Short Term CDs
With CD interest rates being at an historic low, short term CDs are much more popular today than long term CDs. Many more people are following short term CD rates than long term CD rates. Both long term certificates of deposits and short term certificates of deposits rates are low, but we here at Best CD Rates see no reason to purchase long term CDs at this time. Short term CDs are the best buys right now.
What are Short Term CDs?
Short term CDs are certificates of deposits with timed deposit periods one year or shorter. While there is no clear delineation between a short term cd and a long term cd, I draw the line at 12 month CDs. If a certificate of deposit has a term great than 12 months, I would categorize it as a long term CD.
Every bank has different timed deposit periods for their short term CDs. However, 1 month CDs, 3 month CDs, 6 month CDs, 9 month CDs, and 12 month CDs are the most common periods for short term CDs.
Why Invest In Short Term CDs?
Many investors ask why you would buy a 6 month CD with 2% interest when you can buy a 36 month CD earning 3% interest. There are two reasons for why invest in short term CDs. The first reason to invest in short term CDs is that you need access to your money in the near term. If you purchase a 36 month CD, you will not be able to access your money without paying a withdrawal penalty for the 36 month term. However, if you invest in a 6 month CD you will be able to withdrawal your money within a much shorter period of time.
The second reason for buying short term CDs is that CD interest rates might be higher in 6 months. By buying a short term CD you can move your money into a higher interest CD in 6 months or take advantage of another investment opportunity at such time. With CD rates being at all time lows, locking into a long term CD at this time could be foolish. However, having said that, who knows whether CD rates will rise in the future.
When looking to invest in a short term CD, it is important to find the best CD rates for short term CDs. Also compare the short term CD rates of 6 month CDs versus, 9 month CDs versus 3 month CDs. Also, you have to compare bank CD rates because no two banks offer the same CD rates. Through comparing bank CD rates, you will find the best short term CD with the right interest rate and the rate length term. At this time I would check out GMAC CD rates, Wells Fargo CD rates, and your local CD rates. Sometime local CDs will have the best short term CD rates.
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Tags: 12 month CD, 3 month CD, 6 month cd, 9 month cd, CD interest rateComments (0)
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