What Impacts a CD's Rate?

By Avery Mills | Jun 24, 2021 8:02:00 AM

CD RateA Certificate of Deposit, or a CD, usually offers a higher interest rate than a traditional savings. However, there are several internal and external factors that may impact the rate you earn on a CD. Here is what can impact what interest rate you earn on a CD.

TERM OF CD

This is the most likely factor of what will impact the interest you earn on a CD. When you open a CD, you need to select a length of time, usually anywhere from 6 months to 5 years, in which this money will be invested. During this time, this money will not be available to withdraw without a penalty. The longer of term you select, the higher your interest rate will be.

DEPOSIT AMOUNT

As with any savings, the more money you are able to invest, the more you will earn on the other end in interest. For some accounts, they have a minimum deposit amount on higher interest rate accounts in order to incentivize those who have the funds to pick their account.

FINANCIAL INSTITUTION

The institution that you select may impact what rate of interest you receive. For example, the rates between a local credit union and national bank could differ simply based on their personal resources and goals as a company.

OTHER INTEREST RATES

The interest rate of similar accounts or other benchmark rates may impact what interest rate your financial institution is offering. When federal rates rise or fall, this may also impact what happens on a local level.

Topics: savings, certificate, good to know

Author: Avery Mills