To understand the concept of bank CD rates, you will have to clearly know what exactly is a certificate of deposit (CD) and how does it work to benefit you. A CD is a kind of savings account, which gives the bearer rights to receive interest from the bank on a yearly basis depending upon the cash that is saved.

The best thing in a CD is that a cash depositor does not have to deposit a large sum of money. Even if  he has just $1.00, he can easily deposit that as CD savings, of which he will be receiving a yearly interest amount, such that the amount increases.

However, the amount deposited as CD savings cannot be withdrawn before a specific time period, which is usually around one month extending up to five years. During this period  if a user does want to withdraw the cash,there will be a penalty sum charged, which is the loss of six month’s interest money. The reason for this high penalty is to remind the user that he should not take out his savings, until and unless he has a higher interest opportunity elsewhere.

CD deposits less than $100,000 is known as “small CDs” and larger than that are known as “large CDs” and different banks have different interest rates on these amounts. They do not follow one fixed pattern and funnily some banks offer low interest rates on large CDs.

The interest amount provided here is commonly fixed rate, that is no matter the time period of the savings, no matter what the interest rate at the market index is, you will be receiving that same amount of interest on to the cash year after year. However, some banks now lately have adopted to variable rates too and when these go high, banks provide customers with the opportunity of getting high interest rates.

There are number of terms and conditions that has to be met while opting for CDs.  These terms and conditions state that :

• Bank has right to cancel or close the CD before the ending period.

• Interest can be paid out as it is accrued or it could be merged with the CD.

• Interest time is calculated on the discretion of the customer, that is from date of deposit, start of next month or quarter.

• The bank has the right to close the CD if there is a withdrawal of a specific principal amount.

• Penalty for each withdrawal made, which could be at most a loss of six month interest.

• Banks are also liable to automatically renew or rollover CDs without informing customers.

Before opting for investing in CDs, one should understand that the 90% control lies within the hands of the provider and it would require quite an effort from the depositor to be patient with his money.

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