Brick and mortar banks will change the interest rate based on how much you deposit. The tiers are often in the thousands of dollars to get better interest rates.

For example, here are the interest rate tiers for a 60-month CD (Feb 2018):

• $0 – $9,999.99 – 0.60% APY
• $10K – $24,999.99 – 0.80% APY
• $25K – $49,999.99 – 0.80% APY
• $50K – $99,999.99 – 0.80% APY
• $100K – $249,999.99 – 0.85% APY
• $250K+ – 0.85% APY

Capital One 360 has a 60-Month CD with a 2.65% APY, no minimums to get that highest tier.

A 36-month CD at Ally Bank is an example of an online bank with tiers (March 2018):

• $0 – $4,999.99 – 2.6% APY
• $5K – $24,999.99 – 2.70% APY
• $25K – $49,999.99 – 2.75% APY

Early Withdrawal Penalty

There is one feature that often differs between banks, other than interest rates – the early withdrawal penalty.

You’d think that there wouldn’t be many variations among banks on the early withdrawal penalty – but there is.

The early withdrawal penalty is assessed if you close your CD before its maturity date. You always have the option to withdraw your funds and close the entire CD, you simply surrender some or all of your accrued interest.

The penalty varies based on the length of the CD.

Ally Bank has the lowest early withdrawal penalties:

• 24 months or less: 60 days of interest
• 25 months – 36 months: 90 days of interest
• 37 months – 48 months: 120 days of interest
• 49 months or longer: 150 days of interest

Best Certificate Of Deposit Rates 2019

Discover Bank has a more typical early withdrawal penalty schedule at online banks:

• 11 months or less: 3 months of interest
• 1 year to < 4 years: 6 months of interest
• 4 years to < 5 years: 9 months of interest
• 5 years to < 7 years: 18 months of interest
• 7 to 10 years: 24 months of interest

Here’s a brick and mortar schedule, from Bank of America:

• 90 days or less: greater of all interest earned or 7 days of interest
• 90 days up to 12 months: 90 days of interest
• 12 months – 60 months: 180 days of interest
• 60 months or longer: 365 days of interest

Different CD Types

Up until now, you’ve seen the most basic CD – you deposit a sum, it accrues interest until maturity, then you get it all back.

There are banks with CDs that have extra features.

Ally Bank has led the way with the variety of CDs they offer:

• High Yield CD – This is their name for the standard CD.
• Select CD – This CD changes from time to time but will be an oddball term with a promotional rate. At the moment, it is a 2.15% APY 30-Month Select CD that automatically renews into an 18-Month High Yield CD when it matures. Ally doesn’t otherwise offer a 30-Month maturity.
• Raise Your Rate CD – If you dislike CD rates going up when you’re locked in, this 24-month or 48-month CD has a competitive interest rate that can bump up (once for a 2-year, twice for a 4-year) if the rate increases.
• No Penalty CD – This CD has no early withdrawal penalty, but it’s usually an odd maturity (now 11 months) and a slightly lower interest rate.

Renewal Bonus

If it feels like Ally Bank gets a lot of love in this post, it’s because I use them and they have some of the most innovative deposit products in the CD space.

One of those innovations is what’s known as a “Loyalty Reward.”

If you renew a CD at Ally Bank, they give your interest rate a little bump. As of February 2018, that bump is only 0.05% APY:

Hi Jim, we currently offer a .05% Loyalty Reward for CD renewal, and will keep the community updated on any future offerings as they become available. Please let us know if we can answer any further questions! ^KM

— Ally (@Ally) February 22, 2018

When you renew, you take whatever the prevailing interest rate and add 0.05% APY. In previous years, when interest rates were higher, I saw Loyalty Rewards as high as 0.50% APY.

You now have a solid understanding of the lay of the land when it comes to certificates of deposit!

Investing your money in a CD (Certificate of Deposit) is one of the best ways to increase your savings. CDs generally pay more than standard savings accounts because their rates are typically higher than those of traditional savings accounts. The only catch is that you need to agree to leave your cash untouched for a specified period of time.

Still, this does not mean that you will necessarily grab the best and highest rate by merely opening a CD at any bank. Some banks, especially large national banks, pay the lowest rates in the market. Hence, it is crucial that you do your research and hunt down a bank with some of the best and highest Certificate of Deposit rates.

