In the world of day-to-day personal finances, finding the best CD bank rates can seem overwhelming. Even those who are thorough in their research can be besieged by the options available. Fortunately, it is not as daunting as it may seem at first glance and discovering the best CD bank rate takes only a small investment of time. There is no need for insider knowledge or a degree in finance to find those banks that are offering excellent rates on their Certificates of Deposit.
Getting started simply involves typing the phrase “CD bank rates” into your search engine. You will be rewarded with any number of reputable sites that monitor CD rates and maintain charts, updated daily, that compare the interest rates that different banks have for their CDs, making evaluation easy. A quick glance will provide you with all the information you need. When reading the charts, there are only a few key terms you need to find and understand.
The first is the interest rate, given as a percentage, showing how much money an investment will earn (1.2%, 0.80%, etc.) for a particular bank’s CD. Second, look for both the minimum investment required for a CD and the length of its term (one month, one-year, and five-year). This shows you the least amount you can purchase a CD for and how long the CD will be drawing interest. Third, look for the method by which the interest is compounded – daily, monthly, semi-annually, annually, or any fraction of these. The greatest return, or yield, comes from those CDs whose rates are compounded more frequently. Thus, a CD whose interest is compounded daily will return a greater APY than one whose interest is compounded semi-annually.
The APY (Annual Percentage Yield) is the amount of return actually received from your investment, and is based on the method by which the rate of interest is being compounded, and should always be greater than the interest rate. This is the most important figure. For example, if $1000.00 were invested in a six month CD at an interest rate of 10% compounded daily, at the end of six months you would receive $51.46 in interest. Compare this to $50.00 if the interest is compounded semi-annually (there are many free, online calculators available that will help you determine these numbers). The best CD rates are those paying the greatest APY for the amount invested.
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