Typically when thinking about CDs, most account holders don’t think of themselves as investors. The reason for this is that funds in a certificate of deposit are FDIC insured.
With the highest CD rates around being so low however, CD holders are starting to see the loses based on what they could be making in other markets. People are starting to consider index linked certificates of deposit like the ones found at Bromoney.
Sovereign Bank is offering a Save-and-Invest CD rates. The minimum deposit is only $5,000. The way the CD works is that half the CD is put into a standard CD and the other half tracks the S&P 500. This way you can potentially earn a higher return and still be insured on half the funds.
The deal gets sweeter though, as long as there’s a positive return for the term in the S&P, you’re guaranteed an interest rate of 3%. However, if the S&P surges, you’ll also only get 3%.
This product helps both people who want higher returns who currently have CDs and people who have lost money in the stock market. It’s for people who are cautious investors.
The early withdrawal penalty is a hefty 9% if you pull out the first year, 6% in the second year, and 3% in the third year.
Of course you can also go for a more aggressive index linked CD. These CDs have become much more popular over the last year.
There are caps on how much you can earn though, that’s the tradeoff for the protection they offer. The cap for S&P linked CDs is typically around 20-30%.
There are many different variations for earning potential and protection with index linked CDs. You can even link to foreign indexes.
Since June index-linked average bank CD interest rate rose by 8.1%, regular CD rates on the other hand have fallen by 14%. With interest rates as low as they are it’s even more important to find the highest cd rates you can.
For those still looking for regular CDs online banks are still offering the most competitive rates. Index CDs may be the best place for high rates, until the Federal Reserve decides to raise rates.