How to Choose a Certificate of Deposit

Get the most for your CD.
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If you are looking for a higher yield than you can get on a savings or money market account, a certificate of deposit (CD) might be just what you are looking for. With a CD you can enjoy a safe and predictable rate of interest for a set period of time, along with the satisfaction of knowing that you will get 100 percent of your money back when the CD matures.

Step 1

Request a rate sheet from banks in your area. The rate sheet lists the current interest rate on all the bank's deposit accounts, including the CDs it offers.

Step 2

Compare the rates on short-term CDs to long-term certificates of deposit. In general, the interest rate rises as the term increases, so you will need to weigh the inconvenience of tying up your money against the higher interest rate you can receive.

Step 3

Shop online for great rates as well. Many Internet-based banks offer excellent interest rates on both long-term and short-term CDs. You can use comparison websites like BankRate (see Resources) to compare rates of both online and brick and mortar banks.

Step 4

Check the Federal Deposit Insurance Corporation (FDIC) coverage of any bank you are considering doing business with. You can verify that a bank has full FDIC coverage by going to the FDIC website (see Resources). The FDIC is the government agency charged with insuring bank deposits, and it steps in if a bank fails. As of 2010, the limit on FDIC coverage is $250,000 per account.

Step 5

Contact the bank you have chosen and request the paperwork needed to open the CD. You will need to provide your name, address and Social Security number to open the account. Keep copies of all your paperwork with your tax records.

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