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CD Rates: Shopping for the Best CD Rates and Certificates of Deposit

CD Rates: Shopping for the Best CD Rates and Certificates of Deposit

If you're new to certificate of deposit (CD) investing you're probably discovering investing in a CD is one of safest investments you can make. With the stock markets declining in value and the VIX (market volitiity index) high right now you're probably wondering what investment to make.

Another investment that has had a negative return the past several year is real estate. In fact if you stayed out of the stock market and real estate market the past five years you are ahead of the game. Unfortunately most people are investing in real estate in their primary residence and the stock market through their IRA account.

A good place for your emergency cash account is in a certificate of deposit or savings account. Both CD rates and savings rates aren't paying that much but at least you won't lose any of your principal investment as long as you stay under the FDIC insured amount.

There are many different types of CD accounts with many different CD terms, shopping around for the best fit for you will maximize your returns. When you invest in a traditional CD you place your money into a timed account with a financial institution like a bank or credit union. You agree to keep the money in the CD account for a set term which can range from a day to many years.

The financial institution pays you a better CD interest rate than you would receive from a checking account or most savings accounts. Although you agree to have the money in the account for a fixed period of time you can have access to your money before the term ends but you will pay a penalty for this privilege.

These days many banks and credit unions offer more flexable types of CD accounts like a change to "bump-up" or increase the CD rate on the account if market CD rates rise during the CD term. Another type of CD account allows the investor to add money into the CD every month or withdraw money early without a penalty.

Ally Bank offers CD accounts that allow you to raise the interest rate or withdrawal money without penalty before the CD matures. In addition, Ally Bank CD rates are some of the best CD rates available right now.

When shopping for certificates of deposit with the highest CD rates ask what type of account it is. Can you raise the CD rate, can you take money out early without penalty, can you add money into the account after opening it. Also find out when the CD matures and mark the date on a calender.

Besides banks and credit unions you can also open a CD account at a brokerage firm. These types of CD accounts differ so be sure you understand what you're getting into when you invest. The Federal Deposit Insurance Corporation (FDIC) protects your investment up to $250,000 if the bail fails.

Author: Stacy Everest
October 10th, 2011