Certificate of Deposits are among the safest accounts available. That’s because they are protected with the insurance of the Federal Deposit Insurance Corporation (FDIC) as long as you are within the limits. They pay a fixed rate of interest over a fixed period of time. In other words, you promise to keep your deposit with the bank for a specified amount of time.
CDs earn compound interest. This means you earn interest on your principle then you earn interest on the principle and interest previously earned. One important term is (Annual Percentage Yield) (APY), this is the rate you earn in a year accounting for compound interest that is applied to the number of months you hold the certificate (3, 6, 12, etc). For Example: $10,000 deposit with a 2% APY, you would receive $50 in interest for 3 months, $100 for 6 months and $200 for 12 months.
Generally the longer you keep your money with the bank (term) the higher the interest. If you withdraw before the term is over there is an early withdrawal penalty. The penalty will eat into your interest and might eat into your initial deposit.
How Do I Make A Deposit into a CD?
To make a deposit into a CD there are several options. You can go to a Bank, Credit Union or to a Deposit Broker that offers bank CDs. You will need to provide personal information and then you select the term that you would like.
Deposit Brokers (Brokered CDs) sometimes can offer higher rates than going directly to a Bank or Credit Union. There are a lot of differences in CD rates throughout the 6,000 banks, so it pays to shop around for the Best Opportunity. Deposit Brokers provide that role for you and they can research all the Banks and provide you the Best Rates and Terms available.
Sun Cities Financial Group is able to offer some of the best CD rates in the country and obtain higher yields than what can generally be found from your local bank. We research over 6,000 FDIC Insured institutions to find the highest yielding FDIC Insured CD rates.
How Do Deposit Brokers Offer Higher Yields?
As mentioned earlier Sun Cities Financial Group researches over 6,000 FDIC Insured banks for higher yields. For consumers who haven’t made a deposit or are unfamiliar with how Brokers work can at first be highly skeptical with the high yields available through a Broker, especially when their bank can’t come close.
We all know that banks are in the business of earning revenue and are highly regulated by FDIC. Often the question comes up; are these banks in poor financial condition and do they need the money? The answer is the opposite. In order for the bank to do business with a Broker they must maintain a higher level of financial stability.
So why do banks want to get involved with Brokers? They might have a high demand for loans and want to increase their amount of deposits, or they want to expand into other areas and increase their customer base.
Banks are never going to “Give away the farm.” So how are they able to afford the higher rates? Let’s start with the volume of deposits they receive. We all know that with the higher the deposit banks in general can pay a higher rate. A Broker (SCFG) can provide the bank with several millions of deposits that would not be available or would take too long to acquire on their own. As an example: You walk into your local bank and are quoted a rate based on your deposit. Then a bus load of people all go in together with their deposits that are significantly higher than yours. The bank will quote them a higher rate due to the higher volume of deposits. Another reason banks like Brokers is that the bank can save on overhead when they want to expand to other areas to gather customers. It is less expensive to the bank to pay a higher rate than to build additional branches and all the costs associated with the additional branch. A bank can contact a Broker and pick up additional customers a lot easier and with less expense.
Generally the terms on Broker CDs have the highest rates with the shorter terms. With the shorter terms the banks pay out less interest vs longer terms.
The process is simple to obtain a CD from Sun Cities Financial Group. When your funds become available and you come to one of our locations, we will show you two or three different institutions and their financial information, allowing you to choose the one you like best. We (SCFG) will fill out the banks paperwork then you make the check payable directly to the bank, not to SCFG. We submit the application to the bank and the bank sends you a CD. SCFG allows you to compare CD rates from several institutions so you can get the best option tailored to your financial needs.
Federal Deposit Insurance Corporation Certificate of Deposits– Tips for Saver, April 23, 2012
“Consumers also purchase CDs through brokerage firms. A Consumer with significant funds to deposit may use a broker to make deposits to multiple banks, thereby maximizing the consumer’s FDIC insurance coverage. In addition, consumers may be attracted to CDs sold by a broker who has made significant deposits in a bank on behalf of multiple depositors and, therefore, is able to negotiate higher CD rates than the individual consumer.”