How To Find A High Interest CD Online

2009 November 3
by Kyle Bumpus
from → Investing And Investments

The emergence of the internet has made a plethora of everyday activities infinitely easier, and the process of finding a high interest CD is no exception.  In the old days, once was stuck with the rates offered by banks within a relatively short drive from your house.  High interest CD rates varied widely between geographic areas, since local banks were largely isolated from competition in other areas.  All that has changed.  Now, small banks have to compete with every other bank in the country due to the ease of buying high interest CDs at a bank halfway across the nation.

Finding A High Interest CD Online

There are a growing number of websites and tools dedicated to helping you squeeze the absolute highest interest rate out of your CD investments.  Most of them are pretty similar to each other so it doesn’t particularly matter which you use, but here are two of my favorites:

  • Bankaholic – Bankaholic has a high interest CD quote tool that let’s you search CD rates for a variety of maturities from 3 months to 5 years, both jumbo and regular.  It also includes minimum deposit information as well as a star rating of the issuing bank’s financial stability.  But since high interest CDs are FDIC insured, I don’t worry too much about those.
  • Bankrate – Bankaholic actually uses Bankrate’s CD search engine to return its results so you’ll get the the same information; however, Bankrate offers the option of searching for locally-available banks only in case being able to visit a branch is more important to you than finding the absolutely highest interest CD available.

How To Choose A High Interest CD

While high interest CD rates have largely equalized throughout the country, occasionally slightly higher or lower rates will prevail in some geographic area of the nation for whatever reason.  It is important to realize the highest interest CD may be offered by a bank several hundred miles away.  If availability of a local branch is important to you, you probably aren’t going to get the highest rate available.

When all is said and done, the only differences between one high interest CD and another are

  1. maturity
  2. rate
  3. early withdrawal penalties (differ across banks, but usually not dramatically)

That’s it.

Decide How Long You’d Like To Lock Up Your Money First

You should first decide how long you’re willing to have your money locked up and only then seeking the highest rate relative to that duration.  While most banks will let you cash out early, you usually have to sacrifice a certain percentage of your accrued interest in order to do so.  If you know you’ll need the money in less than a year, it doesn’t make sense to buy a 5 year CD for a higher rate since the early-redemption penalties will more than wipe out the extra earnings.  In fact, banks enforce these early withdrawal penalties precisely to avoid savers taking advantage of the system in that way, so don’t think you can beat them at their own game. All CD’s are FDIC insured up to the usual limits, so financial strength of the issuing bank shouldn’t be too much of an issue, but if you are really concerned about potentially not having access to your money for a day or two while the FDIC steps in, stick with one of larger banks. In general, that means you should also avoid banks advertising super-high interest rates. If they have to raise rates that high to attract depositors, there’s probably a reason. Then again, they are still FDIC insured so the risk is minimal.

Resign Yourself To Doing Everything Online

I couldn’t imagine ever actually wanting to walk into a bank branch. I hate going to the bank. Still, some savers prefer being able to talk to a teller in person. If that’s the case, use the Bankrate.com tool to find the highest rates within a manageable radius from your home or work. You probably won’t get the highest CD interest rates if you do that, though. Some of the newer online-only banks can offer higher rates just because they have lower overhead.

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2 Responses
  1. 2012 December 17
    Lou permalink

    What do you think about buying my CDs from Vanguard?

  2. 2012 December 17

    I know next to nothing about buying CDs through Vanguard, but I do believe they just act as a custodian. I suppose it would be easier in that you could own CDs from different issuing banks in a single account.

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