Why should I consider buying CDs?

CDs are a part of many well-rounded investment portfolios. These accounts offer the safety of a savings account with high interest rates. Because you can count on a fixed interest yield for a set period of time as long as you hold the CD until maturity, CDs are a great product for secure wealth preservation and income.

But a CD isn't only appropriate for your nest egg. A CD is also a natural place to put any earmarked sum of money that you won't need for a little while, whether it's a tuition payment in six months or a home renovation you have planned a year from now.

To learn more about how to choose between CDs, savings accounts and money market accounts, read "Beyond savings accounts: CDs and money market accounts."

Why are CD Rates Usually Higher Than Savings Account Interest Rates >>

Why are CD rates usually higher than savings account interest rates?

By depositing your money in a CD, you have guaranteed the bank access to your money for the full term, be it one month, six months, one year, 18 months or even five years or more. Because the bank is able to plan around this time commitment and use your CD deposits in its own higher-earning investments, CDs offer better interest rates than savings accounts, on average.

If you have money you know you won't need to access for day-to-day expenses or at a moment's notice, a CD can be a great place to let those savings grow.

What CD Term Should I Choose? >>

What CD term should I choose?

Choosing a CD term is a balancing act. On the one hand, banks often offer higher CD rates to customers for longer CD terms. On the other hand, the longer the CD term, the higher the likelihood that you may need to tap the money in your CD before it matures.

There's also interest rate risk: if prevailing interest rates rise while you have a large lump sum locked into a multiyear CD at a fixed rate, you could lose out on the rise. If you're buying a single CD, you'll want to base your choice of CD term on several factors, including when you might need the money and where you think interest rates are headed.

Even with the same exact CD term, one bank may well offer better rates than another, so always compare banks to make sure you've located the highest interest rates on CDs of your choice.

What is a CD Ladder and How Do I Set One Up >>

What is a CD ladder, and how do I set one up?

In the tug-of-war between high interest rates and access to your money, a CD ladder gives you the best of both worlds. A CD ladder is a series of CDs with staggered maturity dates. For instance, you might have five CDs, with a maturity date coming up every three months. As each CD matures, you roll it over into a new CD to maintain the staggered schedule.

With your savings structured in a CD ladder, you gain several benefits:

• You have the option of cashing out at least a portion of your money penalty-free at each maturity date rather than having all your savings locked up in one long-term CD.
• You'll automatically take advantage of rising CD rates when you roll over each matured CD into a new one.
• At least some portion of your money will be earning better interest rates with longer CD terms.

What Matters Most in Choosing a CD >>

What matters most in choosing a CD?

With any deposit account, it's important to find better interest rates by comparing bank offers. But when you're choosing a CD, it's even more likely that the interest rate offered will make or break your decision.

Why? When opening a CD, it matters less what the bank's ATM network, transaction fee schedule or online banking portal look like. Those factors are critical when selecting a savings account or checking account, but they're less likely to be differentiating factors for a CD. By definition, this is money that you aren't using for frequent transactions.

Interest rates on CDs can vary widely, so don't just take the rates your nearest bank offers without seeing what the market offers. It's easy to do your own comparison shopping with SavingsAccounts.com's list of CD rates.