Is it safe to open a CD with an online bank?

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Online banks sometimes offer better CD rates than brick-and-mortar banks. But a common concern is whether large sums of money are safe with an online institution. Also, having no branch to go to in case of an emergency or to get a complicated question answered can make online banks seem risky.

Rest assured, your money is as safe in an online-only bank as it is in your local bank.

Compare CD rates from online banks and brick-and-mortar institutions to make sure you’re getting the best rate.

How to determine if a bank is safe

What keeps your money safe is the bank’s capital adequacy, asset quality, profitability and liquidity. Add in the safety and security of deposits insured by the Federal Deposit Insurance Corp. or the National Credit Union Share Insurance Fund and you’re good to go.

The FDIC insures deposits of most U.S. banks up to $250,000 per person in the event of a bank failure. Similarly, the National Credit Union Administration covers the balance of members’ deposits up to $250,000 per person.

You can research a bank’s safety rating by using Bankrate’s Safe & Sound Star Ratings system. Besides the star rating, you can get a memorandum on findings about a bank’s safety and a recent financial statement.

What else to watch for

Make sure that deposits are properly credited to your account and that your account is secure. You have alternatives when sending money to an online bank. You can send it via check, automated clearing house or wire. Regardless, there’s an audit trail of your deposit.