by David Thompson
The best rates for Certificates of Deposits (CDs) may not be on the posters you see at your local bank. Many out-of-state banks offer accounts by mail or online to investors nationwide. If you want to buy a CD, don't just shop locally. Check out listings online to see if rates are higher elsewhere in the country, or to see if any banks are offering special deals.
If you're new to Certificate of Deposits, they're like savings accounts, except you have to leave the money invested for a certain length of time that you agree on at the start. Longer times like five years will pay higher interest rates than shorter times like three or six months.
The bank usually specifies a minimum investment, which may be as long as $100 or as high as $10,000 or more. A "jumbo CD," usually requiring an investment over $100,000, will generally pay more than a CD for less money.
Check online at websites like Bankrate.com or Bankaholic.com which list CDs nationwide, ranked by interest rate. They have search engines where you can plug in the term length and see what the highest rates are.
Compare APY, the annual percentage yield, to see which CD will pay the most, but also look at other factors such as the minimum investment required and the safety of the bank. Make sure that residents of your state are eligible. Most sites that compare interest rates also have some kind of ranking to rate how safe the bank is, though of course nobody can truly predict what bank might fail. You can read the criteria they use to rate the banks and compare rankings from several sites. At least make sure the bank is insured by the FDIC or the credit union is insured by the NCUA. Don't forget to check the certificate of deposit rates online from credit unions, too.
When you find a CD rate online that looks good, go to the bank's own website and make sure the rate is still up-to-date. Read the fine print that describes how often the interest is paid and how you can fund the CD. You may be able to transfer funds directly online, or open the CD online or by phone and then send a check in the mail.
Purchasing a CD from an out-of-state bank doesn't have the same sense of security as walking into your local bank building and buying it face-to-face from a bank employee. But if you check the safety of the online bank and see that it's federally insured, you may find that the extra money you earn from a higher interest rate is worth it. The FDIC offers tips for safe internet banking.