Thrift CDs vs. Bank CDs

Certificate of deposits, more commonly known as CDs, are low-risk timed deposits. Consumers can purchase a CD through either a thrift institution or their bank as the FDIC ensures up to $250,000 for both. The money must be left in the CD for a specified period of time, during which a certain interest rate of return is guaranteed. This rate of return is typically higher then the interest rate on a savings account, because of the time commitment involved in the investment. If a person pulls their financial resources out of the CD before it reaches full maturity they may have to forfeit some of the earned interest as a penalty.

Thrift institutions are a mutually held savings and loan financial institution, where depositors and members typically have voting rights within the organization.  Thrift institutions tend to focus their efforts on savings deposits and making mortgage loans and not corporate banking, brokering, or underwriting. Thrift institutions offer CDs to their customers as an investment option.

Banks on the other hand behave as a payment agent for customers and to borrow and lend money. Banks offer transactional accounts for their customers, like checking accounts. When a banking customer writes a check, the bank makes good on transferring the funds. Customers at the bank have input on the institution’s decision-making process. Banks also offer CDs with a guaranteed rate of return.

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Both thrift CDs and bank CDs are viable options for investing your hard earned cash. On the surface, both tend to operate the same way. However, because thrift banks often have access to low-cost funding from Federal Home Loan Banks, they can offer slightly higher interest rates on their savings accounts and CDs. The benefit of getting your CD through a bank is that banks tend to have more investment options for consumers to choose from. When choosing a CD make sure to investigate all your options, including thrift CDs and bank CDs, wisely.

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Thrift CDs vs. Bank CDs
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