Rediscovering Bank Certificates of Deposit in an Uncertain Environment

An uncertain economic outlook can be bad news for a variety of investment and savings plans.  Most people think about a down stock market when the economy is week or the future is uncertain.  Bank certificates of deposit (CDs) on the other hand, are virtually risk free and can provide a very competitive rate of return.

Most investment options don’t carry the same guarantees as bank CDs.  In fact, many low risk investment alternatives can lead to principal losses due to market forces such as dips and drops in the stock market and bond market.  CDs are a great option in a slow economy and/or a low interest rate environment.

Unfortunately, many bank savings rates and CD rates also tend to perform poorly, on average, during these times.  The key to CD investing is finding the best interest rates and terms available.  Fortunately, there are always some bank offering CD interest rates that are well above the national average rates offered by banks and other financial institutions.

Comparing rates at the big banks and money center banks is good starting point to see some of the average rates of return available but, these bank rates often leave savers discouraged.  By shopping and comparing local and regional bank CD rates, savers can beat the returns found at the big banks.

After viewing the average rates, prospective depositors should compare the rates offered in their state of region.  Consumers on the west coast would be well served by looking at bank rates in California, savers and investors in the southeast could compare just Florida CD rates, and those in the heartland could look at only Illinois rates.

While it may be difficult to forecast exactly where the economy and interest rates are headed, CD investors can choose from a variety of different CD terms to cover several different investment time horizons.  Common certificate terms range from three months to five years.  Generally, the longer the term of the CD, the higher the interest rate on the account.

Once the term or maturity of the account is selected, account holders will need to figure out how much you’d like to put in.  Most CDs can be opened with an initial deposit of $1,000.00 but there are some banks that have lower initial deposit requirements as well.

Comparing and shopping CD rates and terms at a variety of financial institutions is step one towards getting the best rate of return.

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