Posts Tagged ‘FDIC’

While I’m always up for offering my two cents on CD rates and how to maximize your earnings, I’m adding some fresh insights into the world of CD investing from the FDIC for today’s post. As the organization that insures your savings even in the event of a bank failure, the FDIC has plenty of sound advice on how to wisely invest your money. You can read the full article here, but I’ll give you my top three tips in a condensed version below.

Stay away from slam dunk CD rates

The FDIC raises a warning sign we should all know: interest rates well above national averages. By now, everyone know that you’ll be lucky to earn much more than 1 percent on a 1-year CD. If you see a promotion for CD rates of 5 percent, steer clear of it. Remember the old adage “if it looks too good to be true, it probably is”? Well, that adage is correct when it comes to investing in CDs.

Beware of brokered CDs

I’ve covered the benefits of brokered CDs before, but there can be some trickery involved in these types of certificates of deposit, too. The FDIC advises investors to know who is actually issuing their CD when buying from a broker. If the broker is buying your CD from an institution that doesn’t have FDIC coverage, you’re putting yourself in a very bad situation.

Make sure you know your maturity

As naive as this sounds, the FDIC says that some investors fail to understand where their CDs actually mature. Wow! I can only hope that everyone reading this blog will make sure they know how long they will lock money away in a CD. Imagine the rude awakening when you realize that you’ve just invested in a 10-year CD.

What tips would you offer new CD investors? Have you learned any valuable lessons from your past certificates of deposit?

When it comes to banks I’m the type of  person who, even after I think I’ve gotten a great rate on a CD, can’t help but think that a better deal is just around the corner. Or that I just missed a great deal by a couple of days, one way or the other, and I’ll sit and worry … did I do the right thing?

Rest easier. Ally Bank has a two-year Raise Your Rate CD that pays 1.49 average percentage yield (APY). Yeah, I know that’s not a great rate, but the neat thing is you can raise your rate once during the life of the CD. And the rate is much better than what many other banks offer: Chase offers an anemic 0.50 percent and HSBC’s rates are even lower, coming in at a paltry 0.35 percent.

And another great feature for us worrywarts is that the CD comes with the Ally Ten Day Best Rate Guarantee, which guarantees you the best rate available around the 10-day period when you opened your account. No buyer’s remorse and a better night’s sleep.

Check these additional features:

• No minimum. Most banks require a minimum deposit to open a CD.

• Interest compounds daily. Some banks compound quarterly or monthly, but compounding daily helps your money pile up faster.

• Deposits insured by the FDIC up to $250,000.

• Automatic renewal at maturity. Be sure to notify the bank if you’re not going to automatically renew.

• Low penalties for early withdrawal — the equivalent of 60 days interest.

For more information, go to Ally Bank.