How the Size of the Principal Affects CD Rates

As with any investment decision, you’ll want to learn as much as you can about your investment options before purchasing a CD. Particularly, you will want to understand how investment works with regards to interest rates your CD will earn – depending on the size of the principal.

Generally, the CDs with the largest principal get the best CD rates. There are incidences in which you might get a better interest rate on a lower principal CD that has a longer term, but as a rule of thumb, the larger the amount you invest into the CD, the better your interest rate will be. This is the bank’s way of rewarding you for letting them tie up a large amount of your money for a long period of time.

If you are willing to invest a larger sum of money, you might also be qualified for special types of CDs and high yield certificate of deposit rates that require a certain minimum balance. If you can meet the minimum balance, you are entitled to the best certificate of deposit rate available. Check with your bank or financial institution to find out what the minimum balance requirements are for the type of CD you are considering. Sometimes, you may also be required to have a checking account at that institution to qualify for special rates.

If you check online, you can find many resources to do research if you want to compare interest rates and find the best CD rates for your area. You can easily compare certificate of deposit rates offered by various financial institutions, whether it is through a traditional storefront bank, a credit union, a brokerage, or an online account. Also, many popular financial websites offer calculators which can help you estimate your earnings on any particular investment. Results on estimated earnings are based on the size of the principal you are willing to invest, length of time it takes for the CD to mature, and the annual percentage yield. With a little research, you can find a CD that offers what you are looking for at the best CD rate.