Time deposits, also known as certificates of deposit, have fixed terms and earn time deposit rates. To get the best rates, use a certificate of deposit ladder or invest in long-term certificates of deposit. Use a website to compare options and find the highest rates.
A time deposit is another name for deposit accounts, such as certificates of deposit, that have a fixed term. The interest rates that the deposit earns are known as time deposit rates. You can get the best time deposit rates by using one of two options: build what’s known as a certificate of deposit ladder, also called a ladder, or deposit your money in longer-term certificates of deposit.
Building a certificate of deposit ladder requires you to deposit money into multiple certificates of deposit. It starts by depositing some of your money into short-term deposit accounts, such as three-month certificates of deposit. To build the next rung on the ladder, then put some money into a six-month certificate of deposit. You continue to deposit your money to have nine-month, 12-month, two-year, three-year, four-year, and five-year certificates of deposit.
You can get the best term deposit rates over time by using a certificate of deposit scale because as each certificate matures, you invest the money in a five-year certificate of deposit. As the longer-term certificate of deposit, this also pays a higher interest rate than shorter-term options. Since you have a certificate of deposit maturing every three months and then every five years, you’re not tying up your money for long periods of time where you get low interest rates.
The second option for getting the best term deposit rates is to invest a lump sum of money in a long-term deposit account. Long-term certificates of deposit tend to pay higher rates than short-term certificates of deposit. Some long-term deposit accounts also require a higher minimum deposit amount, so the certificate also earns a higher rate. For example, a jumbo certificate of deposit pays a higher interest rate than long-term or short-term certificates of deposit. The jumbo certificate of deposit also requires a minimum deposit amount that is significantly higher than those types of certificates.
To find the highest rates on deposit accounts, you should use a website that compiles deposit account rates from various banks and financial institutions across the country. Using a website that collects this information for you allows you to do a side-by-side comparison of certificate of deposit options, minimum deposit required, term, and interest rate. You can easily compare various term options with each other and choose the best one for yourself.
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