When considering opening a 4-year CD, it's important to compare rates and terms from various banks and credit unions to ensure you're getting the best deal. You should also be aware of any fees, minimum deposit requirements, and early withdrawal penalties associated with the CD.
Once you open a 4-year CD, your funds are locked in for the full term of the CD. Early withdrawals may incur penalties, so it's important to make sure you can commit to the full term of the CD. At the end of the term, you can choose to renew the CD, withdraw your funds, or transfer the funds to another account.
Compare 4-Year CD Rates And Minimum Deposit
Although the interest rates offered on 4-year CDs are competitive when compared to short-term CDs and savings accounts, committing your funds to a fixed term of such length requires careful consideration of your individual financial goals and needs.
It's important to compare CD rates and terms from various banks and credit unions before deciding if a 4-year CD is the right investment option for you.
Compare Early Withdrawal Penalty For 4-Year CDs
The penalty for early withdrawal of a 4-year CD can vary depending on the institution, but it is typically determined as a specific number of days of interest.
The table indicates that most penalties for 4-year CDs are approximately 180 days or 6 months of interest, although some penalties of 270 and 365 days of interest are also visible. Ultimately, the penalties are higher than what you can find on shorter CDs such as 6-month or 9-month CDs.
Financial Institution | Early Withdrawal Penalty |
|---|---|
Fidelity
| N/A |
Synchrony Bank
| 365 days of interest
|
Capital One Bank
| 6 months interest |
Discover Bank
| 9 months interest
|
PenFed Credit Union | 365 days / 30% of dividends
|
TIAA Bank | 25% of interest |
Marcus | 180 days interest
|
Merrick Bank | 270 days of interest
|
Bread Financial | 365 days simple interest
|
Bethpage Credit Union | 180 days of dividends
|
Affinity Plus Federal Credit Union | 180 days of interest |
Randolph-Brooks Federal Credit Union | 240 days of interest
|
Vanguard
| N/A |
Populat Direct | 365 days |
Things To Consider When Choosing 4-Year CD
Interest rates: Interest rates for 4-year CDs vary between banks and credit unions, so it's essential to compare rates to ensure you're receiving the best deal.
Minimum deposit requirements: Many banks and credit unions require a minimum deposit to open a 4-year CD. Ensure that you can meet the minimum deposit requirement before opening the account.
Early withdrawal penalties: If you need to withdraw your funds before the end of the 4-year term, you may face an early withdrawal penalty. Understand the penalty and your comfort level with the risk.
FDIC insurance: Confirm that the bank or credit union you select is FDIC insured. This will safeguard your investment up to the maximum amount permitted by law.
Automatic renewal: Some 4-year CDs renew automatically at the end of the term. Understand the renewal terms and how to opt out if you do not want to renew.
Accessibility: 4-year CDs are not liquid investments like savings accounts, and you cannot withdraw your funds without penalty until the end of the term. Consider your need for access to your funds before committing to a 4-year CD.
FAQs
What are the benefits of a 4-year CD?
The main advantage of a 4-year CD these days is the ability to lock in high-interest rates for a long time, making it a good investment option for individuals looking for a low-risk, predictable way to earn a higher return over a longer term.
What is the minimum deposit required to open a 4-year CD?
The minimum deposit required to open a 4-year CD varies between banks and credit unions. It's important to ensure that you can meet the minimum deposit requirement before opening the account.
Can I withdraw my funds before the end of the 4-year term?
Yes, you can withdraw your funds before the end of the 4-year term, but you may incur an early withdrawal penalty. Make sure you understand the penalty and are comfortable with the risk.
Is the interest rate fixed for the entire 4-year term?
Yes, the interest rate for a 4-year CD is typically fixed for the entire 4-year term.
Can I get a higher interest rate by opening a jumbo 4-year CD?
Sometimes this is possible, some banks and credit unions offer higher interest rates on jumbo 4-year CDs, which require a larger minimum deposit.
What are the risks of investing in a 4-year CD?
The main risk of investing in a 4-year CD is that your funds are locked in for a fixed term, and early withdrawals may incur penalties.