Best CD Rates in Illinois
The rush towards financial freedom, now, more than ever is on the rise. There’s been a downward trend in the market rates, thanks to the shaky economy. CDs, however, have proved to be among the most promising savings ventures.
Despite the March 2020 cut on the market rates, you can still earn some pretty good yields on CDs. In this article, we’ll highlight all about CDs and point you to the best CD rates in Illinois.
- APY
- Min Amount
- Term
West Town Bank
- 1.16%
- $10,000
- 1 Year
Millenium Bank
- 0.90%
- $10,000
- 1 Year
United Community
- 0.90%
- $10,000
- 1 Year
- APY
- Min Amount
- Term
Preffered Bank
- 1.10%
- $10,000
- 2 Years
Midwest Bank
- 1.10%
- $100,000
- 2 Years
PN Bank Of Kewanee
- 1.51%
- $1,000
- 5 Years
- APR range
- Fees
- Terms
- Amounth
- Unemployment protection
Bank 1
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Bank 2
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Bank 3
- 6.95%–35.89%
- Up to 5% transfer fee
- 3–5 years
- $1,000–$40,000
- No
Table of Contents
What is a Certificate of Deposit (CD)?
Certificate of deposits are accounts run by financial institutions that allow people to lock their savings and earn fixed interests at the end of an agreed term.
Banks and credit unions are the most preferred for CDs.
Savers choose their preferred terms based on their saving goals and the present market offers.
Short-term CDs are mainly for storing money value. They are preferred mostly by savers who have issues with commitment, or ones who just can’t keep their money away for long.
Savers are not supposed to withdraw before the maturity of their terms. Doing so will attract penalties deducted from your interests.
Therefore, investing in CDs calls for great discipline and commitment. However, knowing you’ll pay penalties should you make an early withdrawal will keep you motivated.
Money invested in CDs is totally safe. The federal government insures up to $250,000 of your CDs.
Investing in CDs calls for great discipline and commitment.
How CD rates are calculated?
Financial institutions work out interests using the compound interest approach. Here, accumulated interests are added to your principal amount and paid upon maturity of your term.
Remember, your financial institution will work out your interests using the present market rates at the time of investing.
Your principal amount will start attracting interest right from day one. The financial institution pays them quarterly, semi-annually, or annually.
Financial institutions compound interests daily, weekly, or monthly. The frequency in which your preferred institution compounds your interests will determine how much you’ll earn. Go for institutions that work out your rates daily for even higher yields.
Also, how much you invest as your principal amount will have a great influence on how much you earn as returns. Larger principal amounts attract higher rates.
Knowing when to invest in CDs is also crucial. Investing when there’s a downward trend in the market rates will see you earn lower rates.
Rates are calculated at the beginning of your term and locked in till maturity.
Terms and Risk of CDs
Investing in CDs, though a profitable venture, calls for the need to make smart moves, and play by the rules. For a successful savings journey, consider the following:
- Yields – Remember, the idea is to maximize earnings and grow your savings. That means going for higher interest rates. Prioritize institutions offering higher interests, something equal to, or higher than the market average. You’ll easily note this by looking at an institution’s APY
- Available principal – How much you invest will also determine how much you earn as interest. Making an informed choice of how much you’ll be willing to lock for your chosen term is crucial to avoiding early withdrawals. You’ll also want to make sure that your chosen financial institution’s minimum deposit is within your projected budget. Also, have in mind that the money is locked and you won’t be able to add on your principal amount.
- Penalties – Like we earlier noted, savers are only supposed to make withdrawals upon maturity of their terms. Invest in CDs with institutions charging lower early withdrawal penalties. Approach banks and credit unions for more friendly terms.
- Safety – The safety of your savings is critical. The federal government through the FDIC insures up to $250,000 against any possible institutional risks. Instead of investing an amount higher than this on single CD terms, consider spreading out to different terms.
- Tax – Yes, CDs are taxed. Upon maturity of your term, your earnings will be taxed and the remainder paid to you.
