For those that take out certificates of deposit as part of their investment strategy, it’s important to look back at historical CD interest rates to know how to invest in them. Looking at our history helps inform us on how to avoid making mistakes in the future.
Here’s a few things the past have taught us about the best CD interest rates that you can learn from.
1) More money gets you a higher interest rate.
The more money you invest in a CD the higher your interest rate will be in general. Banks will often setup different levels of money that qualify for varying CD rates. You should know what these levels are for the bank you’re investing with and try to get into the highest bracket you can. You should also be advised that not all banks participate in this practice. Some will offer the same interest rates for $1,000 as they will for $100,000. It all depends on what bank you invest with.
2) Longer CD terms yield a higher interest rate.
In a stable economy the longer term CDs will offer higher rates. In general you’ll get a higher yield on a 5 year CD than a 6 month CD and is thus better to invest in longer term CDs. This doesn’t always hold true. In times when the economic outlook is uncertain banks will drop interest rates on their long term CDs.
You should always take out CDs that are insured either by the FDIC if you’re getting a CD at a bank or the NCUA if you’re taking out a CD from a credit union. The current insured limit is $250,000 for CDs.
If you’re looking at Jumbo CDs or IRA CDs you need to take the same considerations as you would a normal certificate of deposit. Jumbo CDs (CDs that require a minimum deposit of $100,000) generally have higher rates than normal CDs. On the other hand, IRA CDs usually have lower rates than normal accounts. These are just general guidelines and you need to check with your bank to find out which rules apply to them.