How do I choose a CD account?

How do I choose a CD account?

Mitchell Freedman, CPA/PFS (CEO, MFAC Financial Advisors) gives expert video advice on: What kinds of bank accounts should I have?; How do I open a bank account?; How can I compare banks and the services they offer? and more...

When trying to determine what the best CD is for you, you have to evaluate several things. The first is, what period of time you will feel comfortable tying up the money? The second is, how much interest will you be paid? and different banks pay different rates at different times, so comparative shopping is important. Generally speaking, the longer the period of time that you're going to tie up the money, the higher the interest rate will be. Sometimes, a certificate of deposit will not pay interest until the certificate has matured. Other times, you can actually have the interest paid to you on a monthly basis. And determining, first of all, if you need interest, if you have a long-term certificate of deposit, say a year or could be up to five years, and you need monthly cash flow from it, making sure you can get the interest on a monthly basis can be an important determination. If, however, you don't need it on a monthly basis, one can just allow it to accrue until the duration of the certificate.