Certificates of deposits or CD are short to medium-term debt instruments issued by banks, thrift institutions, and credit unions. CDs are insured by the FDIC for banks or by the NCUA for credit unions. CDs are similar to savings accounts in that they are insured and thus virtually risk-free; they are "money in the bank". They are different from savings accounts in that the CD has a specific, fixed term (often three months, six months, or one to five years), and usually a fixed interest rate. It is intended that the CD be held until maturity, at which time the money may be withdrawn together with the accrued interest.



Investors will put their money to banks for certain time period in which investors cannot withdraw the money. In exchange, the banks will pay a predetermined rate of interest to the investors called . Certificates of Deposit (CD) bear a fixed rate of interest. Early withdrawal of amount before maturity date will penalize the depositor/Investor. Investor can also compare CD rates among different banks and different types of CDs themselves. The philosophy is that CDs having higher maturity periods pay higher rates of return. The Factors that determine CD rates are the length of the maturity period and the current interest rate environment.

Understand what a CD does -  Let's say you want to invest $20,000 in CD. The next thing you'll want to do is figure out how long you'll want to invest your money. You can tie your money from 3 months to 10 years. So, let's say you want to have your money held for 1 year at 5%. At the end of the year, you can withdrawal your money and you'll now have $21,000.

How to Find the Best CD Rates

First thing is how much money you're going to invest into a CD. This will help your search when you're looking at online banks or at your local banks. A majority of the banks you look at will require some sort of minimum. The minimum usually ranges anywhere from five hundred dollars and up.

Second is how long will you invest your money into a CD. Depending on the time period, this will determine how much the CDs interest rate is going to be. The longer the period the more CDs rate you will get and of course the more you're going to get on your money. The only downfall is, is that you're not going to be able to touch this money until the CD matures. If you  want to withdraw your money before the CD matures you will get early withdrawal penalties from the bank.

The third is to find the bank, institution or credit union that has a good reputation, and make sure they are insured by FDIC or NCUA. You can check out the online or locally, but generally an online bank will usually give you a better CD rate than a local bank. You can also find out how much money you're going to make on that CD, make sure you use some helpful CD rate calculators online. This will show you the exact amount you're going to receive from the bank at the end of the maturation for the CD.

How to Apply For CD Rates

Whether you want to apply online or locally, it's all up to you. Opening a CD is just like opening up a checking account, etc. They will want your personal information and some evidence to prove that it's you. Once you open up your account, you'll be able to access it online and you can track your progress.