3 Things to Know Before You Buy Certificate of Deposit Accounts

Determining Your Best CD Choices

September 2012

When exploring your savings options, you may be looking beyond regular savings accounts and considering a certificate of deposit. It's common for people to see the process as setting out to "buy" certificate of deposit (CD) accounts at a bank, but others see it as simply depositing money since these days you don't receive an actual "certificate."

Either way of thinking is fine as long as you understand that a CD is a time deposit, which pays you interest when you agree to keep your money with a bank for a set length of time. At the end of that term, the CD matures and you receive your deposit back along with the interest that has accrued. Most CDs carry an early withdrawal penalty, which helps provide incentive to stay the course toward your savings goals.

So whatever the case is in your mind — if you "buy" certificate of deposit accounts or "deposit" money in CDs — you most likely start by looking for the highest interest rates you can find for the longest term your budget can bear. However, there are a few additional factors that will affect the your CD choice, too.

Keep the following things in mind before you choose a CD:

  1. Many banks require a large minimum opening deposit to get their best CD rates. If you don't meet this minimum, you may not see the best return for your money. By contrast, here at Ally Bank, we don't require a minimum opening deposit to buy certificate of deposit accounts. You can open and fund a CD with any amount and still get our great rates.
  2. Find out if the bank compounds your interest daily to help your savings grow faster. Some banks may only compound weekly, monthly or even annually. Interest on Ally Bank CDs is compounded daily.
  3. Make note of the early withdrawal penalty, even if you don't think you're going to end up paying one. Life is full of surprises, after all. If you end up taking an early withdrawal, you may want to minimize the impact of a potential penalty by choosing accordingly from the start.

To find the most competitive CD interest rates, you might look beyond traditional financial institutions and choose an online bank like Ally Bank. We don't have the costs of maintaining brick-and-mortar branch locations. That means we can pass the savings on to customers in the form of great rates.

And like most any bank, when you buy certificate of deposit accounts from us, your deposit is FDIC-insured up to the maximum allowed by law. Learn more when you call live customer care at 877-247-ALLY (2559) where help is available 24/7 or visit Allybank.com, where you can get all the details and even chat live with us.

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