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6 Tips for Firsttime CD Shoppers

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  • Know your own finances

    Don Taylor, assistant professor of business administration at Penn State Brandywine in Media, Pa., and Bankrate's investing adviser, advises consumers to consider three factors when looking for a new home for their money -- liquidity, yield and convenience.

    For an investor with a smaller amount of capital to invvest in CDs, Taylor recommends answering one question: Do you have liquidity concerns?

    If unexpected financial challenges force you to withdraw your funds early, Bankrate's 2010 early withdrawal study shows that banks can hit you with hefty fees. In fact, 92 percent of banks in the study will take funds from your principal deposit to cover fees, if necessary.



  • The truth is in the APY The interest rate does not tell the whole story.Instead, a CD's annual percentage yield, or APY, paints the full picture of your expected return. The Truth in Savings Act requires that all banks use a standard formula to calculate their advertised APYs. This formula takes the CD's compounding rate into account to deliver an exact calculation of how much money a CD will help you earn annually.For example, if a five-year CD carries an interest rate of 2.46 percent, an investor's return -- the APY -- will be slightly higher annually at 2.49 percent because the interest is compounded daily.

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    Bankrate.com is the Web's leading aggregator of information on financial products including mortgages, credit cards, new and used automobile loans, money market accounts, certificates of deposit, checking and ATM fees, home equity loans and online banking fees. Visit Bankrate.com to get the tools and information that can help you make the best financial decisions.

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