Certificates of Deposit

Certificates of deposit combine higher rates of return with the security of knowing your investments can't lose money. As banks compete for more deposits, CD rates alone can't predict whether a particular savings product will work for you. Experts recommend that you choose a CD based on a combination of deposit rates, laddering options, and customer service.

Getting Better Deposit Rates from CDs
CD rates usually go up in tandem with term lengths. Many banks also offer better CD rates to customers who hold other accounts at the same institution. For example, some home lenders now offer special CDs that can help reduce mortgage rates, especially if CD accounts are offered as a backstop against missed mortgage payments.

Laddering Bumps CD Rates, Boosts Flexibility
Although your deposits are federally insured against bank failure or theft, accessing your cash before your certificate's maturity date could result in a hefty service charge. Expert savers use a technique called "laddering" to divide large deposits into smaller chunks. By depositing smaller amounts into a series of CDs with varied terms, you can ensure access to a portion of your portfolio without penalty at least once a quarter. Some service-oriented banks can automate this strategy on your behalf, usually at no extra charge.

Opening CDs Based on Customer Service
The recent recession changed the savings landscape, as banks scrambled to increase long term deposits. When choosing between similar CD rates and offerings, use your perception of a bank's customer service as a tie breaker. If a branch manager or a call center operator answered your questions politely and promptly, you may prefer to reward the bank with your business. Likewise, a well-designed online savings bank may earn your account over a brick-and-mortar branch that appears disorganized. Because most CDs require long-term commitments, you should choose a bank with which you feel comfortable building a lasting relationship.

ShopRate.com can help you narrow your choice of CDs from banks and credit unions across the country. By comparing deposit rates, you can learn about little-known providers that want the chance to earn your business. Seasoned investors understand the importance of placing guaranteed returns at the foundation of any successful portfolio.