Why Online Banks Often Feature the Best CD Rates

Getting the Best Certificate of Deposit Rates

September 2012

The Internet can be a great resource to search for the best certificate of deposit (CD) rates online.

"You can find rates in various online sources, [and] Bankrate.com is probably the biggest," Wayne Blanchard, a certified financial planner in Orlando, Florida, and member of the Garrett Planning Network, told Ally Bank in a recent interview.

Searching online is convenient and allows you to cover a lot of ground quickly. It's also possible to find the best CD rates at online banks. "Generally, online banks' rates are higher," Blanchard said.

He pointed out that online banks often have lower operating costs because they do not have to maintain brick-and-mortar branches and can pass that savings on to their customers.

"That savings often means better rates for customers," he said.

CD interest rates will vary—but watch out for rates that are quite a bit higher than those offered by most banks, Blanchard pointed out. "A very high rate probably means there is an extra risk. You must decide whether you are willing to take that risk," he said.

At Ally Bank, we take a straightforward approach to the CDs we offer. Visit Allybank.com and you'll see some of the most competitive interest rates available, as published by Bankrate.com. We'll even show you the rates of our major competitors.

Ted George, president of George Financial Advisors in Scott's Valley, California, recently told Ally Bank that, in addition to looking for the best CD rates, "You need to look at the compounding period, which differs from one CD to the next. A lot of banks offer daily compounding, but it could be monthly or annually." George adds that you can compare different compounding rates by looking at the annual percentage yield, APY.

The APY, George explained, tells you how much of a return you will have at year's end when the compound interest is factored in. "The more frequent the compounding, the higher the APY will be," he said. "So interest that compounds daily will have a higher APY."

Make your money work hard in an Ally Bank CD. Learn more at Allybank.com or call 877-247-ALLY (2559) today.

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