As interest rates continue to fall it is becoming increasingly difficult to find a certificate of deposit that pays a reasonable interest rate. Despite the apparent lack of earnings that is currently available, CDs remain one of the most important financial tools for many households.
Some people choose to invest in CDs because they are an extremely safe option. Others do so to help supplement their retirement income. Regardless of why people invest in CDs everyone wants to find the best certificate of deposit rate for their portfolio.
CDs have absolutely no market risk. These super safe investments will not change in value even if the stock market increases or decreases by 500 points. Furthermore, since they are fully insured by the FDIC your principle is never at risk. With this safety, however, an investor generally earns an interest rate that is much lower than most traditional investments. Ultimately this leads savvy investors to ask how they can find the best CD rates without increasing their risk.
One simple solution is to simply dismiss your banking ‘loyalties’. Just because you have conducted your banking business at the same branch for many years you are still free to try and find a more competitive rate. Shop around and you might be pleasantly surprised with the rates that you can find. Do not, however, limit your search to your neighborhood or state. You can often find rates being offered in neighboring states that are 30 to 40 percent higher than what you are currently receiving. It is also just as easy to buy an out-of-state CD as it is to buy one right down the street from your house.
Another solution is to consider buying a certificate of deposit that is being offered by an online bank. As these financial institutions generally do not have the enormous overhead expenses that are typically associated with banks you can generally get a higher interest rate. As a word of caution you will need to make sure that the bank you choose is fully insured by the FDIC. If they are your investment is just as safe with an online bank as it would be at your neighborhood bank.
Finding the best certificate of deposit rate is crucial to creating a well balanced and diversified investment portfolio. If you are searching for a safe, yet flexible, fixed income investment option consider purchasing a certificate of deposit.