When you're considering a certificate of deposit (CD), there are a number of options, and it's important to shop around to find the right fit for your financial needs. Fortunately with a little online research, you can quickly find a variety of banks offering CDs and you can check out their websites to compare their offerings.
Compare interest rates.
Your CD comparison can begin with a look at what you will earn with various offerings. After all, knowing just what and when you will be paid is one of the key advantages of having a CD. “Assuming you are comparing CDs with similar terms that are all FDIC-insured, the interest rate is the most visible [differentiator],” says Andy Tilp, president of Trillium Valley Financial Planning in Sherwood, Oregon. Sites like Bankrate.com are valuable resources for comparison shopping.
Compare frequency of compounding interest.
When comparing CDs, it's also important to look at how often interest is compounded. That might be daily, monthly, quarterly or even annually, but the more frequently it is compounded, the more you earn by maturity.
Compare the fine print.
Jim Heitman of Compass Financial Planning in Alta Loma, California, warns that you should be sure you examine the terms of any CD you consider. If, he says, “somebody offers you a CD rate that is a lot higher than anybody else, be very careful.” Currently, Heitman explained, a half-percent to a one-percent difference in rates is not unusual. But if there is a several-percentage point difference, you should find out why. A drastically high rate could be only a temporary enticement or, in rare instances, it might be for a product that is not insured by the Federal Deposit Insurance Corporation (FDIC).
As you compare your CD options, it's important to look beyond rates and yields. Ask a few questions about each CD you consider, such as:
- What is the minimum opening deposit you need to put into the CD? At Ally Bank, you can open and fund a CD with any amount.
- What is the penalty for withdrawing money before the CD matures? These can vary from bank to bank.
- Will the CD automatically renew at the end of the term? Will it be renewed at the original rate or a new rate?
In addition, be sure you understand the full variety of CDs that might be available to you. For example, in addition to the traditional fixed-rate, fixed-term CD, there are “no-penalty CDs” that allow you to withdraw money before the CD's maturity date. “Bump up” (or “raise your rate“) CDs let you earn more if the bank's interest rates rise. And of course, CDs come with different maturity terms.
With Ally Bank CDs, you'll get a rate that's consistently among the most competitive in the country according to Bankrate.com. In fact, we'll even show you our competitors' rates alongside ours for a quick and easy CD comparison. Explore your options at Ally.com or call live, 24/7 customer support at 877-247-ALLY (2559) today.