CD Rates vs Savings Accounts

Financial institutions offer both savings accounts and CDs where people would always have trouble which one is the best choice for them.  Savings accounts have interests just like CD rates are there for certificates of deposit.  When it comes to CDs, financial institutions like banks require depositors to have their money left to their care for a certain period of time that can range from a couple of weeks to years.  Savings account on the other hand offer depositors easy access to their deposited money at any time and security to having hard-earned money in a bank.

When it comes to interest rates, the highest CD rates can outshine what savings account can offer since the bank has full control of the depositor’s money for a certain period of time.  This control given to the bank or financial institution gives it more flexibility to have it invested in long-term investments that will be able to provide higher return rates.  These high returns can also be passed down by the institution to the depositor who chose CD.  Technically, the longer the term you have signed up for a  CD, the higher the interest rate you will be receiving.

 Liquidity is where CDs and savings accounts have a major difference.  Liquidity is the ability of the account holder to gain access to his funds or money.  Money signed up for certificate of deposit is not accessed by the holder until the contract has finished or until the account has matured.  Pulling it out of the bank or contract can lead to pricey penalties that financial institutions can automatically charge to the said account.  Savings accounts are more liquid since the holder can withdraw his deposited money at anytime he wants without the need to pay for penalties but, as long as you still have the minimum required balance left after withdrawing.

Certificates of deposit and savings accounts are secured and protected by the Federal Deposit Insurance Corporation or FDIC.  This means that your deposit has a certain amount of protection of up to $250,000 per depositor.  This type of protection makes both the CD and savings account secure.

Interest payments in savings accounts are usually added to the account once the interest is compounded which is every month and you can use it immediately.  CDs on the other hand can make use of interest payments in one of two ways.  First, it can be used after the account matures or you can have it settled so that you can use it every month.

If you are to decide which is best for you, be it savings account or certificate of deposit you should consider your situation first.  If you are the type who usually is in need of quick withdrawals to your funds, then account savings is what you need.  But if you are the type who has extra money for some investments aside from what you need, then CD with the best CD rates is perfect for you.

CD Rates and Changes in the Market

Deflation occurring in a country’s economy just like the recent downfalls is a big factor that affects CD rates from bank depositors.  Looking at the recent consumer price index or CPI have shed a light on the problem with promises of changes in the future.  With these changes, and in such a situation, depositors should be anticipating whether inflation will overtake the effects of deflation to CD rates.

 What deflation brings is the falling of overall prices in the market and is known to be the opposite of the rising prices called inflation.  Measuring inflation is by means of CPI and any changes with it in a certain period of time will show whether a country’s economy is facing inflation or deflation.  Although deflation is not a common event, 2009 marked the year of the most known deflation since the 50’s.

This affects rates in certificates of deposits where the falling of prices would mean more to depositors since they are earning purchasing power in the market.  This can make bank rates seem higher than the usual.  For example if you have invested with a 1% interest rate and there is a deflation of 1%, you will be earning about 2% after the inflation. 

Since 2009, there has been a record of deflation that reached 1%.  Since then, depositors with CDs have received a bonus from their investments.  Although it would seem low, the CDs are actually working better than it looks to the depositors.  With the interest rates remaining low, the question now is “would it be okey for depositors to keep on relying from the boost of deflation?”

In times when the market isn’t performing as well as expected, CD holders tend to be concerned.  However, this can be alleviated by the decline of CPI like when it dropped to about 1.4% which led to an increase in yield from the CD holders point of view.  Those who had an average of 1.6% interest have gained a total of about 3% in return after the trend in inflation.  The rate of inflation can’t be much of a problem to the highest CD rates, but could pose a great problem to those who are tied into a rate of about 1%-2%. 

Being in exposed in such changing environment, those who are into CDs with low interest rates are better off sticking to their savings account.  This is to avoid being tied into what you thought to be the best CD rates despite the fact that it could turn out to be the other way around.  You can also opt for long-term CDs that can earn you big amount over the inflation that’s happening but, only if the inflation gets back to moderate level and does not go out of control.

No matter what option you choose during such trends in the economy, just keep in mind that there is always a way to fully secure your investments.  Learn the twists and tricks around CD rates to get the best out of every situation. 

Understanding CD Rates

Investing is something that people should do. If you have a lump sum of money, you should not think twice about utilizing it for investment. Remember that it is a right thing to do to invest for the future. You are not only investing for yourself but for your family as well. There are a lot of ways on how to invest your money. You can invest it by buying a property. You can put up a business that you think would yield big profit for you. You can also consider investing it in the stock market. There are some people who would just simply want to open a bank account. They will just let the money rest there for a specific span of time, after which interest will be generated. A very good example is the Certificate of Deposit. Maybe some of you are aware of this. But for the benefit of those who are not familiar with it, let’s do some comprehension of what CD is.

Certificate of Deposits or much well known as CD, are debt instruments which can be short term or medium term. These kinds of deposits are being issued by thrift institutions, banks or credit institutions. People who are planning to avail CD should not worry because it is being insured by FDIC (insurance for banks) and NCUA (insurance for credit unions). People can assure that Certificate of Deposits are the same with savings account because of the fact that both are risk free and are insured by FDIC if money is being subjected to a bank. It is usually termed as ‘money in the bank’.

Process speaking, CD is different from savings accounts for they have more specific, fixed term, usually varies for three months, six months, one year or five years. CD rates are usually fixed. The main concept of this type of investment is to hold the money until its maturity. After a specific range of time, the money can then be withdrawn, together with the highest CD rates that the deposit can achieve.

