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How to Choose the Best CD (Certificate of Deposit)

a young woman drinks her coffee while researching CDs

A Certificate of Deposit (CD) can be a valuable tool for boosting your savings, but with various options available, it's essential to cut through the noise. Here's a practical guide to help you find the best CD account without unnecessary fluff:

(Need a refresher on the basics of CD’s? Start here!)

1. CD Term Period

First and foremost, CD terms play a pivotal role (a CD term is the duration your money remains deposited). Financial institutions like banks offer a variety of terms, ranging from months to years. Be sure to align your decision with your financial objectives and withdrawal needs. Short-term CDs may suit those saving for immediate goals, while long-term CDs are ideal for future expenses like a child's college tuition. Be mindful of minimum opening deposit requirements and make sure to understand the terms and conditions.

2. Compare Interest Rates

The allure of potential earnings typically centers around interest rates. While higher rates generally mean increased earnings, consider factors like compounding frequency and the Annual Percentage Yield (APY). This metric accounts for interest rates and compounding frequency. To pinpoint the best CD account, assess the APY and compare rates across different institutions for a comprehensive view of potential returns.

3. Understand the potential fees

Like any financial product, CD accounts may come with fees, notably early withdrawal penalties. A clear understanding of these fees is crucial to anticipate their impact on your earnings. Reach out to your bank to learn more about the fees associated with CD accounts.

4. Explore additional features

Financial institutions may sweeten the deal with incentives like account opening bonuses or enhanced interest rates under specific conditions. While these promotions can boost earnings, it's smart to review their terms and conditions. Keep an eye out for such features, contacting your bank for helpful information.

5. Prioritize Insured Institutions

Opting for a CD account at an insured bank provides an added layer of security. FDIC Insurance for banks covers deposit accounts, providing protection up to $250,000 per depositor, per insured financial institution. This means that insured depositors will be reimbursed for their losses in the unlikely event of bank failure.

Want to learn more about FDIC Insurance and why it matters? Check out our previous blog.

6. Consider CD Ladders

Savvy savers may embrace the strategy of building a "CD ladder." This involves distributing your total deposit across multiple CD accounts with varying term lengths. The CD ladder strategy combines the flexibility of short-term CDs with the benefits of higher interest rates from longer-term CDs.

Choosing the Best Certificate of Deposit at Academy Bank

Selecting the best CD account is the first step in embracing the full potential of these valuable financial tools. By aligning your financial goals and preferences with CD basics, you can identify a Certificate of Deposit that seamlessly integrates with your personal objectives and circumstances. This framework empowers you to kickstart your savings journey with the best account tailored to you! Get started with a CD today!

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