How to Find the FDIC-Insured Highest CD Rates

The Federal Deposit Insurance Corp., a branch of the federal government, insures a variety of domestic financial instruments, among them certificates of deposit (CDs) offered by many qualifying U.S. banks. You invest in a FDIC-insured CD for a given amount and a minimum length of time. In return, you receive an agreed-upon interest rate. If the bank fails, the FDIC makes good your loss up to a maximum of $250,000 per account.

Rates of return will vary widely for different kinds of CDs.

Before you can find the highest rate of return on your money, you need to decide how much money you want to invest and how long you want to invest it., one of many online sites where you can find information about CD rates at various banks, gives ratings and interest rates in each of eight different groups: three-month CDs (meaning you can take back your principal without a penalty after three months); six-month CDs; one-, two- and five-year CDs; and one-, three- and five-year jumbo CDs, which require a minimum $100,000 deposit. The rates of return for these CDs vary significantly.

Once you've determined how much money you're investing and for how long, search Bankrate and other CD-rating websites (see Resources) for the best rate. In general, investing more money for longer periods of time will earn higher returns than investing less money for shorter periods of time, but you will find surprising exceptions.

At the low end of the interest rate scale (as of May 2010), Bankrate shows 24 different banks offering three-month CDs with annual percentage yields (APYs) ranging from .10 percent to .90 percent, and with minimum deposits ranging from $0 (no minimum) to $50,000. At the high end of the scale, Bankrate shows 25 banks offering five-year jumbo CDs at rates ranging from 1.31 percent APY to 3.1 percent APY. Before choosing the bank with the highest rate that matches the amount you have to invest and the length of time you want to invest it, consider the different ways these banks compound interest.

An APY rate, which Bankrate, and other rating sites use to evaluate interest, gives you a more realistic indication of your rate of return because it takes into account compounding. An annual percentage rate (APR) doesn't. A bank with an annual APR of 3 percent simple interest pays you slightly less on a $1,000 investment than a bank with an annual APR of 2.99 percent compounded daily.

Broaden your search to include local banks and credit unions. You can often find a higher rate of return than you will get from a national or online bank. Many of the highest rates, however, have special restrictions. You may not qualify. Money Rates, another website offering comparison CD rates, shows some local institutions and credit unions with rates from 2.9 percent to 7 percent APY for terms from seven months to a year, and with minimum deposits from $50 to $500. Some of the local institutions listed have residency and/or relationship requirements: You have to live in the area and/or open a checking account.

Before investing in a CD, make sure the bank is FDIC insured. This will usually be indicated on the bank's website, but if not, call to verify.