Take Advantage of Today’s Competitive CD Interest Rates
The Federal Reserve’s recent rate cut has created a window of opportunity for savers to lock in high certificate of deposit (CD) interest rates. With rates at their highest in over a decade, it’s essential to shop around and find the best offers.
Understanding CD Rates
Historically, longer-term CDs offered higher interest rates than shorter-term CDs. However, in today’s economic climate, the opposite is true. The highest CD rate currently stands at 4.30% APY, offered by Marcus by Goldman Sachs on its 9-month CD, with a $500 minimum opening deposit required.
How CD Interest Works
The annual percentage rate (APY) determines the interest you can earn from a CD. This rate takes into account the base interest rate and how often interest compounds. For example, a one-year CD with 1.81% APY and monthly compounding would yield $18.25 in interest on a $1,000 deposit. In contrast, a one-year CD with 4% APY would earn $40.74 in interest on the same deposit.
The Power of Higher Deposits
The more you deposit in a CD, the more you stand to earn. A $10,000 deposit in a one-year CD with 4% APY would earn $407.42 in interest, resulting in a total balance of $10,407.42.
Beyond Traditional CDs
While interest rate is a crucial factor, it’s not the only consideration when choosing a CD. There are various types of CDs that offer different benefits, often with slightly lower interest rates:
- Bump-up CD: Allows you to request a higher interest rate if the bank’s rates increase during the term.
- No-penalty CD: Enables you to withdraw funds before maturity without penalty.
- Jumbo CD: Requires a higher minimum deposit (usually $100,000 or more) and often offers higher interest rates.
- Brokered CD: Purchased through a brokerage, these CDs can offer higher rates or more flexible terms, but carry more risk and might not be FDIC-insured.
Finding the Best CD Rates
With so many options available, it’s essential to compare rates and terms from different financial institutions. We’ve narrowed down some of the top CD offers to help you make an informed decision.
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