Your Money Working Harder
Savers are having a tough time. Interest rates are low, and that means yields on cash are low, too. The term “high yield” doesn’t have the same meaning that it had before the financial crisis of 2008, but that shouldn’t stop you from trying to get the best possible deal when it comes to your time deposit accounts.
What Should You Look for in a CD?
It’s not just about yield (although that is a major concern). Here are some of the items you should consider as you look for a CD.
Length of Term
How long will your money be locked up? While you can get a higher yield if you choose a longer term, it’s important to remember that if you try to get your money before the CD matures, you will pay a penalty. On top of that, if yields rise while your money is locked up, you can’t take advantage of the increase.
Some CDs require a minimum deposit for you to take advantage of the yields. While some minimums are as low as $500, others require as much as $10,000 or even $25,000 to get the best return. If you don’t have a large amount of money, or if you are looking to create a CD ladder, it might make sense to look for a CD that offers a relatively high yield with a minimum deposit of $1,500 or less.
How Interest Is Compounded
Look for a CD that compounds your interest. This means that you earn interest on your interest. Each time your interest is compounded, it is added to your CD total, and begins earning interest along with the principal. Some CDs compound your interest daily, which provides you the best earning potential. Others compound interest monthly, quarterly, and annually.
Other Features and Perks
You should also look at other features and perks offered by high yield CDs. Some offer you the opportunity to “bump up” your rate one time during the course of the maturity, allowing you to benefit if yields rise. Others are “no penalty” CDs that allow you to withdraw money before the maturity without incurring a penalty. You have to read the fine print, though, since many of these types of CDs come with lower yields to make up for the flexibility.
Consider your situation and what works best for your finances as you consider what CD might work for you. Choose a term and double-check the minimum deposit amount. Also, be aware of other issues that might impact your eligibility for the advertised yield. Sometimes the rate you see advertised is not the yield you end up getting.
Below are five great high yield CDs to consider. All of the CDs listed below are at properly insured financial institutions, and you can check with the financial institution for different maturities and other high yield products. As always, though, read the fine print before you commit to a CD account.
1. CIT Bank
CIT Bank offers term CDs with rates up to 0.50% APY, but you can also choose from a number of CDs with different rates, terms, and options. For example, a No-Penalty CD gives you the option to withdraw the full balance and interest earned, without penalty, seven days after funding the CD. RampUp CDs allow you to adjust your rate once during the term of your CD should CIT’s rates go up, and RampUp Plus CDs allow you to adjust your rate and increase your deposit once. There are no monthly maintenance fees for any of these CDs.
2. Ally Bank
Ally’s one-year CD has an APY of .60%. The interest is compounded daily. You don’t need a minimum to open this CD, and you can arrange an automatic renewal when the CD matures. You can also get an APY starting at .85% (also compounded daily) if you choose a five-year maturity.
3. Nationwide Bank
When most of us think of Nationwide, we think of an insurance company. However, there is a bank, and it offers reasonable customer service and features competitive CD products. The 12-month CD offers a yield of up to .20%, and there is no minimum deposit. Rates are even more attractive if you have a jumbo CD with $100,000 or more.
4. OneWest Bank, FSB
OneWest Bank has a five-star rating on Bankrate, which means that it’s probably a solid choice. The rates are competitive. You can earn up to .30% APY on an 18-month CD.
Right now, you are unlikely to find a cash account that pays a truly high yield. You are probably going to have a hard time finding an account that will keep pace with inflation. But if you want to make the best of a difficult savings situation, these institutions offer decent CD options.