Certificates of Deposit (CDs) can play an important role in a person's wealth-building strategy, because "there's typically going to be a cash portion of your portfolio, and if the rates on CDs are better than what you can get on a money market...that could be a good choice," said Ted George, president of George Financial Advisors in Scott's Valley, California, in a discussion with Ally Bank. George also points out that CDs offer an element of safety because deposits are insured by the Federal Deposit Insurance Corporation (FDIC) to the maximum amount allowed by law, as long as they're issued by an FDIC member bank.
"You can get higher interest rates [with CDs] than you can with interest a checking account or other type of cash vehicle, typically," George adds.
As a general rule, the longer the time period of a CD, the higher the interest rate. Rates vary from bank to bank, so it's a good idea to shop around. "Jumbo CDs, for example, offer a higher rate for larger amounts of money, even for short periods of time," he said. At Ally Bank, on the other hand, everyone gets the same great, competitive rate - regardless of how much you deposit - so you may not even need another bank's jumbo CD product.
George pointed out that it's important to protect against interest rate risk-that is, being locked into a lower-rate CD if rates go up in the future. "Consider that a three-year CD may be a good choice, but a 10-year CD may not be."
One way to protect against the kind of risk that George pointed out is with the Ally Raise Your Rate CD, which allows you to start with a great rate, plus have the option/opportunity to increase your rate once over the 2-year term or twice over the 4-year term if Ally Bank's rates for these CDs go up.
Confirming a CD's maturity date is also an important part of a wealth-building strategy, George said, adding that it's important to re-examine your CD before it rolls over or automatically renews, as interest rates may have changed or your need for the money may have shifted.
With Ally Bank CDs, you'll earn some of the most competitive interest rates available anywhere, based on rates published by Bankrate.com, and we'll even show you the rates of our major competitors on our website. Learn more at Allybank.com or call live, 24/7 customer service at 877-247-ALLY (2559) today.