cds

High CD rates may sacrifice safety

Don Taylorq_v2.gifDear Dr. Don,
I know it's not a good idea to keep all my money with one bank, but I couldn't pass up the CD rate that Discover Bank offers, presently 1.84 percent for 12 months. So I have $500,000 with them, which I laddered into 10 CDs. I feel safe since it is FDIC-insured. Would you agree?
-- Corina Certificates

a_v2.gifDear Corina,
There's no upside to keeping deposits in a bank above the insurance limits of the Federal Deposit Insurance Corp. By definition, uninsured deposits aren't FDIC-insured. Your feeling of safety is misguided.

You can do a search on Bankrate using its "Compare Rates" feature and find one-year CDs with rates higher than your Discover Bank CD. The current high rate is a 2 percent annual yield for a one-year CD.

There are ways to finesse the issue, like using CDARS, which allows you to deal with one depository institution and have your deposits insured for up to $50 million. You may not get the highest rate in the land on your CD but you'll be insured.

Bankrate's content, including the guidance of its advice-and-expert columns and this Web site, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this Web site is governed by Bankrate's Terms of Use.

Read more Dr. Don columns for additional personal finance advice. To ask a question of Dr. Don, go to the "Ask the Experts" page, and select one of these topics: "Financing a home," "Saving & Investing" or "Money."

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Product Rate Change Last week
1 Year CD 0.90%  0.01 0.89%
2 Year CD 1.03%  0.02 1.01%
5 Year CD 1.59% --0.00 1.59%
 
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