Does It Matter If Your Bank CD Rates Aren't the Highest?

Check the Annual Percentage Yields (APY) and Beware of Hidden Costs

September 2012

It's the number that can usually be found in big type at the top of a banking website: Annual Percentage Yield (APY).

APY represents your real rate of return over the year. And when you're researching bank certificate of deposit (CD) rates, there's no doubting its importance: All things being equal, you generally want the highest APY possible, because it means more money building up in your account.

But with CDs, all things aren't equal. CDs require you to deposit your money for a specified time to receive the full rate of return. The length of the CD's "term" can be as important as its APY when you're weighing bank CD rates.

In general, the longer the term, the higher the rate of return. But there can be an opportunity cost for tying your money up for so long. Interest rates rarely stay the same for years on end; if they go up during the term of your CD, in most cases, you won't be able to take advantage of the increase.

This can be particularly painful with CDs that require a significant deposit. In fact, you may need to deposit $25,000 or more to take advantage of some bank CD rates.

Another item on your CD checklist: You should be fairly certain you're not going to need the money that you put into a CD for unexpected situations. In most cases, you'll have to pay a penalty for making an early withdrawal. "Be sure and get a clear explanation of what you'll have to pay if you redeem a CD early," according to Kiplinger's Personal Finance in Kiplinger's Practical Guide to Your Money.

"Another thing to watch for when using a certificate of deposit is the rollover provision," the Guide also notes. CDs can be rolled over into a new term, but you want to make sure you have sufficient notice and time to make the right renewal decision.

Knowing consumers appreciate a straightforward approach, Ally Bank CD rates are consistently among the most competitive available in the country, based on rates as published by Even more, our CDs have no minimum opening deposit and an Ally Ten Day Best Rate Guarantee: Fund your CD within 10 days of opening or renewing your CD, and you'll automatically get the best rate we offer during that 10-day period, starting with your open or renewal date. In fact, we even show you our rates alongside other banks' CD rates to show how competitive our rates are.

Learn more about us, including the great Ally Bank CD rates you'll really appreciate, at or call 877-247-ALLY (2559), where live help is available 24/7.

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