Okay, we all need to admit it – there’s something about seeing your savings grow that just tickles the ol’ pleasure center in the brain. Yep, the thrill of watching your lil’ nest egg snowball over time is second to none, don’t you agree? And one of the smart ways to accelerate this growth, my friends, is by parking your moolah in Certificates of Deposit (CDs). Oh la la, fancy, right? CDs are quite the charmers, I must say. They usually offer higher interest rates than your run-of-the-mill savings accounts, but there’s a catch though — you need to be ready to put your funds on the line for a preset period.
Money Honey
With CDs acting as your financial darlings, you get the sweet liberty to choose from a myriad of term lengths—ranging from a teeny-tiny month to a decade or even more. You decide the timeline, neat, huh? And when we talk about interest, plenty of banks give you the ace up the sleeve, letting you dictate if you want the payouts monthly or you’d rather wait for a wholesome surprise when the CD matures. How’s that for control?
But as a wise man once said, it’s not all sunshine and rainbows. Withdrawing money from the CD before maturity often incurs a price (yes, they can be a little high-maintenance) —predominantly looking like a loss of earned interest or, worse, a chunk of your principal. And another tiny issue — CDs typically offer set, fixed interest rates for your chosen duration. So, if the interest rates decide to be unruly and skyrocket, you might feel a tad bit left out in this otherwise low-rate environment. Oh, the ironies of life!
To zero in on the winner for the Best CD title, we decided to play fair and compared a whopping 70 different 12-month CDs from banks with bricks and mortar, digital-only banks, and credit unions spanning the nation. Our strict evaluation criteria consisted of annual percentage yields (APYs), any minimum deposits needed to start flirting with the account, and, of course, penalties for an early breakup.
BEST 12-MONTH CD: ALLY BANK..and the winner is (drumroll, please).. Ally Bank
What makes it so special, you ask? Ally Bank’s 12-month High Yield CD offers a winning combo of enticing interest rate, no daunting opening deposit, and bearable early withdrawal penalties. As of the magical date, October 7, Ally graciously offers an APY of 0.65% on all balances, without any mandating minimum deposit to kickstart this journey. After all, who likes starting a journey with a burden?
But you’ll only start to see the money magic once you’ve got some funds in your account (that should happen within 60 days of opening, by the way). Plus, there’s another cute little feature — Ally’s 10 Day Best Rate Guarantee, meaning if the rates decide to climb within the first 10 days of opening, guess who’s getting the higher rate? Yup, you are!
Oh, and did I mention they have a reward system in place? Roll your maturing CD into a new Ally CD, and the bank will sprinkle an extra 0.05% on top of the new interest rate. Just be sure to give Ally a shout 30 days before your CD matures to confirm the exact reward chunk.
Should you feel the need to part ways with your funds prematurely, Ally will only charge you 60 days worth of interest, which is comparatively a much softer blow than the harsh 180 to 270 days smacked by several other banks and credit unions. Who needs such severe penalties in life, right?
Opening a CD at Ally is as easy as pie: you can do it online, you can chat with a representative on the phone, or hey, you could even mail in an application. Once you’ve set up your account, you can juggle your CD, ask for renewals or withdrawals, and customize account alerts through Ally’s website or mobile app. Neat and easy, eh?
Just a couple of things to keep in mind – Ally doesn’t allow you to withdraw or transfer earned interest without penalty, unlike a few of their counterparts. Plus, Ally pays a flat rate regardless of how beefed up your account balance is, while other competitors might offer tiered rates for bigger deposits. Life is all about compromises, I guess.
On the Fence? Here are Some Alternatives:
Marcus by Goldman Sachs: Offering a promising 12-month High Yield CD with an attractive APY of 0.85% (as of, again, Oct. 7), Marcus is definitely a contender worth considering. Much like Ally, Marcus too provides a 10-day rate guarantee, letting you cash in if rates happen to surge after you’ve opened your CD. The only hitch? You’ll need a minimum deposit of $500 to get the party started. And if you need to withdraw early, brace yourself for a rather steep penalty amounting to 270 days of lost interest.
Synchrony Bank: With a reasonable APY of 0.60% (as of Oc. 7, no surprises there!), Synchrony’s 12-month CD is worth a second look. They have a 15-Day Best Rate Guarantee—if you fund your account and the rate so happens to increase, you’ll comfortably slide in the groove with the higher rate. The minimum deposit is a slightly pricier $2,000, higher than both Ally and Marcus, but still quite doable for many savers. If early withdrawal becomes necessary, Synchrony slaps you with a penalty equivalent to 90 days’ worth of interest. That’s deducted from the principal, mind you!
Our 2020 Best Bank rankings involved a diligent analysis of data from more than 70 leading U.S. banks, digital lenders, and credit unions. We examined minimum deposit requirements, the allure of interest rates, and the pothole of early withdrawals. All of this was thoroughly fact-checked by Money’s editorial hotshots in October.
Still curious? Check out these links for more money wisdom:
- Money’s Best Banks: Why Capital One Beer Goggles on for Best National Bank [/best-bank/]
- Money’s Best Banks: Why Ally has the Crown of Best Online Bank [/best-online-bank/]
- Best High-Yield Savings Accounts [/best-high-yield-savings-accounts/]