If you have a $1000 cushion in your checking account, consider opening a CD Account to start growing your money.
The median checking account balance for U.S. households was $3,400, according to data from the 2016 Federal Reserve Survey of Consumer Finances (SCF). This survey is conducted every 3 years.
Having a little wiggle room in a checking account can save you from unnecessary overdraft fees and give you peace of mind but it does nothing to grow your money.
There's a little more you can do with that extra money in your checking account. Your checking account stores your money but it does not help build wealth.
What are your longer-term goals? If you want to save more, make a future major purchase or even save a downpayment to purchase property, let a CD account help reach your goals. The current CD rates tend to be higher than even the best savings account rates.
What is a CD Account (Certificate of Deposit)
A CD Account (Certificate of Deposit) is a savings instrument used to save money for longer periods of time. This type of account is offered by banks that are federally insured up to $250,000, making them the safest possible place to put your savings. CD Accounts opened at credit unions are called a share certificate and are also insured by the U.S. government.
Finding the best CD Rates makes a big difference in the interest you earn.
How CD Accounts Work
CDs have a fixed interest rate and fixed date of withdrawal. More facts about how certificate of deposits work:
- CD Accounts can have terms ranging from 12 months up to 5 years.
- CD Accounts typically have higher interest rates than savings accounts.
- Interest rates don't change during the term of the CD account.
- Monthly fees are not charged for owning a CD.
- You will not have access to your money through checks, ATM withdrawals or electronic transfers.
- You can withdraw your money at any time but you may incur an early withdrawal penalty.
- Once your CD-term is over, you receive guaranteed returns.
What $1,000 will do in a CD Account vs. a Checking Account
Checking accounts are primarily the type of bank account designed for daily transactions to pay bills and daily expenses. Most checking accounts do not offer interest on your balance, unlike CD Accounts. Holding extra money in a checking account is not ideal when you could earn interest on that money.
For example, you might purchase a one-year CD with a $1,000 minimum deposit that returns 1.50% Annual Percentage Yield (APY). In this example, the $1,000 CD will be worth $1,020 after one year, when it's considered to be “mature.”
Best 5 Bank CD Rates for a $1000 bank balance
The best CD rates for a $1000 bank account balance can generally be found at online banks. Online banks don't have the extra expenses related to running branch locations. Customers get the savings passed down to the in the form of higher interest rates earned on CD accounts and other savings products like money market accounts.
1. CIT Bank No-Penalty 11-Month CD – (0.35% APY)
With a CIT Bank No-Penalty CD, you get the security of an 11-month CD plus know you can withdraw the total balance and interest earned without penalty. The No-Penalty CD kicks into full effect 7 days after your deposit is made.
Here are the details:
- Minimum deposit of $1,000.
- You may withdraw the total balance and interest earned, without penalty, beginning seven days after funds have been received for your CD.
- No account opening or maintenance fees.
- Daily compounding interest to maximize your earning potential.
- FDIC insured.