The Flexible Saver: Reacting to Certificate of Deposit Rates

Understanding How Certificate of Deposit Rates Can Reshape Your Savings Plan.

October 2014

For your typical hard-working saver, figuring out how to adapt a savings strategy to the current financial climate is something of a Catch-22. On one hand, conservative savings vehicles like certificates of deposit (CDs) tend to earn lower interest rates than riskier investments. On the other, the stock and bond markets can be volatile.

Still, there are plenty of smart decisions among the conservative choices, explained Richard Barrington, a personal finance expert with MoneyRates, in an interview with Ally Bank. "It is important for people to realize the banking industry is very fragmented," he said, "so that if there is something going on with your bank that you don't like, you have a lot of options."

Your first consideration, he explained, should be finding the best possible certificate of deposit rates: "Go to a site like ours, pick a CD product and term length, and you'll get a list of some of the best rates out there." But don't simply choose the highest rate, he warned. "There are plusses and minuses to every product."

Among the other important questions to ask before opening a CD:

  • Does this CD rate apply to the entire term of the CD? "There are what are called 'teaser' rates," Barrington explained, "so make sure you know the rate for the full term."
  • What is the penalty for early withdrawal? According to Barrington, "That question is important not just because you might need the money early for an emergency, but because interest rates could go up again. And in some scenarios, it might make sense to pay the penalty in order to get a higher rate."
  • What are the rollover rules? Barrington explained that a bank will notify you that your CD is about to mature, and let you know what the new rollover rate will be. But it's up to you to be mindful of your own CD rates, and not just let inertia take over.

At Ally Bank, we offer an array of CDs to suit your needs, all backed by our Ten Day Best Rate Guarantee for CDs, which gives you the best rate we offer for your CD term during the ten days starting with your CD open date, provided you fund your CD within that time. And with our Raise Your Rate CDs, you have the option of a one-time rate increase if our Ally 2-Year CD rate goes up; you have the option to increase your rate twice (two times) if our Ally 4-Year CD rate goes up. In addition, all your deposits are protected by the Federal Deposit Insurance Corporation (FDIC) up to the maximum allowed by law.

Learn more by visiting Allybank.com or call live, 24/7 customer care at 877-247-ALLY (2559) today.

Ally Bank, Member FDIC

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