offers CDs in great condition. The 11-month CDs with no penalty stand out because they offer outstanding returns. There’s also no penalty if you need to use the money early.
CIT Bank also offers regular CDs in various lengths and large CDs for deposits over $100,000. There are no CDs that include an account opening fee or account management fee.
CD fees: CIT bank currently pays fees ranging from 0.05% to 0.45% for CDs, depending on the terms chosen. The highest rates are available for 4-year CDs and 5-year CDs with fees of 0.40% and 0.45% per annum, respectively.
Peerstreet is similar to Lending Club and other lenders in that it invests in short-term loans. The difference is that Peerstreet makes real estate loans, so your money is secured by real estate. They advertise a yield of 6-12% on a 12-month loan. It’s a great alternative to CDs.
We rated Synchrony Bank because it has no minimum balance requirement but competitive interest rates on loans. We offer a 15-day guarantee that allows you to increase your advertising fees if you increase your advertising fees within 15 days of purchasing your CD.
The duration can range from 3 months to 60 months. Early withdrawal fees on their CDs are also reasonable. For example, early withdrawals from CDs of 12 months or less charge a simple 90-day interest fee at the current rate.
Word is a lending platform where you can invest in small business loans. A good feature of this platform is that it pays a flat rate of 5% on bills. Check out Decent Word’s review here.