Current CD Rates–Any good investor knows how important it is to shop around for the best investment ventures. The same principle applies when it comes to investing money into CDs. Although it is one of the safest investment ventures, it is important to get the most out of the invested funds by earning the highest yield possible. Financial institutions offer deals that they think their customers want. Without shopping around for rates, investors may be locked into an interest rate that they do not want. Investors must make choices that are right for their financial futures.
The Advantages of Searching for the Current Certificate of Deposit CD Rates Before Investing
There are no disadvantages to shopping around for rates—only advantages. Investors should make sure to place themselves in a position of control when it comes to investing their money. Here are the advantages of searching for the current CD rates before investing:
- Committing early does not guarantee the best rates. Banks and credit unions may offer a bait offer to get new customers to become members. The rate may be slightly about the current market rate. Once the banks and credit unions get their quota met, they may lock in the interest rate and not increase it for quite some time. In the mean time, investors who took the deal that they offered may be surprised to find that other financial institutions offer higher interest rates on their CDs.
- Financial institutions compete with each other. Investors should continue to search for the best rates until the desired rate is available. Financial institutions keep up with the current CD rates that others offer, and they raise their rates to maintain customer business. Smaller banks and credit unions may offer the best rates in order to get new customers through the doors.
- Searching for rates gives the investors the opportunity to research the financial institution. New banks and credit unions may offer great deal, but investors do not want to invest their money if the financial institutions do not have a long history, or if they are not insured. This can cause financial ruins for an investor if their money is not insured. Banks that have not been in existence for a while may offer higher rates now, but they may not be able to compete with large financial institutions in the future.
- Investors may be able to use the rates of other banks and credit unions as a bargaining tool. Take a computer printout or flier of a competitor’s rate to a bank or credit union to see if they will negotiate their rates. It may be easiest to try this method with the bank in which investors are members. This method may or may not work, but it does show the staff that their members are doing their homework.
- Researching helps investors determine the amount of money they want to invest in CDs. Many people invest their money in various investment opportunities. Investors may still want to invest money in CDs, but if the current rates are not very impressive, they may only want to invest a small portion of their money in CDs. If CD rates doubled or tripled today, there would be many people who would pull their money out of other investments to invest their money in CDs.
Terms to Avoid When Searching for Certificate of Deposit CD Rates
- Avoid very short term CDs. Rates for CDs that have terms of less than 1-year usually earn less than 1% interest. The return on CDs is not very substantial so the interest that investors earn on such a low interest rate will not be very much.
- Avoid long CD terms. The market changes daily. Investors who lock themselves into interest rates for 5 years may lose a large amount of interest if the interest rates increase before the terms of the current CD ends.
- Avoid terms that do not offer the option to ladder the investments. Laddering helps investors have access to their money more often than traditional CDs do, and it helps investors benefit from CD rate increases. Customers can have varying terms on varying amounts of money. It offers the most benefits because investors can benefit from a different interest rate with each invested amount.
Investing money in CDs may seem like a difficult task to those who do not use their research skills to their advantage. Remember that financial institutions want their customers’ money so customers are in an advantageous position that can make them money.