How to Choose the Best Certificate of Deposit

A certificate of deposit (CD) is a great way to save money, especially with the current high-interest rates. With a CD, you can lock in a rate of interest for a set period of time. However, if you withdraw before the CD term ends, there can be a penalty associated with it. Knowing how to choose the best CD and when to withdraw early can help you maximize your yield.

If you find a higher-yield certificate of deposit and the math checks out to earn more money than the CD you have, consider an early withdrawal from your current CD. A withdrawal penalty will apply, but if you do the math and the higher yield outweighs the penalty, it can be worth it. When deciding whether to withdraw early, keep in mind that higher yields typically come with longer terms.

The best interest rates on CDs—certificates of deposit—today range as high as 4.50%, depending on the CD's term. And, average CD yields are typically higher than savings accounts and money market accounts. To make the most of your CD, try to find the balance between a high yield and a reasonable term length.

When shopping for a certificate of deposit, look for banks or credit unions that are offering promotional rates. Promotional rates can often be higher than the standard rates offered by banks, so it’s worth looking for them. However, in some cases, the promotional rate only applies for a short period of time, so it’s important to know what you’re getting into.

Before investing in a CD, look for any fees associated with the account. These fees can include early withdrawal penalties, maintenance fees, and minimum balance requirements. Knowing what fees you can expect to pay can help you make sure that you are getting the best return on your investment.

With careful research and planning, a certificate of deposit can be a great way to save money and earn more interest than you would with a traditional savings account. Just make sure you understand the terms of your CD and any associated fees before you invest.