Why Are Huntington CD Rates Higher Than Savings Rates?
Whether you’re finally putting your savings plan into action or are simply looking for ways to boost the earnings on your existing deposits, you’re likely scouring local banks and credit unions for the very best interest rates. If that’s the case, then you have probably noticed that the CD rates in Huntington are generally a lot higher than the rates for savings accounts.
So why is this the case. There are a couple of reasons why financial institutions tend to offer better rates for CDs, but just because CD rates are higher doesn’t necessarily mean they’re the best investment for you.
Why Huntington CDs Earn Higher Interest Rates
If you understand how financial institutions use their deposits, CD and savings rates make a lot of sense.
Banks and credit unions use a large portion of the money they hold on deposit to fund loans. Interested is collected on these loans, helping to generate revenue for the institution. However, when it comes to savings accounts, you can deposit and withdraw money as you please. It’s hard for banks and CUs to make use of your deposit if you can pull it out whenever you want.
A CD, on the other hand, requires you keep your money in the bank for a set period of time. The term length can range from months to years, but the point is that during this time, you don’t make withdrawals. That means more money available to fund loans.
As incentive to keep your money on deposit longer, financial institutions will pay higher earnings for long-term CDs. It’s a win-win: You get higher rates and the bank makes more money.
Who Should Invest in a CD?
You can see there are a number of differences between certificates of deposit and savings accounts. That means a CD is a better savings option if you meet the following characteristics:
- Your top priority is higher earnings, not liquidity
- You’re averse to the risk involved in investing in market securities like stocks
- You can afford to commit to a set investment period without making withdrawals
If you think a Huntington CD is right for you, be sure to check out rates from several financial institutions in the city to be sure you get the best one.
