Find the Best CD Rates in Texas
Texas is one of the states in the United States, both in terms of area and population. That means that there are lots of banks that offer accounts and financial services to Texans.
Certificates of deposit (CDs) are a type of account that allows you to grow your money faster than you would with a typical savings account. If you’re a Texan who wants to open a CD, find out what options are available from local banks and compare them to CD rates from online banks.
Largest Banks in Texas
The largest banks in Texas by assets are:
- Wells Fargo
- Bank of America
- First National Bank Texas
- BBVA Compass
- Capital One
- Prosperity Bank
- Woodforest National Bank
This list is composed of a combination of national and local Texas banks, but they’re not your only choice for opening a savings account. You can also look at small credit unions or online banks.
You can expect the following options from these banks:
How to Earn Good Rates at Texas Banks
National banks tend to offer the same rates and fees on their accounts, regardless of what state you open the account in. Local banks often provide more attractive options to try to entice customers who aren’t as familiar with the local banks as the national chains.
First National Bank of Texas
The First National Bank of Texas offers both fixed-rate and variable-rate CDs.
The fixed-rate CD is just that, a CD that pays the same rate throughout its term. You can get a fixed-rate CD with a term of 3, 6, 9, 12, 24, or 60 months. The minimum deposit for all of the CDs, except the 9-month CD, is $500. The 9-month CD has a $5,000 minimum deposit. If you can increase your deposit to $50,000 for any of the terms, you’ll get a boost to your interest rate.
The variable-rate CD pays an interest rate that can change depending on market rates. While this means you’ll lose out if rates go down, you could earn more with a variable rate CD if rates rise. As a bonus, you can make additional deposits to variable-rate CDs at the First National Bank of Texas. Fixed-rate CDs don’t allow additional deposit.
The initial deposit minimum is $500. Any additional deposit must be at least $25.
BBVA Compass offers customers in Texas CDs with terms of 12, 15, 18, or 36 months. Customers are encouraged to open CDs in person as certain promotional rates are only available to CDs opened in-branch rather than online.
The minimum deposit to open a CD is $500.
Prosperity Bank offers CDs with terms ranging from 30 days to 5 years. All CDs are Prosperity Bank pay a fixed-rate of interest that is competitive with CDs from other institutions.
Woodforest National Bank
Woodforest National Bank offers CDs with terms of 1, 3, 6, 12, 24, 36, 48, or 60 months. The longer the CD’s term, the better the interest rate will be. Like at other Texas banks, the minimum deposit to open a CD is $500.
Advantages and Disadvantages of Local Banks
Local Texas banks tend to offer more value than national chains in the customer service department. They can personalize your experience more effectively than online or national banks. You’ll have the comfort of knowing that you can drop by a branch to get face-to-face help with your account.
Advantages and Disadvantages of Savings Accounts from Local Banks
Online CD Accounts Available Nationwide
Despite the benefits of local banks, online banks have many features that make them an attractive choice. One such feature is that you can easily access your online bank from anywhere that you have an internet connection.
Low Fees, Great Rates
Another benefit that online banks bring is low fees and high interest rates.
Paying to run a branch of a bank is expensive. In addition to the rent payments or the money spent purchasing the land, the bank needs to pay utility bills, pay for security, and pay for staff at the branch. That forces banks to pay less interest, charge higher fees, or both.
Online banks tend to centralize their operations. By paying for fewer physical locations, they can save a lot of money. Online banks then pass those savings on to customers by paying better rates and charging fewer fees.
Tip: Use a CD earnings calculator to estimate how much interest your money can earn.
Online Accounts Safety Through FDIC Insurance
One thing that many people worry about when they think about online banks is the safety of their money. With online fraud so rampant, it’s reasonable to wonder whether money at an online bank is safe compared to money at a local bank in Texas.
Thankfully, the Federal Deposit Insurance Corporation treats online banks and physical banks the same. Just because your money is at an online bank does not mean that the money is less safe.
The FDIC insures balances of up to $250,000 per depositor, per account type at a bank. So, if you deposit any amount of money, up to $250,000, in a CD, and the bank closes, the FDIC will reimburse you for the covered amount.
If you open a CD and a checking account at the same bank and place $250,000 in each, both are fully protected because the $250,000 limit is per account type.
So long as a bank is FDIC insured, the money at the bank is safe. Whether the bank is an online bank or local Texas bank doesn’t matter.
What Kind of Account is Right for You?
If you’re trying to decide whether to open a CD at a local bank or an online bank, consider the following questions.
First, ask yourself how tech-savvy you are. People who are comfortable with technology and more likely to be able to handle an online CD and will worry less about their account. If you regularly use your phone to pay your friends or check your bank balance, an online bank’s CD should be no problem. If you tend to do all your banking in-person, maybe you should opt for a CD from a local bank.
Next, ask yourself how often you actually visit a branch of your current bank. If you mostly use ATMs to do your banking, you’re a good candidate to open an online CD. If you visit your branch on a regular basis, opening a CD there is a good choice.
Finally, ask yourself about how much you’re willing to give up in terms of interest and fees. If you opt for a local bank that pays less interest or charges more in fees, figure out exactly how much money you’ll be losing compared to an online CD. Decide whether you’re okay with that cost.
Most Important Features in a CD
Choosing the right CD can put you on the path to a more secure financial future by helping you earn more of a return on your savings. With so many options to choose from, it’s easy to get overwhelmed.
Once you’ve narrowed down your choices to a few banks, compare these aspects of their CDs.
Early Withdrawal Penalties
When you deposit money in a bank, the bank uses that money to make investments and loans. It earns a return on those investments and loans. It pays some of that back to you as interest and keeps the rest to pay for the running of the bank.
CDs pay a better interest rate than savings accounts because when you open a CD, you make a promise not to ask for the money back for a specific amount of time. If you renege on that promise and ask for the money back, it can cost the bank money since it will have to alter its investments and lending to get the money to pay you back.
That’s why banks charge a penalty if you ask to withdraw your money early. Often, this penalty is equal to a few months’ interest.
If you’re not confident you can keep the money in the CD for the full term, compare the penalties charged by different banks and look for the bank that charges the smallest penalty.
Possibly the most important part of a CD is the interest rate you’ll earn. When you put money in a CD, you’re locking it away for the long-term, unless you’re willing to pay an early withdrawal penalty. That means it’s essential to find the best CD rate available. If you open a CD, then find a bank offering a higher rate, you can’t move the money without paying a fee.
If you do opt for a CD with a lower rate, make sure the other features make up for the difference.
When your CD’s term ends, your CD is said to have matured. Different banks treat CDs differently when they mature. Some automatically renew them while others move the money to a savings account. How long a grace period you have in which to withdraw the money without penalty also varies.
Make sure you know the renewal policy of the bank you open your CD at. You don’t want to pay an early withdrawal fee because you were a day late to withdraw your money after the CD matured and automatically renewed.
CD laddering is a process by which you open multiple CDs with staggered maturities. For example, you could open a one year CD each month for a year. Starting with the thirteenth month, you’ll have a CD maturing each month for the next year. You can then decide whether to allow the CDs to renew or to use the money in them.
The benefit of laddering CDs is that you get the higher interest rate of a CD, but still have some access to cash on a regular basis.
If you want to pursue a CD laddering strategy, it’s easiest to get started at a bank that offers a wide variety of terms, so factor that into your search.