Latest Bank CD Rates

Many investors expect that a longer term CD (certificate of deposit) interest rate should be better than a short term CD interest rate. In many cases this is correct. However, there are exceptions to this rule. You may find that a short term CD interest rate is the same or even better than a longer termed CD. When you find this scenario, take a good look at the industry as a whole. It could be telling you something.

A long term CD is a better commitment from an investor for banks than short term CDs because they permit a bank to have more variety with the investments they make with CD funds. The best banks usually pay a better interest rate because of this freedom for long term CDs. If interest rates never changed and always remained the same you would know without a doubt that a longer term CD is a better interest rate than their short term counterpart. However, because interest rates do change you may find a short term CD has a higher or better interest rate than a long term CD. There are several situations where a short term CD is a better investment than a long term CD for interest rates.

The interest rates in the industry are set by the Federal Reserve or the Fed. If banks expect overall interest rates to change they may make a decision that interest rates in general are a bit high. If the bank feels interest rates are high and will fall shortly, they generally keep their long term CD rates low even with interest rates overall being high. This is a situation where the long term CD has a lower interest rate than the short term CD. Most investors in this financial climate will purchase the short term CD to receive the higher interest rate and have more liquidity for your cash than the longer term CD.

As an investor you don’t really know the future and whenever you purchase a long term or short term CD you are predicting you will receive the best rate of interest as possible overall. When shopping for the best certificate of deposit available take this into consideration. Choose the terms that work for your individual situation. Of course you want to get the best interest rate available while having your monies available when you need them.

Look at the overall financial climate and interest rates as a whole. Review interest rates in other investment platforms and evaluate any information provided by the Fed concerning interest rates in the future.

If you feel rates will go down or remain constant for a while, lean toward a longer term CD. If you feel interest rates will increase a shorter term CD or money market account with a changing interest rate may work better for you. With CDs being a low risk investment you won’t find financial ruin with either. What you are hoping for is a better return with attempting to predict interest rates in the future.

If you have a financial goal of more than a few years out and can afford to keep your investments tied up that long, CDs may not be the right choice for you after all. Always check on the CD rates to know you are getting the best rate possible.