A term deposit is another name for deposit accounts, such as certificates of deposit, that have a fixed term. The interest rates that the deposit earns are known as term deposit rates. You can get the best term deposit rates by using one of two options: building what is referred to as a certificate of deposit ladder, also called laddering, or by depositing your money in longer-term certificates of deposit.
Building a certificate of deposit ladder requires you to deposit money into several certificates of deposit. You start by depositing some of your money in short-term deposit accounts, such as three-month certificates of deposit. To build the next rung on the ladder, you then deposit some money into a six-month certificate of deposit. You continue depositing your money so that you then have nine-month, 12-month, two-year, three-year, four-year, and five-year certificates of deposit.
You can get the best term deposit rates over time using a certificate of deposit ladder because as each certificate matures, you invest the money into a five-year certificate of deposit. As the longest term certificate of deposit, this also pays a higher interest rate than the shorter-term options. Since you have a certificate of deposit maturing every three months and then every five years, you are not tying your money up for extended periods where you are earning low interest rates.
The second option for earning the best term deposit rates is to invest a lump sum of money into a long-term deposit account. Long-term certificates of deposit tend to pay higher rates than short-term certificates of deposit. Some long-term deposit accounts also require a higher minimum deposit amount, so the certificate also earns a higher rate. For example, a jumbo certificate of deposit pays a higher interest rate than either long or short-term certificates of deposit. The jumbo certificate of deposit also requires a minimum deposit amount that is significantly higher than those types of certificate.
To find the highest rates on deposit accounts, you should use a website that compiles deposit account rates from various banks and financial institutions from around the country. Using a website that compiles this information for you allows you to do a side-by-side comparison of the certificate of deposit options, the minimum deposit required, the term, and the interest rate. You can easily compare several term options to each other and choose the best one for you.