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CD Rates

A CD or certificate of deposit is really a time deposit.  A time deposit is funds deposited at a banking establishment that is held by that institution for a fixed period of time or term.  In exchange for depositing your money in an account with that particular financial institution, you will be given a higher CD rate on your money.  The longer the agreement terms, the higher your CD rate and the more interest you will accrue therefore you will receive more upon withdrawing your CD.

fixed CD rates and variable CD rates are offered by the financial institution when establishing a CD.  A fixed CD rate is an unchanging interest rate during the entire period of the CD term.  These fixed rates are more common but some financial institutions offer various forms of variable rates.  An example of a variable rate consists of a single adjustment of the interest rate.  The customer at can request this adjustment anytime during the term of the certificate of deposit.

When buying a certificate of deposit there are a few basic rules concerning CD rates.  First, the initial principal deposited will predictably determine the interest rate.  The higher the deposit, the higher the interest rate.  This applies for the term period of the CD.  The longer the term, the higher the interest rate.  this rule may not apply, based on the yield curve.  Next, the financial institution’s size determines the return on your CD.  The smaller the institution, the higher the interest rate and vice versa.  And last, is the difference between the interest rate for a personal CD versus the rate for a business CD.  A personal CD will receive a higher CD rate than a business CD.

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