Interest rates are not good right now. When I opened an ING savings account years ago, it had the best interest rates around for a basic savings account. That account earns very little now, while it’s still at a better rate. More recently I opened an ING Electric Orange checking account. This checking account earns a little bit of interest, which is a nice bonus. I’m using the account mostly for storage, but I need more access to the funds than a savings account affords.
If I really wanted to get a better interest rate, I’d open a certificate of deposit. Certificates of Deposit are a great vehicle for savings. CDs are easy to get and inexpensive to maintain. They’re as secure as a regular savings account provided your CD is with an FDIC insured institution.
There are benefits to certificates of deposit. CDs are easy to get. You can get a CD at your bank or credit union. ING Direct has CDs with terms from six months to five years. The interest rates start at .75% for six months to two years. At ING you can decide if you want interest paid at the end of the CD term, each month, or yearly. Knowing the benefits of compounding interest, I’d want interest paid often.
There are drawbacks to CDs too. Certificates of Deposit are not regular savings accounts. You deposit funds at the start of the term and then generally cannot touch the money again until the end of the term. If you know you are going to need a certain sum of money in five years, then a CD is a great place to park it. But if you don’t have all the money upfront, then a CD isn’t for you.
Shop around for the CD that meets your needs.