Here's What Happens When You Get a CD From a Bank You Don't Recognize

Core Insights - The Federal Reserve's rapid interest rate hikes have led to a significant increase in Certificate of Deposit (CD) rates, with many top-paying CDs exceeding 5% APY, some even surpassing 5.5% [1] Group 1: CD Market Dynamics - Many high-paying CDs are offered by smaller credit unions rather than well-known national banks, which may cause skepticism among potential depositors [2] - Banks utilize CDs as a strategy to attract depositors, as they earn revenue by lending at higher rates than what they offer to depositors [3] - Lesser-known banks often provide better CD rates to compete for deposits, as they lack the brand recognition of larger institutions [4] Group 2: Comparison of CD Rates - Bank of America offers lower rates on most of its CDs, even in the current high-interest environment, making them less attractive [5] - In contrast, Quontic offers a 3.25% APY on a 1-year CD with a minimum deposit of $500, while Bread Financial also provides competitive rates [6] Group 3: Safety and Trust in CD Issuers - The presence of FDIC insurance is crucial for deposit safety, covering up to $250,000 per depositor, per bank [6] - Signs of a weak bank include branch closures, increasing fees, and loss of depositors, which can indicate potential problems [7] - Many lesser-known CD issuers are likely safe, and thorough research is recommended to find the best rates [8]