Here are some tips on how to find the best and highest CD rates:

1. Determine how much you are willing to invest

If you have a bonus, tax refund or generally a higher than needed savings account balance, you might want to invest part, if not all of those funds, in a CD. To figure out how much you can invest, factor in an emergency fund and any expected near-time expenses such as insurance, tuition or property taxes. Once you have deducted that amount, you can invest the rest in a CD. The APY (Annual Percentage Yield) is likely to vary depending on the amount you deposit.

Also Read:17 Best Low Risk Investments for High Return

2. Consider opening a CD account at Nontraditional banks

For you to get the highest CD interest rates, you need to consider opening a CD account at a nontraditional bank, which is highly likely to give you a great deal. A traditional bank typically gives CD rates at 0.02% for a 6-month term, whereas you can get CD rates of 1.5% for the same period from a nontraditional bank.

3. Use online comparison shops

There are some websites like DepositAccounts, MoneyRates, and Bankrate that aggregate CD financial rate information of different financial institutions. You can use these websites to review which banks and financial institutions give the best and highest rates. However, make sure to review these search results, since banks that do not necessarily have the best rates can top these sites just because of advertising on them. Hence, scroll down the entire list and you could possibly find one that offers better rates. Also, note that none of these online websites include all CD issuers.

4. Consider credit unions

According to a report by the National Credit Union Administration, credit unions that are also included in the online comparison are paying quarter points more than traditional financial institutions on ten thousand dollar 5-year CDs plans. Most investors count themselves out from buying CDs from credit unions simply because they do not meet certain credit union membership requirements. However, most credit unions are less stringent than you would think.

A good example is the PenFed Federal credit union. This credit union is open to people serving the US military, government employees, and their families. However, regardless of this requirement, almost anyone can become a member by simply joining the National Military Family Association, which is less restrictively available to Military members and their families. Such easier eligible options are ever more common.

5. Opt for long-term plans to enjoy higher rates

One of the best and easiest ways to increase your rate is by investing in a long-term CD. For instance, investors may get 1.3% APY on annual CDs plan, whereas others get 2.3% on five year CDs. The only downside to going long-term is that you will be tying your money up for longer periods, which, in a rising rate environment, may cost you in lost earnings. That is why laddering is highly suggested.

6. Negotiate CD rates

Although most banks give a fixed rate for CDs, there are those that allow you to negotiate a better deal. Some banks and credit unions allow investors to negotiate one interest rate per maturity on CD investment. Although most banks do not list this as a CD feature, it will not hurt to call the bank and speak with a financial officer if you already have a CD that is almost at its maturity.

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7. Create a CD ladder

If you do not need to access your funds immediately, you can benefit from creating a CD ladder. This involves the creation of multiple smaller amount CDs as opposed to one account with a large sum of money. Set the smaller CDs to mature at different intervals so that you have one maturing after 6 months, the next one after a year, and then after two years and so forth. Implementing a CD ladder gives you periodic access to your money whenever you need it. You also have the option to reinvest your funds once they reach maturity. However, always remember that the longer your term, the higher your interest rate.

Best Certificate Of Deposit Rates

8. Use a CD Barbell Approach

A CD barbell is quite similar to the CD ladder, only that you are expected to set up long-term and short-term CDs and skip the medium-term ones. Short-term CDs enable you to earn interest quickly while the long-term CDs have some of the best interest rates, which makes them an essential part of this strategy. Hence, once your short-term CD Matures, you can roll them over to the long-term CD to continue earning.

9. Employ a CD bullet approach

A CD bullet approach is when you purchase CDs at different times but choose the same maturity date for each. This is a great way to avoid interest risks, especially if you are planning for a long-term goal such as retirement. You can take advantage of traditional bank rates or credit union CD rates to implement this strategy. Just make sure to compare and choose an institution that will give you the best return on your investment.

10. Confirm the legitimacy of the unknown banks

New predominantly online banks are popping up each day and offering quite attractive rates to lure customers. However, before depositing a large sum into these banks, make sure you verify their legitimacy to avoid losing all your money. One of the best ways to check a bank’s legitimacy is by calling the FDIC. You can also look online using the FDIC’s BankFind tool.

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