Short-Term CD vs Long-Term
Armed with your principal amount and a suitable institution with friendly policies and opportunities for growth, you can proceed to choose a term.
Short-term CDs will let you save your principal amount for one year or less. Here, you can choose between 3, 6, or 12 months depending on your savings needs.
Short-term CDs attract lower market rates compared to long-term CDs. They lie greatly on the value storage aspect of money than money growth.
However, they attract the lowest rates compared to long-term CDs. They also attract the lowest withdrawal penalties should you withdraw before maturity.
Their flexibility and low level of commitment required is their greatest selling point. Your money matures within a short time.
However, long-term CDs are quite the opposite. They attract the highest rates in the market today. But, investing in long-term CDs also call for extra sacrifice and commitment. The financial institution rewards your trust in them for letting them handle your money for long.
Short-term CDs are excellent for those looking to store their money value and save without much commitment required. On the other hand, long-term CDs are for those with long-term financial goals looking to grow their wealth.
For an even better saving experience, you should consider building your CD laddering. That involves saving on multiple CDs with different maturity terms. This way, you’ll have money each time they mature, with an option to reinvest the earned proceeds.
For a better saving experience, consider building your CD laddering. That involves saving on multiple CDs with different maturity terms. This way, you’ll have money each time they mature, with an option to reinvest the earned proceeds.
Pros and Cons of CD in Illinois
| PROS | CONS |
|---|---|
|
Guaranteed returns – With CDs, you can never go wrong. You are assured of your earnings, all worked out at the onset of your term. You’re also not faced with the fear of making losses like there is in the stock or other money markets. You receive your original principal amount and the accumulated interests upon maturity of your term. |
Steep early withdrawal penalties – withdrawing your funds before maturity will see you pay penalties worth a couple of months’ interests. With the traditional savings account, you can withdraw your cash anytime you wish to. |
|
High level of safety – the safety of your savings is guaranteed when you invest in CDs. Your savings are federally-insured by the Federal Deposit Insurance Corporation (FDIC). They insure up to $250,000 in individual accounts. In case you wish to invest in more than that amount, you should consider spreading it in different CDs for guaranteed safety and to build your ladder. |
Locked returns – Your earnings are calculated beforehand using the present market rates. You’ll, therefore, know your possible earnings at the onset of your term. This way you miss out on the future rises in interest rates. |
|
Fixed returns – You’re assured of returns from your invested CDs regardless of the market conditions. That, therefore, makes you immune to the normal market turbulence experienced in other money markets such as stock, especially when there’s a continuous downward trend in the market rates. |
Lower returns – Compared to stocks and bonds, CDs tend to attract lower returns. |
Requirements to Qualify
Opening a CD account isn’t different from opening a normal savings account. However, different financial institutions have different eligibility requirements for new members.
The first step involves finding an institution whose policies and regulations conform with your savings goals.
After finding one, you’ll need to fill out an application form. For this, information such as your name, address, social security number, and residence will be required. You may also need information about your next of kin.
You’ll also need to be a legal resident of the United States and attained the age of 18 years. For verification purposes, your financial institution will need a copy of a valid ID, driving license, or passport.
Some institutions also require new members to pay joining fees. However, most of them don’t. Find out about yours.
Most institutions also have the minimum amount savers can invest in CDs. For our chosen institutions with the best CD rates in Illinois, the least required minimum deposit is $1,000.
Go for an institution asking for an affordable minimum deposit, basically an amount within what you intended to invest.
Be on the lookout for offers and incentives from different financial institutions. New and least popular institutions tend to have lots of offers. Don’t be afraid to invest with them as long they are federally-insured.
Frequently Asked Questions (FAQ)
The table above lists financial institutions with the best offers in Illinois. And, West town Bank trust tops the list.
Yes. Despite the 2020 cut on rates, CDs are still among the best avenues to save and grow your money.
A Jumbo CD is one that requires a higher minimum deposit than the normal CDs. In turn, they pay the highest rates.
Yes. Long-term CDs attract the highest interest rates.
While traditional savings accounts give you full flexibility for your money, CDs will earn you higher interest rates.
