The fact of the matter is, banks are always looking for new members, and the best way to get them is through offering specials that attract people locally. This is especially true for smaller banks. They may not have as many people banking with them as they would like, so they put an ad in the paper for a special on a CD rate, or they advertise through other methods to get attention of a rate that is much better than the competition. This money is then invested for the bank to gain a higher return on interest and then redistributed back to the person investing at a small interest rate.

Larger banks B of A can afford to always have lower rates because they can borrow more from the government and because they have many more options for cash flow than smaller banks. What you will find with Chase bank CD rates or Bank of America CD rates is that they will usually always hover around the national average. This can sometimes be as much as 1% less than what you might find elsewhere.

So the next time you decide to throw a couple thousand dollars into a CD, why not look at some of the smaller banks locally, or check with bankrate.com as they update rates regularly on their site to provide the information you need on banks and their reliability as well.

CDs pay interest on your money in a way similar to your typical savings account, however, CDs can pay higher rates based on a APY (annual percentage yield) by locking in a particular APY over a specified period of time. The longer the period of time you “lock in,” the higher the interest rate will be.

“Locking in” means that you agree to keep your money in a particular CD at a particular bank at a particular rate by filling out a simple form and disclosure at that bank. If you should decide to take out your money before that specified time is up, you will usually pay a penalty for early withdrawal.

The bank uses invested monies to lend or reinvest. That is why they want you to “lock in,” because then your money is less likely to leave the bank until your specified “lock in” time is over.

The highest paid CD rates usually involve the longest “lock in” times. For instance, if you choose a 3 month CD you might earn 1.2% interest APY, however, choosing a 5 year CD might earn you 3.50% interest APY over the 5 year period.

When your CD “matures” (the date your CD term ends), your agreement with the bank ends for that particular rate you had agreed upon and the bank will stop paying the rate you agreed to and you can withdraw your money from the bank without a penalty.

When your CD matures you usually have a window of time of 10 to 15 days to decide whether you want to take your money out of the bank or reinvest it again with the bank. Many banks will automatically reinvest your matured CD into another new CD if you don’t give them alternate instructions. If you do not want your money rolled over, make sure you let the bank know ahead of time.

In simple terms, you could look at an IRA as way to add to your retirement. The types of investments that can be obtained through a Roth IRA include Bank CD’s, stocks, mutual funds, bonds and of course various cash options.

Where do you get a Roth IRA?  There are quite a few brokerages that offer the service of purchasing your plan in the form of trades. Tradeking is one that has a nominal fee of $4.95 per trade, but their IRA’s have no maintenance fee. Zecco is another brokerage that is great because it doesnt charge any fee as long as the investment is large enough.

So whats the difference between an IRA and a Roth IRA? If you want to not pay taxes on money put away in a traditional IRA, then you can do that now. The Only downside to that is that you will have to pay later when you pull that money for retirement. On the other hand, if you have a Roth IRA, you pay taxes now on your investment so that you do not have to pay for it later when you do draw it for retirement income.

So whats the downside if you pull the money out before retirement? You might be subject to additional taxing and may owe fees. This leads us to the next question. When can you draw the money penalty free of taxes? This can be done at the age of 59 in most cases. You can also take out half if the money has been held in a Roth IRA for at least 5 years.

The advantages of  a Roth IRA are obvious, and the great thing is that you can still choose how you invest whether you go with safe certificate of deposits or with riskier stock investments. The bottom line is that a Roth IRA is excellent for those looking at retirement in the near future and want a way to put their money away.