Open Certificate of Deposit

Cerfitcate of Deposit Accounts to Help You Save and Grow Your Money

A certificate of deposit is way that you go about saving money. Certificate of deposits are different than a traditional bank savings account. When you think of opening a traditional savings account with your local bank or evening opening an online savings account, you have to consider one major thing. A traditional bank savings account allows you immediate and instant access to your money at all times.

Let’s say that you were to open a regular savings account with a bank today and a few weeks later you decided that you want to close your account and withdraw your funds from that bank and put is elsewhere, in most cases you will have no problems and there will be no penalties for closing your account so soon. While there are banks that will penalize you with a fee for closing your bank account within a certain time frame of when it was opened, the majority of banks will have no problem with you closing your savings account.

If you were deposit a check into your account today and you wanted to take some of that money out of your account by tomorrow, as long as it is within your banking guidelines and there are sufficient funds for your withdrawal, you will be able to take the money out tomorrow. Some banks like Wachovia, a Wells Fargo Company, will even allow you access to those deposited funds on the same day that you deposit the check. Because of the immediate access to your bank deposits, banks pay you a lower interest rate on the funds that you deposit into a traditional savings account. This flexibility is what makes a regular savings account much more popular than a CD account.

A certificate of deposit does not have the same level of liquidity. In other words if you were to open a certificate of deposit, you would have to choose the maturity date. Certificates of deposit, also known as CDs are savings vehicles offered by banks and other types of financial institutions that are meant to be used to save money. CD rates are variable. The typical maturity date for a CD can be anywhere from 3 months to several years. What they CD maturity means is that once you have deposited your money in a CD account, you will not be allowed to take it out until it matures. Should you remove the money before the CD maturity date, you will be assessed a hefty penalty.

Find the best CD Account

Your CD interest rate will depend on the maturity date that you choose. If you choose a longer maturity date, you will receive a much higher CD rate than if you were to choose the earliest maturity date. So the further out the maturity date, the higher the yield on your CD. Saving with CDs is a way that you can receive higher interest rates for your savings. However, it is advised that if you are opting to open a certificate of deposit account that you do so only with the money that you feel will not be needed until the expiration date. It can become very costly should you deposit your money in a CD and a month later have to pull it out. The level of interest is also affected by the size of the financial institution. A larger bank or credit union tends to pay a lower rate of interest on the CD than a smaller bank or credit union, which tends to pay a higher rate of interest.

It is because of these maturity dates and the locking away of your money for set periods of times that banks are able to offer you higher interest rates. What this does is that it allows the bank to take the money in its bank CD and loan it out to an individual for the set amount of time, knowing that they will not need to have the money handy for at least the time specified. Let’s say that they bank is pay your 3% on a bank CD with a 1 year maturity. That means that the bank can loan out the money for a years and they do it at a much higher percentage that they are paying you. Basically the bank plays the role of the middleman in the transaction and keeps the difference as profit.

Ally Bank is an online bank or internet bank that has a no penalty CD that they offer. Normally you would be penalized for early withdrawal, but Ally will allow you to withdraw your entire balance, including interest earned, without penalty.

Ally Bank No Penalty CD Account Features:

• Get a fixed CD rate with the freedom of a no penalty early withdrawal 
• Open with $0 
• Get the best rate we offer for your CD term with the Ally Ten Day Best Rate Guarantee 
• Daily compounded interest for maximum earnings 
• FDIC insured to the maximum allowed by law 
• Automatic renewal at maturity 
• Want a no penalty early withdrawal? We'll hand over your full balance and interest any time after the first 6 days of funding your CD 

 As of September 30, 2011 an 11-month No Penalty CD from Ally Bank is paying 1% interest. That rate is more than double some of the rates that are being offered by regular banks. In some cases, it’s more than triple the rate.

High yield CDs are akin to money market accounts. These are both high yield savings account vehicles that allow the investor to earn a higher level of return on their investment. The primary difference between these two financial vehicles is that a money market account is liquid. By liquid it means that your money is not locked up and can be withdrawn without fear of penalty. Although, the no penalty CD account puts them on a level playing field, CDs were intended as a means to lock away your money and have it grow at higher interest rates. Since your money was locked away and you were not able to withdraw it without penalty, it created a sense of discipline in the investor and forced them to make do until the maturity date of their CD.

When searching for certificates of deposit, you should compare CD rates and maturity as well as whether or not there is a penalty for early withdrawal. Only invest the amount that you can do without for the locked-in period. If you are not sure, then it would be wise to find a no penalty CD or as it is sometimes called, a no-risk CD account to invest in. If you are still uncertain then stick your money in a money market account or some other high yield savings account.