See These CDs

In the increased interest rate environment, many people have found Certificates of Deposit (CDs) more attractive for their excess cash holdings that would otherwise be in a bank account. CDs are conservative investments issued by banks that have been more attractive due to the current interest rates with minimal risk.

CDs pay a fixed interest rate and can offer higher interest rates than other types of deposit accounts. They are typically FDIC insured for up to $250k per owner, meaning if two spouses buy CDs in a joint account they are FDIC insured for up to $500k.A CD is worth considering when interest rates and market risk are both high. If you can earn a safe return without exposing yourself to unnecessary market risk, you should consider investing.

A CD is not worth it when interest rates are low, as your money is typically committed for a certain period, and you could miss higher potential market returns in exchange for a low interest rate. Make sure you do not commit money that is needed in the short term for a longer term than you can wait. Some standard terms are 3, 6, 9, and 12 months.

Consumers often go directly to the bank rather than buying “brokered CDs” from a financial advisor outside the bank. The bankers typically have a more limited supply of CD selections, often just through their employing bank. The bank also takes its commission cut from the client’s deposited money, which reduces the effective interest rate.

We’ve been putting a lot of clients in brokered CDs because interest rates on CDs in the open CD market have been around half a percent higher than the highest interest rate we’ve heard offered to our clients by a banker or private banker. A great way to find a brokered CD is to find an independent financial advisor who uses a custodian with no trading costs.