| A lot of people are taking stock today to make sure that the investments they have are the right choices for their long term goals. If anything good comes out of this current economic downturn it will be the fact that people are becoming more proactive with their money and investments. That new attitude will help everyone get closer to achieving their long term financial goals. One of the first things you will want to do when reevaluating your investments is to make sure you are getting the best interest rates.
If you have a savings account you can check various banks, online and off, to see who is offering the best rates. Before you decide to change banks, though, make sure you fully understand what other rules the bank has. Even if you could earn a higher interest rate you may find that you have to maintain a higher minimum balance, or the bank might charge more or higher fees. Just remember to find out all the details before you make a decision.
Generally speaking, when investing in certificates of deposit, the longer term your investment and the larger the amount invested, the higher the interest rate you will earn. That's because the bank wants to use your money to lend to others. That's how the system works. The longer you agree to let them use your money the more money they can make. In order to encourage you to leave your money invested longer they will agree to pay you more in interest.
One the downsides, though, is the fact that if you want to withdraw your money early you will lose a significant amount of interest as a penalty. CD's can be a good investment for many people since they are government insured so they are less risky, yet they will still provide an attractive interest rate.
Remember that a high rate is only one element. There are other factors you will need to consider before opening an account. Here is a list of some things you need to be on the lookout for:
1. Make sure you always, always, read and understand that fine print. Many people think that since they are dealing with a reputable bank they don't have to read the fine print since there's no way this huge bank would rip them off. And that's probably true, but, you do need to make sure you understand how much interest you will earn, how to access your money, what fees the bank charges and for what, and if you're investing in a CD you will need to know if the interest rate is fixed or variable, how it will be paid out, what the maturity date is, etc.
2. How much money will you need to open an account, or buy a CD? Some banks offer more choices than others. Not everyone has an extra $100,000 sitting around to invest, and not everyone wants their money tied up in a CD for 10 years. These are things you need to know ahead of time, and don't just take someones word for it, get it in writing.
3. Don't make the mistake of just going with whatever bank has the highest interest rate. Remember, the interest rate is important but there are other factors that you will have to take into consideration before you open an account or invest.
When it comes to finding the best interest rates you can use a service like Bankrate.com. Make sure to only use rate information as a starting point. Once you've narrowed it down to several banks make sure you ask all the questions I've listed above so that your money will not only be working hard for you, it will also be easy for you to get to. |