investing

Researching savings rates on Bankrate.com

Bankrate.com tracks a variety of fixed-income banking products that are excellent investment options for emergency funds, capital preservation or short-term financial goals. The good news is these are practically risk-free investments -- you won't lose any money. The bad news -- the trade-off for that lack of risk is that you don't get much return.

Let's go back and consider what's meant by "practically" risk-free. When interest rates are low, it's fair to assume that inflation is low. But sometimes the difference between your interest rate and the inflation rate is so small that you're not getting much benefit from the interest your deposits earn because inflation is eroding the buying power of your money. So while you're not risking your capital, you are taking a risk that its buying power will decline.

For instance, if your certificate of deposit is earning 2 percent annually, but inflation is running at about 2 percent too, it's a wash. Your money is just keeping pace with inflation. If the inflation rate is 3 percent, you're actually losing buying power. That's why it's so important to shop for the best interest rate you can find -- and Bankrate.com is the best way to shop.

Certificates of deposit

Starting at Bankrate.com's home page, you'll find a section that allows you to "compare rates in your area." In that box, you'll see tab options for "Mortgage, Home Equity, Auto and CDs and Investments." Click on the CDs and Investments option and you'll be taken to our CD home page for deposits. This is where you'll find the overnight averages for CDs, money market accounts, passbook/savings, IRAs and money market mutual funds.

Looking at "Certificates of Deposit" you'll see a box with today's rates and last week's rates for five popular CD maturities; 6-month, 1-year, 5-year, 1-year IRA and 5-year IRA.

Click on the link above those maturities and you'll see "Search By 100 Highest Yield" and "Search By State." Chose the "best rate" option and you'll see the full line-up of CD rates that Bankrate surveys.

Click on whichever maturity you're interested in and you'll see the best rates offered nationwide. This page contains all the information you need to buy a CD from any of the listed financial institutions. All of the institutions make their CDs available across state lines. The Safe & Sound rating for the institution is always listed, the Web address and telephone number is listed for some.

Next to the "Institution" column is a "Date" column. This is the date the survey was taken. The date is important as many lenders change rates several times a day. A quote several days old is often no longer valid.

The "Rate" column shows the simple interest rate, the annual rate of return without the effect of compounding interest. The "Yield" reflects the total interest to be received, based on an institution's compounding method for a 365-day year.

You'll also see a column labeled "CM" for compounding method. These include: S--Simple interest. A--Compounded annually. H--Compounded semi-annually. Q--Compounded quarterly.

The "Minimum Deposit" column shows the lowest dollar amount the institution accepts to buy a CD for that rate and term.

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