Investors will entrust their funds on a certain bank or financial institution for a certain period of time. Set expectations that once you opt to do CD, you will not be able to touch your money. In other words, you can’t withdraw any amount. The banks or credit institution will then pay a predetermined interest rate which is referred as Certificate of Deposit Rate or CD rate. Bear in mind that CD rate is fixed, so it is crucial for investors to find a financial institution with best CD rates. In case that the investor opt to withdraw the money before the Certificate of Deposit’s maturity, there will be a corresponding penalty.

If you want to have the best rates, then you can do some comparison. You can compare the rates of different banks or credit unions. The philosophy of CD is that the longer your money will stay to the financial institution, the higher the interests will be. Thus the main factors for CD are the length of maturity period and institution’s interest rate.

So if you’re having hard time thinking about what type of investing method you are going to use, you can take Certificate of Deposit as your option.

Certificate of Deposit: Safest Way to Invest

Some people are a bit frightened about the concept if investing their money. Maybe it’s because of the fact that recession is occurring nowadays. If you’re going to think of it, who would really want to invest if the status of the economy is not in good condition? Definitely no one wants to take the risk. There are a lot of people who thinks that investing is not a good choice nowadays. They are afraid that they will lose their money. But if you’re going to ponder, how will you be able to know if you will not take the risk? There are really some people who are brave enough to take the risk of investing their money. Some are successful, some are not. Sometimes it depends on the type of investing method that you’re going to use. So it is really crucial for you to research about investment methods that are in demand nowadays. But there are still some traditional methods that can guarantee big profit.

If you have a certain amount of money and you want to invest it for a long span of time, then Certificate of Deposit is the best option for you. This type of investment method can assure you a decent return of the money that you invested. In the banking and finance world, Certificate of Deposit is considered as the safest investment alternative. Because of a high chance of experiencing recession, majority of the people are searching for effective investment methods and safest place where they can invest their money. That makes high yield Certificate of Deposits beneficial. Both safety and decent return of money can be assured with Certificate of Deposits.

CD only requires a minimum amount of money compared to other investment methods like money market funds which requires a big sum of money. By the time that the Certificate of Deposit reaches its maturity, the bank or the financial institution will then pay the amount of CD rates or interest rates that was agreed upon. A good example of Certificate of Deposit is when the person invested his or her money and it will stay in the financial institution for six months and there is a guaranteed four percent interest rate that will be added on every minimum investment of let’s say $6,000. If the invested amount is lower than $6,000 therefore the interest will be lower as well.

Certificate of deposits are often being offered by lending institutions. But some still prefer to do it with a bank. The rates may vary from one bank or financial institution to another. So it is important for the investor to search for institutions that can give best CD rates. If you think that the first financial institution that you found offers a high interest rate that means that there are still other institutions that can offer the highest CD rates possible.

Since you are entering a delicate transaction, it is crucial for you to read all the details of the CD agreement before signing it. You must understand also that you can’t withdraw any amount; you have to wait for the maturity period. That is the reason why you really have to ascertain carefully if you’re going to subject your money to Certificate of Deposit or not. Because once you take it as your option, there’s no turning back.

Understanding CDs and CD Rates

A certificate of deposit (CD) is simply another term for time deposit. What this generally means is that you entrust your hard-earned monetary savings to a bank or a credit union, agreeing to leave a certain significant amount into their hands for a certain period of time. With federal insurance that may or may not cover the entire sum you are willing to deposit, you will end up having magnified the amount of money you deposited by gaining interest that the bank or union has to offer. This is why most people decide to invest in CDs—so that their savings are not left standing in a dormant and unproductive state.

Although certificates of deposit (CDs) were in legal existence way back in the 1960’s, they were not very popular until about a decade later. This is mostly due to the misconception that CDs did not offer insurances. On the other hand, in the 1970’s CDs gained popularity when it was made clear that they did offer federal insurance protection that were reported to amount to $100,000. Moreover, as compared with regular bank savings account, CDs promised interest rates that are way higher. This simply means that CDs offer more money in store for you, and that money is protected and insured.

Before you make the final decision on whether to choose CDs over regular bank savings accounts, there are a few important things you must weigh. Like any other thing in the world, CDs also have their pros and cons. On the bright side, CD rates are generally higher than regular savings accounts. In addition to that, they are known to do well come inflation period. Even more than that, if you find the best CD rates with proper insurance coverage, you’ll have the possibility of enjoying the benefits of ‘compounding’ wherein you significantly earn interest from interest.

On the other hand, since you are agreeing to leave your money without withdrawing for a fixed timeframe, you should make it a point to find a reputable and stable bank or union that is most unlikely to fail and go broke. Plus, if you are left with no choice and an emergency prompts you to withdraw the money you have deposited outside of the agreed timeframe (whether in installments or in full), you should know that you will be penalized with an amount reaching 3 to 6 months of interest. Therefore, you should definitely make sure that you’ll have a regular savings account at hand aside from a CD.

After having gone over the pros and cons of CDs, you should start looking for the highest CD rates to earn the most money from your otherwise dormant savings account. When hunting for the best CD rates, try checking out what banks call ‘jumbo’ CDs. Jumbo CDs promise payment of higher interest rates. On the down side, you should know that a certain fractions of it may or may not have federal insurance. As a final tip, when searching for the best CD rates, do make the necessary research before making the final and irrevocable decision of entrusting your funds to the right hands.