How are CD Rates Determined?

Are you thinking about putting your money into CDs? If so, you’re not alone. Certificates of deposit are once again attractive investment options for many investors, now that the stock market has taken such a massive beating, and real estate shows no sign of reaching bottom. So CDs, although not the flashiest investment possibility, are once again making people sit up and take notice due to their stability and safety. CDs offer interest rates on your initial investment, and when the CD reaches its maturity date, you collect your original investment along with the interest you earned. Clearly, the higher the interest rate the more money you will make.

When you invest your money into a CD, you want to be sure you’re getting the highest interest rate available. These rates are set by the market as a whole, although their general limits are suggested by the Federal Reserve Board. Rest assured, banks want your money – now more than ever – and they are aware that you are looking for the most competitive deals and offers available. One important determinant in getting a higher CD rate is by investing in a CD of a longer duration: the longer the maturity terms on your CD, the higher your rates will be. For example, if you get a 5-year CD, it will almost always have a higher interest rate than a CD that matures in 7 days.

To learn more about CDs, how CD rates are determined, interest rates, and other financial topics, themes, products and issues, be sure to meet with your financial advisor. He or she will share their expertise with you and get you up-to-speed on the basics of investing your money. After all, there’s no such thing as “too much information” when it comes to your finances and your future.