Cd Rates Comparison

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Generally, investment in certificate of deposits and money market mutual funds are

helpful to people for short-term objectives such as buying a car, a house, etc.

These types of investments will not provide any quick incentives but will provide highly secured income. Money market mutual funds (MMMF) are open-ended short-term debt instruments with a maturity period of usually less than a year.

Currently we are seeing rates around 5.30% to 5.40%. Rates from 1994 to 2000 and 2006 were above the averages. Rates from 1993 and 2001 to 2005 were below.

The best way to find interest rates on accounts that will earn you the most is to use the Web. All financial institutions have a website nowadays, in such websites they will post their interest rates on certificate of deposit accounts. While this is a very easy way to find out the CD rates a specific bank has to offer it is most certainly not the best. Using a comparison site that is able to gather information on an account from several financial institutions is a much better way to find CDs with high interest rates. Doing a side-by-side comparison across different banks and terms will enable you to make an educated decision.

However there is an advantage with respect to MMMFs, the investor's money is not locked in for a long period. With CDs, the investor cannot withdraw the money before the maturity period, but those investors who wait until the CD matures earn a reasonable and secured rate of interest.

CD accounts tend to work better with higher balances; this means that if a person has $100,000 sitting on a regular checking or savings account their funds may not be doing anything for them but, if those $100,000 were to be transferred to an account earning an interest of 5% the return will be, you guessed it, $5,000, this is a sizable return compared to the five dollars we were originally talking about.

Historically, a drop in rates has followed an inverted yield curve. As a result, Banks and Credit Unions are anticipating this drop and don't want to offer too high of a rate for the long-term CDs.

One can also compare CD rates among different types of CDs themselves. The philosophy is that having higher maturity periods pay higher rates of return. Since APY measures the actual interest earned per year by an investor, he can use it to compare CDs of different interest rates and compounding frequencies.

by: Derek Finagaley

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