CDs: Why Large Banks Are Ripping You Off

Sat, Sep 11, 2010

Financial Advice, Investment

If you are thinking of saving money with a CD, you might be throwing away money by choosing a large bank to deposit with. CDs, or Certificates of Deposit, let account holders put away money for a fixed period of time and get a fixed return on their deposit. A recent trend has seen a wider and wider disparity between the rates that large banks offer and those that small, local banks make available.

Large, national banks get plenty of traffic with their many locations and built in advertising, so they have not had any problems maintaining CD customers as the economy has slowed. This means they have not had to offer better rates. Small local banks, on the other hand, do not have large marketing budgets, so their best way of competing for CD customers is offering better rates.

The small Mass Country Bank, for instance, grew their amount of deposits by ten percent when they offered a 6 month CD with a 1.49% interest rate. By comparison, the national average for a one year CD has hit a record low rate of 0.7%. That is a difference of more than double!

If you are thinking of ways to earn interest on your money and think a CD might be best, it is important to shop around. More than likely you will find the best rate at a small, local bank. As these banks look to maintain their customer base and savers need competitive rates in a slow economy, the end result is a win-win situation.

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