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FDIC Deposit Insurance Extension Affects CD Term Length Decisions

Posted by: RateAPY Bank Rates News
September 22nd, 2009

On May 20, 2009, the federal government opted to extend through 2013 the temporary increase in the standard maximum deposit insurance to $250,000 per depositor. Consumers wary of the stock market have turned to saving their money in bank certificates of deposit (CDs) as a way to maintain their principal and earn some interest. This increased security of the FDIC’s backing only makes CDs more attractive as a stable investment vehicle.

Savers often search for the best CD rates to maximize their profits, but they quickly discover that the rates vary by the amount they are ready to invest and the term of the certificate. Individuals looking to save more than $250,000 in CDs should be careful to diversify between banks so as not to exceed the insurance limit in any one institution. This is particularly true if you opt for a high-interest, long-term CD of 5 years or more, which would mature after 2013. While rates for 7-year CDs with a minimum deposit of $100,000 can be found for more than 3.5%, remember that after 2013, deposits above the old $100,000 limit will no longer be FDIC-insured.

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