How You Can Earn 200x More Interest
Rising Certificate of Deposit (CD) returns prove that time really is money
The most common interest rate on savings accounts is 0.01%, according to ValuePenguin’s 2018 report. If your money is with a big bank, chances are you’re earning just that.
In a year where rates are on the rise, it may be time to rethink your savings strategy. On June 11, the average national rate on a 4-year Certificate of Deposit (CD) account was 1.06% annual percentage yield (APY), according to Bankrate. Bankrate notes that “savvy savers” can find rates well above the averages. For instance, Texas Citizens Bank’s shorter, 13-month Special Term CD more than doubles Bankrate’s average APY. That’s more than 200x the interest rate many get from their traditional savings accounts. A $1,000 minimum balance is required to open and earn the advertised APY for the 13-month Special Term CD.
What is a CD?
Unlike a traditional savings account, a CD account is a time deposit. This means the date of withdrawal is fixed according to the selected term length and funds become available at the “maturity date.” The biggest downside is the lack of accessibility during maturation. Penalties are put in place to discourage early withdrawals. The biggest draw for these accounts is the low-risk, high-yield payoff. Essentially, CD accounts pay you for your patience. The longer the wait, the more you can make.
Which term length should I choose?
CD accounts are more often used as long-term savings options. To earn a bank’s highest CD rate you generally have to maintain a larger balance with longer terms. That said, many banks offer short-term CD accounts as well. It’s not uncommon to see terms as low as three months. However, if you are a business owner with a larger deposit in need of more access to your money, you may want to consider a Money Market savings account. These accounts often require a larger balance, but tend to offer better interest rates than the typical savings account.
What if rates keep rising?
Most CD rates are fixed. However, some banks offer alternatives. The right “bump-up” or “step-up” CD accounts provide a safe way to start investing now while giving you flexibility to adjust rates if you think interest rates will continue to rise. “Bump-up” CD accounts allow the account holder to “bump up” to the current interest rate during the term of the CD. Oftentimes, these accounts restrict users to a one-time bump; however, some variable-rate CD accounts automatically increase at set intervals.
Texas Citizens Bank offers one of the more attractive “step-up” CD accounts with its 19-month Special Variable CD that adjusts four times per year. On specific dates in February, May, August, and November, rates adjust to the effective federal funds rate plus 0.15%.
For more information on high-yield CD rates, visit TexasCitizensBank.com/rates-fees or call 713.948.5700. Texas Citizens Bank is an FDIC Member.
EDIT: As of September 21, 2018, Texas Citizens Bank is no longer offering 7-month and 13-month Special Term Certificates of Deposit.