Many people have their savings parked in a traditional savings account that is safe but pays little interest (high yield savings accounts represent a much better deal these days). Yet it is possible to find a better savings instrument that pays more in interest without sacrificing the security of holding funds in a federally insured institution. A certificate of deposit (CD), for example, will pay a higher rate of return as long as the account holder guarantees that he or she will not touch the money for a specific period of time. Here are some basic tips for finding the best high interest CD.
First, account holders should be aware that the longer they are willing to put their money in the CD, the greater the amount of interest that the bank will pay on the account. Because the bank knows that it will be able to invest the principal for a longer amount of time, a five-year CD will yield a greater rate of return than a three-year CD. The extended period of investment makes it more likely that the bank will earn a good rate, enabling them to pass it on to the consumer. Thus, consumers should open CDs with the longest possible terms according to their particular financial needs and budget.
Secondly, potential CD holders should not be afraid to look outside their existing bank for a better interest rate on a CD. One’s own current bank may very well offer the best rates of return on CDs, but that is not necessarily the case. It is wise to call and visit other banks to find out which one pays the most in interest and then open the CD at that bank.
Savers who take the time to do their research should have no problem finding a bank that will give them an excellent return on their CD. Those who keep these steps in mind will earn more on their money over time. This better rate of return will enable them to better prepare for the future.