How do you find a high rate Certificate of Deposit? This page discusses way in which you can find a high rate Certificate of Deposit as well as providing you with a general guide to CDs.
What Is A High Rate Certificate Of Deposit
A high rate Certificate of Deposit (otherwise known as a high rate CD) provides bank customers with a higher rate of interest investment in exchange for a loss of liquidity. High rate Certificates of Deposit usually offer a fixed interest rate over a specific set term, during which the customer is not able to withdraw the money deposited. In the event of a situation requiring withdrawal, one can only do so at the expense of a significant penalty.
When you are comparing a high rate Certificate of Deposit you should look at more than just the interest rates. There are also other important factors that you need to consider like terms, call features, and the way interest is paid, since all of these things will significantly affect your CD return.
Ways To Assess A High Rate Certificate Of Deposit
You have to determine the current Annual Percentage Yields (APY) of the Certificate of Deposit. Understand that the APY takes into consideration compound interest so that you can make a better comparison than if you are simply comparing annual percentage rates or APRs. You may want to call your local banks or compare other high rate Certificate of Deposit deals using online websites or resources.
Contrast and compare the terms of CDs. High rate Certificates of Deposit with longer terms usually have higher interest rates. However, you will lose access to your money for the duration of the CD agreement.
Check each Certificate of Deposit for call options as this will allow the bank to force you to cash in your Certificate of Deposit after a certain time if it no longer wants to give the interest rate agreed. For example, a 5-year CD may be callable after only 1 year. If the interest rate falls, the bank will likely force you to cash it before reaching the maturity date. However, only the bank will benefit from call options because you cannot cash in a callable high rate Certificate of Deposit early.
In addition to the above, compare how the banks pay the interest on the CD. Some high rate Certificate of Deposit plans add the interest rate to the CD, which benefits customers who do not need access to the money and prefer to have the money earning returns. Other CDs pay the interest to the customer over the term of the loan, which is generally preferable to those looking for a fixed income investment. Moreover, find out the early withdrawal penalties for every CD. In general, the longer the term of the high rate Certificate of Deposit, the larger the penalty is. Of course, penalties can differ among financial institutions.