Despite the recent decline in interest rates across all bank deposit products, certificates of deposit still offer a pretty good value compared to other savings options. Whether you look for a no-penalty CD, like one you’d find at Ally Bank, or just a traditional CD with a higher rate, saving with a CD beats putting your money in a checking account earning 0.01% (if anything!).
Where can you find the best bank CD rates? I maintain an updated list of all competitively rated CDs for maturity yields of less than 24 months (2 years). I typically don’t put my savings into a CD for more than two years because interest rates are usually on the unpredictable side, at least when you go out that far.
One thing to consider is that with a CD your principal is FDIC insured and protected from loss, but they are not without risk. If you’re earning 2% on a CD and inflation is 3%, you’re actually losing 1% each year. Of course, in a 0% checking account, you’re losing 3%. CDs are simply the better of several evils.
Tags: Certificates of Deposit
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