Investing in CDs: Get Higher-than-Average Yields with FDIC/NCUA Insurance up to $250,000
Savers have a lot of options when it comes to investing their money. Risk-averse investors or those looking to invest for the short-term may want to consider certificates of deposit (CDs). CDs are a safe way to save, backed by the full faith and credit of the U.S. government up to $250,000, and can offer higher-than-average yields. Banks and credit unions offer CDs with terms ranging from a few months to five years, with the longer terms typically offering higher yields.
The Federal Reserve has been on a mission to slow the pace of inflation, and the central bank raised rates seven times in 2022 and once so far in 2023, with a quarter of a percent increase on February 1. This has driven up the cost of borrowing, to the point where once-affordable options like home equity and personal loans may be less attractive these days. In response, CD rates are now offering the highest yields seen in over a decade — with many paying more than 4.5%.
For savers looking for the best CD rates, online banks can offer competitive yields across 14 terms, including 10 terms that are less than two years. Eleven-month, no-penalty Certificates of Deposit and two-year, bump-up CDs are Popular Direct offers CDs in eight terms, from three months to five years, with a $10,000 minimum deposit to open. Synchrony Bank also offers a bump-up CD and a no-penalty CD.
When considering a CD, carefully consider your needs before putting your money in. Take into account your short- and medium-term financial objectives when considering when you may need the funds. By understanding your requirements, you can make an informed decision about which type of account is most suitable for your finances. While a three-year CD can feature a higher interest rate than shorter-term CDs and liquid savings accounts, it often has a lower yield than what you’d see if you were willing to tie up your money for a longer term.
Overall, CDs are a safe way to save, with an FDIC or NCUA insurance up to $250,000 per depositor. CDs can offer higher-than-average interest rates, but it’s important to compare your savings options and consider liquidity as well as yield.
0. “Want to earn a guaranteed 4%-4.75% on your money? While this savings vehicle hasn't been that popular in recent …” msnNOW, 1 Feb. 2023, https://www.msn.com/en-us/money/personalfinance/want-to-earn-a-guaranteed-4-4-75-on-your-money-while-this-savings-vehicle-hasn-t-been-popular-in-recent-years-pros-say-it-s-now-worth-another-look/ar-AA16YScg
1. “The Fed's Interest Rate Hikes Continue: Here's What That Means for Your Savings Account” The Motley Fool, 1 Feb. 2023, https://www.fool.com/the-ascent/banks/articles/the-feds-interest-rate-hikes-continue-heres-what-that-means-for-your-savings-account
2. “CD Rate Trends, Week of January 30: Rates hold” Investopedia, 31 Jan. 2023, https://www.investopedia.com/cd-rate-trends-week-of-january-30-rates-hold-7101183
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