Want To Earn High Interest From Savings? Here Are the Best Banks For CDs (Certificates Of Deposit)

These days, traditional savings accounts have not offered much to investors for some time. But now that the Federal Reserve is raising interest rates, big banks are raising rates as well.

This is a positive catalyst for certificate of deposit (CD) investors. CDs are a simple and safe way for individuals to grow their savings without investing in stocks. And higher interest rates generate more income in CD accounts.

Why It Matters: As of Oct. 19, the national average one-year certificate of deposit has an average yield of 1.03%, according to Bankrate.

See Also: Is The Residential Housing Market In Peril? Real Estate Brokerage Says 'Winter Is Coming'

CDs can be valuable investments for the average American looking to lock up a specific amount of money for a period of time to earn higher interest rates on their savings.

Firms that are online banks or credit unions tend to offer the best yields and terms of conditions for CDs.

Pros

• For those that do not need access to all of their funds, CD’s can be a great savings tool and earn higher yields than checking, savings, or money market accounts.
• Additionally, CD’s offer more security and predictability than most investments, as you are locked into a predetermined rate of return paid through the disclosed maturity date.
• Some certificates of deposits allow customers to make its CD a traditional or Roth IRA to reduce or eliminate taxable income.
• Lastly, the best CD options tend not to have monthly fees and allow flexible withdrawals.

Cons

• An individual's return from the certificate of deposit can be eaten away by rising inflation, as the agreed upon interest rate does not change even if the Fed raises interest rates.
• Some CD’s have withdrawal fees that do not permit the investor from making a withdrawal without a large fee attached.
• Accrued interest is taxed as regular income and is subject to IRS and state regulations.

Top Rated 1-Year Certificate of Deposit's 

• Discover Financial DFS is offering a 1-Year annual percentage yield of 3.25%, with a minimum deposit of $2,500. Discover allows its certificate of deposit customers to structure any CD as a traditional or Roth IRA, to avoid or reduce taxable income.
• Barclays BCS is offering a 1-Year annual percentage yield of 3.25%, with a minimum deposit of $0. Barclay’s CD’s are perfect for the more frugal customer as they offer no monthly fees, no minimum investment, and daily compounding interest.
• Ally Financial ALLY is offering a 1-Year annual percentage yield of 3.25%, with a minimum deposit of $0. Ally offers a Raise Your Rate CD which comes in two-term configurations: 2-year and 4-year. If prevailing rates allow, you get to raise your rate once with the 2-year term and twice with the 4-year term.
• Capital One Financial COF is offering a 1-Year annual percentage yield of 3.25%, with a minimum deposit of $0. Capital One’s certificate of deposits tend to offer no monthly fees and no minimum deposits.

Also Read: This Congressman Likes To Trade Tech, But Bought These 3 Dividend Stocks Instead