Is a CD a Good Way to Go When Planning for Your Future?

Three CD Products, All With Great Rates and No Minimum to Open

January 2015

There are many options for saving money for the future. A certificate of deposit (CD) can be a good way to go if you're looking for a low-risk place to park money with higher interest rates than savings accounts usually offer.

Here are a few reasons why a CD can be beneficial in longer-term savings plans:

Interest Rates—Typically, CDs offer higher interest rates than traditional savings accounts. In general, the longer the CD's term, the higher the interest rate. For example, a 5-year CD product will usually give you a better annual percentage yield (APY) than a 1-year CD. Of course, a longer-term CD means you'll need to commit to that term or risk paying an early withdrawal penalty.

Choosing a CD term doesn't have to be an either/or situation, however. You could simply put part of your savings in a shorter-term CD and the rest in a longer-term CD or ladder several CDs over multiple terms.

Planning Ahead—Because most CDs have fixed terms, they can be particularly useful when saving for specific events in the future. Unlike withdrawing from a savings account, you usually can't take money out of a CD until it matures without paying a penalty. Some people find this helps them stick to their savings strategies.

Safety—CDs are often considered low-risk places to save money because you usually get a fixed rate for a certain amount of time. Your deposits at FDIC-member banks, like Ally Bank, are insured by the Federal Deposit Insurance Corporation up to the maximum allowed by law.

Selection—Many financial institutions, including Ally Bank, offer a variety of CD products with different benefits to fit your financial plan. At Ally Bank, we offer three kinds of CDs:

  • High Yield CD: A CD with a fixed rate for a fixed term.
  • No Penalty CDs: This CD allows you to withdraw all your money, including interest earned, without any penalty, any time after the first six days following the date you fund your account.
  • Raise Your Rate CDs: With these CDs, you have the option of a one-time rate increase if our 2-Year CD rate goes up; you have the option to increase your rate twice (two times) if our 4-Year CD rate goes up.

Depending on your long-term goals, you might find that one CD fits your financial plan better than another. It's important to understand the differences between CDs before deciding which one is right for you. With every Ally Bank CD, you can open and fund your account with any amount. Plus, our CDs compound interest daily for maximum earnings. 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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