Bank CD rates are posted everywhere. They are becoming a more popular way to invest money so financial institutions are capitalizing on it. They want to keep their existing customers and recruit as many new customers as possible. How do investors decide which financial institution to invest their money? It is easy to find certificate of deposit rates available online and at local banks. Each has a wonderful offer that seems to be the best available. Investors must remember that these financial institutions want their money so they have some say in the rates they receive.
Pros and Cons of Online Bank Certificate of Deposit CDs
- Online banks usually have the highest rates. Online banks try hard to gain new business. It may be harder for them to get new customers because many customers may not even know that these online banks exist. The financial institutions may increase their rates to compete with larger banks and local banks. It is always beneficial for customers to shop around for rates.
- The terms of online banks may be more flexible. Customers like flexible terms on their CDs. Online banks may offer terms between 3-months and 5-years. Many of the online banks even offer the option to ladder the investments so that there is always money available when needed. Online banks may adjust terms as the market changes.
- Online banks may be a less personal experience. It may not always be easy to speak to someone when the need arises. This experience may be less personal. It can take a long time to speak to a representative, depending on the day and time called. When problems arise, customers may want to talk to a representative immediately and it may not be possible to speak to someone for several days.
- It may take longer to receive money. Many online financial institutions hold on to customers’ money for as long as 7 days before allowing access. It may take an additional 7 days before the money is transferred into a savings or checking account. If something unfortunate happens during that time, customers may be forced to turn to another method to finance their financial needs.
Pro and Cons of Local Bank Certificate of Deposit CDs
- Customers may be able to negotiate their rates at their own bank. It may be much easier for customers to get the good rates that they want from their own local bank. They take into consideration the amount of time that customers have been a bank member and the amount of money they plan to invest. They generally want to keep their customers’ business so they do their best to make them happy. Not all banks may be open to negotiation, but it is worth it to try.
- Customers can speak directly to someone about their investment. Customers have the freedom to walk directly into the bank and speak to someone about their account. It is a more personal experience, and customers can be confident that their money is in the right hands. It is also easier to receive the money if the need arises to withdraw money from the CDs.
- The terms may be less flexible with local banks. Many banks only offer certain CD rates. They usually prefer that customers invest their money in the long-term CDs so they make the best offers on their longest CD terms. Customers who are a little unsure about investing their money may want to start with a short-term CD. They can roll the money into a CD with longer terms after they decide if this investment method is in their best interest.
- The rates may be lower. Local banks have so much business that they may decide to keep their rates at or lower that the market rate. Most of the bank’s business comes from checking and savings accounts so they may not be very interested in offering the best rates to customers. Local banks may offer competitive rates when they want to bring in new customers. Customers should invest in CDs during this time to get the best rates on CDs.
Online and local banks both have advantages and disadvantages of investing in CDs. Customers have a great amount of freedom to decide which financial institution is the most beneficial. It may be possible to negotiate CD rates with when investing large sums of money. Shop around to find the best rates with the greatest amount of flexibility. Compare the rates of online and local banks before making a decision.