Investing ones money in high yield certificates of deposit is a great way to earn passive income. Even with low interest rates, it is hard to beat the safety and security of knowing your money is working for you creating a fixed income stream that is guaranteed. As interest rates continue to remain low, it is important to maximize your fixed income potential by locking in the highest CD rates available.
Here are 4 places you may want to look to find the highest CD rates.
- Credit Unions – The credit union that I belong to is quickly becoming one of my favorite places to look for high yield investment options. As interest rates remain low, your credit union may be able to offer you the highest CD rates available. According to DATATRAC, Inc., in December of 2009 the national average for a 12 month certificate of deposit for a credit union was 1.43%. During the same period, the national average for a similar deposit at banks was 1.12%. You may be surprised at just how much more interest you can earn by going through your credit union compared to your bank.
- Jumbo Certificates of Deposit – Investing in jumbo certificates of deposit can provide an opportunity to earn a little extra interest compared to a traditional CD. Individuals who have at least $100,000 to invest may want to consider a jumbo CD in order to bump up their interest. Now that the FDIC has increased the guaranteed insurable amount from $100,000 to $250,000 on deposits from insured institutions, there is very little downside risk. If you don’t mind investing in an asset with low liquidity, jumbo CDs can be a great source of fixed income.
- Virtual Banks – Virtual or online banks tend to offer more competitive deposit interest rates than a traditional brick and mortar. Online banks typically have much lower overhead costs allowing them to pass the savings back to their customers. Online institutions such as Ally Bank and Discover Bank offer some of the most competitive interest rates on the market today. Regardless the institution or bank you choose to open up a CD at, just make sure that all deposits are FDIC insured up to $250,000 to protect your assets.
- Research – Spending a little time searching for the highest CD rates can identify the best investment opportunities. Sites like Bankrate.com can save a lot of time and effort comparing some of the most popular banks and the current interest rates on most deposit accounts, including CDs. There are also several financial websites and blogs that provide comparisons of current rates. Spending as little as 30 minutes on research can be well worth the effort if you can find the highest CD rates available. I will earn over $400 more this year on my certificate of deposit accounts just because I spent the time researching the highest CD rates.
Final Thoughts
Finding the highest CD rates (even in a bad economy) can save you hundreds or even thousands of dollars. As I mentioned earlier, I will earn over $400 more in fixed income interest this year just from doing a little research. Instead of leaving my assets tied up in certificate of deposit accounts at a brick and mortar bank earning under a half percent, I made a switch. I spent about an hour researching the best available rates that were FDIC insured. I finally settled with moving my assets to my credit union and am earning more than 2% on my investments.
What tips can you offer to help others find the highest CD rates available?
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Great advice. If i had the money I’d love to invest in a jumbo CD! I suppose that getting to that point though is a step by step process! I’ll start small by investing in my CU, then maybe build up enough over 5-10 years and invest in a jumbo!