Investing extra cash into a CD account is one way to set aside money for future goals while also growing that savings. Certificates of Deposit (or CDs) are a safe way to tuck away extra money for a specified amount of time and earn some interest for doing so - they're offered by banks, credit unions and other financial institutions. While other kinds of investments come with an element of uncertainty, CD accounts are actually very safe. When you open a new CD, you decide how much you want to invest and you choose the duration for your account. Interest rates on your CD vary according to how long you let the financial institution hold onto your money; the longer the duration, the better your rate, and the more money you make over time. Listed here are three of the best one-year CD rates.
If you have a fairly large sum of money to put into a CD for a year, then the 1 year CD from Live Oak Bank may be for you. The current CD requires a minimum deposit of $75,000. It pays 1.4 percent in simple interest and is FDIC insured up to $250,000. For comparison, the 2 year CD with Live Oak Bank earns 1.5 percent for the term.
For those looking to deposit a much smaller sum of money, the 1 year CD from Chartway Federal Credit Union has a minimum deposit of $2500. This CD pays 1.3 percent interest compounded quarterly. Be aware that early withdrawal is an option, but a penalty will likely apply.
A third option is to go with the Connexus Credit Union 1 year CD. With a minimum $5000 deposit, you will earn 1.3 percent interest compounded quarterly. One other catch here is that the $5000 must be newly deposited money with Connexus; it cannot be funds already sitting in an account with this bank.
When you take out a CD you are basically agreeing to lend the bank a certain amount of money for a specified term and they agree to pay you a percentage of interest for the loan of those funds. Different institutions have varying terms and rates, so it's a good idea to shop around and get the best deal for you. Typically, the longer the term and the more you invest, the higher the payoff.
We focused this list on one-year CD rates because it's a popular account duration. Many people are hesitant to have their savings tied up for more than a year. While it's possible to find CDs with durations of less than a year, these short-term CDs often don't yield valuable savings growth. On the other hand, people who can afford to part with a large chunk of their savings for more than a year can get even better CD interest rates. If you are worried about not having access to the funds in case of emergency, there are some CDs that allow for early withdrawal, but the option typically comes with a penalty.