A certificate of deposit (CD) is a type of savings account where you deposit a fixed amount of money for a set amount of time. In return, the bank pays you interest. Usually, CD interest rates are better than those offered for traditional savings accounts.
Right now, CD rates are high, making them an attractive option for savers looking to maximize their returns.
If you’re in the Chicago area and considering a CD, it’s important to shop around and compare your options. This article explores some of the best certificate of deposit rates in Chicago and the factors you should consider when choosing a CD that’s right for you. We’ll break down everything you need to know to make an informed decision and grow your savings.
Understanding CD Basics
CDs, or certificates of deposit, are a type of savings account that can be a good choice for money you don’t need immediate access to.
Key CD Features
- Fixed Term Length: When you buy a CD, you’re agreeing to keep your money in the account for a specific period of time. Terms can be as short as a few months or as long as several years.
- Guaranteed Rate of Return: CDs offer a fixed interest rate, so you know exactly what you’ll earn over the term. This makes them a more stable investment than something like stocks, where the return can fluctuate.
- Early Withdrawal Penalties: If you need to take your money out of a CD before the term is up, you’ll typically have to pay a penalty. This is why it’s important to only put money in a CD that you’re sure you won’t need for a while.
Important Terminology
- Annual Percentage Yield (APY): APY tells you the actual annual rate of return you’ll earn, taking into account how often the interest is compounded.
- Compounding Interest: This is when the interest you earn is added to your principal, so you earn interest on your interest. The more often interest is compounded, the faster your money grows.
- CD Ladder: A CD ladder is a strategy where you buy CDs with different maturity dates. This helps you balance liquidity (having access to your money) with getting the best possible returns.
Exploring CD Options in Chicago
If you’re looking for the best CD rates in Chicago, you’ll probably want to check out both online banks and local banks. Here’s a quick rundown of some options.
Online Banks
Online banks typically offer more competitive rates than brick-and-mortar banks because they have lower overhead costs. Here are a few to consider:
- Marcus by Goldman Sachs: Marcus offers a variety of CD terms and guarantees their rates for 10 days. You’ll need at least $500 to open a CD.
- First Internet Bank of Indiana: First Internet Bank offers pretty competitive rates on CDs with terms from 3 months to 5 years. The minimum deposit is $1,000.
- Bread Savings: Bread Savings offers nine CD terms with competitive yields. You’ll need $1,500 to get started.
- Merrick Bank: Keep in mind that Merrick Bank requires a $25,000 minimum deposit for its CDs.
- Bank5 Connect: Bank5 Connect offers a wide range of CD terms with high yields.
Local Chicago Banks
If you prefer banking with a local institution, First Bank Chicago might be a good option. They offer several CD options with varying terms and minimum deposits:
- 11-month CD with 4.00% APY
- 15-month CD with 3.85% APY
- 30-month CD with 3.25% APY
You’ll need a minimum deposit of $5,000 to open a CD at First Bank Chicago.
Key Factors to Consider When Choosing a CD
So, you’re ready to sock some money away in a CD? Smart move! But before you jump in, there are a few things to think about to make sure you’re getting the best deal for your situation.
- Interest Rates and APY: Don’t just look at the interest rate, pay attention to the APY (Annual Percentage Yield). This takes compounding into account and gives you a better idea of your actual return. Shop around and compare APYs at different banks and for different term lengths. Keep in mind that rates can change, so what looks good today might be different tomorrow.
- Minimum Deposit Requirements: Some CDs require a hefty minimum deposit to open, while others are much more accessible. Make sure the minimum fits your budget.
- CD Term Length: This is how long your money will be locked up. Longer terms usually mean higher interest rates, but you won’t be able to touch your funds without a penalty. Choose a term that matches your savings goals and when you might need the money.
- Early Withdrawal Penalties: Speaking of penalties, understand exactly what they are. If you think there’s even a small chance you might need to access the money early, a no-penalty CD might be a better fit (but be aware that even those might not allow partial withdrawals).
- Bank Type (Online vs. Traditional): Online banks often offer higher rates because they have lower overhead. However, they lack the personal touch of a traditional bank with physical branches. Consider what’s more important to you: higher returns or face-to-face service.
- FDIC Insurance: This is a non-negotiable. Make sure the bank is FDIC-insured. This protects your deposits up to $250,000 per depositor, per insured bank.
Strategies for Maximizing CD Returns
If you want to get the most out of your certificate of deposit, here are a few strategies to consider:
CD Laddering
A CD ladder involves investing in several CDs, each with a different maturity date. This way, you’ll have regular access to your funds as each CD matures, while still earning the higher interest rates that CDs offer. For example, you might invest in a 6-month CD, a 1-year CD, an 18-month CD, and a 2-year CD.
Relationship Rates
Some banks offer higher CD yields if you have other accounts with them. Check with your bank or credit union to see if they offer these types of perks for their existing customers.
Special Offers and Promotions
Banks sometimes run limited-time offers or promotions that can temporarily boost your APY. For example, First Bank Chicago sometimes offers a bonus for students who open an e-Banking account.
In Closing
CDs can be a smart way to grow your money, offering guaranteed returns, security, and often better interest rates than you’d get with a regular savings account.
Before you lock in your money, though, it’s essential to shop around. Compare CD rates, terms, and minimum deposit requirements from different banks and credit unions in Chicago to find the best fit for your financial goals.
Keep in mind that rates can change quickly, so it’s a good idea to call the bank directly or visit its website to confirm the latest information before making a decision.