A certificate of deposit or CD is a financial instrument with a yield that is fixed in advance used by banks to take deposits from their customers. Before investing in the CDs, it is very important that one understands the U.S. bank CD rates in order to see how one can get the best returns on investment. Investing a particular amount of money in a bank deposit gives you a particular rate of interest that is fixed in advance for a particular period or term. There are different US bank CD rates to choose from depending on how long you can afford to have your money locked in.
The US bank CD rates essentially depend on the position of the economy in the Unites States and are indicative of its well-being. From time to time the US Federal Reserve fixes a limit on the PLR or prime lending rate for banks in the United States to lend money to people for business or personal use. The PLR keeps changing as per the status of the US economy. As a result, the U.S. bank CD rates keep changing time and again.
The banks in the United States have to follow the guidelines of the US Federal Reserve as well as the PLR cap. They make profits by collecting higher APY or annualized per year interest rates on loans as compared to the US bank CD rates that they offer their customers. This comparison is made taking into account the same time period both starting on the same day for loans as well as deposits. The U.S. bank CD rates vary for different terms and you have the 12 month CD rates and 3 month CD rates besides others.
Banks actually fix the APY ate of interest that they amass on loans on the PLR cap which is fixed by the US Federal Reserve. They are allowed a certain amount of freedom in loan rates which is dependent on the cap and hence you will find that interest rates on loans might vary slightly from one bank to another for the same period. The banks also revise the U.S. bank CD rates whenever the US Federal Reserve periodically revises the PLR rates. So you should keep checking for new and better US bank CD rates before deciding to invest in the certificates of deposit.
Some of the US bank CD rates might be slightly higher than others; the reason for this is to draw more customers. As a result, they can collect more money so that they are able to give out more loans to businesses. Subsequently their profit margins go up. The U.S. bank CD rates are higher for longer periods but this also depends on the cap that exists for tenures of five years and more.
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