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

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

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 usually 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. 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.

Ally Bank CD rates are consistently among the most competitive available in the country as published by Bankrate.com. What’s more, our CDs have no minimum opening deposit and you get our Ally Ten Day Best Rate Guarantee. When you fund your CD within 10 days of your open date, you'll get the best rate we offer for your term and balance tier if our rate goes up within that time. The Ally Ten Day Best Rate Guarantee also applies at renewal. In fact, we even show you our rates alongside other banks' CD rates to help you make the best decision for your financial goals.

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