Indexed bank CDs and variable rate CDs
January 01, 2008
About Indexed CDs
A certificate of deposit is a time deposit issued by a bank or credit union that pays a specified rate of interest for a set period of time. A majority of CDs are of the fixed-rate variety that pay a constant rate of interest for the lifetime of the CD. If market interest rates increase or decrease before the maturity date of the CD, the interest rate on a fixed-rate CD will remain the same. MoneyRates reports daily on the best CD rates on fixed-rate CDs.
But not all CDs are fixed-rate, indexed CDs are a certificates of deposit with rates determined by changes in an underlying index, common benchmark or even the fluctuation of a foreign currency. Examples of indexed CDs, which are also called variable rate CDs, include stock market CDs, inflation-linked CDs, prime rate-linked CDs and foreign currency-linked CDs.
Banks also offer hybrid CDs that are similar to indexed CDs, but with some important differences. CDs that pay progressively higher interest rates (step-rate CDs) and CDs that give investors a limited option to increase their CD rate (bump-up CDs) are increasing in popularity. If you own a step-rate CD, you can compute your blended rate over the lifetime of the CD and compare it directly to the rate on a fixed CD. This is different than indexed CDs and bump-up CDs where you have to wait-and-see what your return will be.
Banks can be very creative in how they market indexed CDs. MoneyRates is listing a variety of indexed CDs including CDs with rates that are tied to the S&P 500 Index, the prime rate in the United States, rates on Series EE Savings Bonds, yields on Treasury bills, the performance of the Chinese stock market index and even the annual increase in the cost of college tuition. Indexed CDs will often feature a partial participation rate on the upside potential of the benchmark, as well as capping the downside if the benchmark decreases. Check the table below for a list of the best indexed CDs offered by banks today.
|
BANK |
TERM |
INDEXED RETURN |
MINIMUM |
| EverBank | 6-month | WorldCurrency Pacific Advantage CD. Interest rate is indexed 40% to New Zealand dollar, 20% to Hong Kong dollar, 20% to Singapore dollar, and 20% to Japanese Yen. ** | $20,000 |
| College Savings Bank | 5-yr | The InvestorSure CD is a variable rate certificate of deposit indexed to the Standard & Poors 500 Composite Index. The InvestorSure CD does not risk principal, should the value of the S&P 500 decline over the investment period, you will receive your full investment back at maturity. Investments held to maturity will also receive at least 85 percent of the average increase in the S&P 500 based on a formula*. InvestorSure CDs are issued exclusively by College Savings Bank through the Montana Family Education Savings Program. | $500 |
| Carolina First Bank | 13-month | CD pays a base rate which will increase if prime rate increases | $2,500 |
| Carolina First Bank | 30-month | CD pays a base rate which will increase if prime rate increases | $2,500 |
| PNC Bank | 18-month | The PNC variable rate CD has an interest rate that is indexed to 3-month Treasury bill yields. | $1,000 |
| Harris Bank | 5-year | The return on a Harris Bank Market Linked CD is determined by the performance of the S&P 50. Upside potential is limited to 10% per year. If the S&P 500 return is negative during the term of the CD, the interest rate is zero percent and CD investors will receive their full principal at maturity. | $15,000 |
| Ridgewood Saving Bank | 5-year | Dow Jones Industrial Average Indexed CD with rate indexed to DJIA and principal guaranteed against losses. Upside earnings potential is uncapped. | $500 |
| USAA Savings Bank | 5-year | Current rate is 1.27%. If interest rates increase, customers can receive one-time adjustment to their CD rate. | $1,000 |
| USAA Saving Bank | 7-year | Current rate is 1.42%. If interest rates increase, customers can receive one-time adjustment to their CD rate. | $1,000 |
| Cary Bank & Trust | 12-month | Rates indexed to Treasury yields. Tiered rates apply. Higher balances earn better rates. | $5,000 |
| Iberia Bank | 5-year | The Iberia Bank Power CD offers a return linked to a basket of selected individual stocks or leading stock market indices. If the return on the stock market benchmark is negative during the term of the CD, the interest rate will be 0% for CD holders. Principal is FDIC insured if held to maturity. | $250 |
| Sovereign Bank | 36-month | Rate indexed to return of S&P 500 Index. If the value of the S&P 500 decreases during term of CD, principal is still guaranteed. Equal deposit in a 6-month CD required. | $2,500 |
| First Bank Richmond | 3, 5, 7 or 10-years | Rate indexed to rate of Series EE Bonds, guaranteed minimum annual percentage yield | $1,000 |
| First National Community Bank | 1 yr to 5yr | The interest rate on your First National Community Bank variable rate CD is calculated by deducting a pre-determined margin from the National Prime Rate. | $1,000 |
| 1st Mariner Bank | 18-month | Rate indexed to U.S. Treasury index. Current rate is 0.60%. IRA accounts only. | $250 |
| Rollstone Bank and Trust | 7-month | Rate indexed to prime rate. Current rate is 1.47% APY. Minimum deposit $100. | $2,000 |
| Oregon Coast Bank | 6-month or 1-year | Rate indexed to Wall Street Journal prime rate. Current rates are 0.90% for a 12-month Variable CD and 1.25% for a 24-month Variable CD. | $1,000 |
| East West Bank | 5 years | The East West Bank Chinese Renminbi-linked CD offers an interest rate tied to the performance of the Chinese Renminbi (CNY or RMB) relative to the United State Dollar (USD). | $5,000 |
| Central Bank | 1 year | The CD Management Account allows additional deposits and a single penalty-free withdrawal. Rate indexed to six-month Treasury bill and resets every month. | $2,500 |
| Citizens First Bank | 1 year | 1-Year Prime Rate CD with rate changes when the prime rate changes. | $2,500 |
| EverBank | 90-day | The EverBank WorldCurrency Swiss Franc CD is denominated in Swiss Francs.** | $10,000 |
| Think Mutual Bank | 6-month or 1-year | Rate indexed to Treasury yields, resets every 90 days. Current rates are 0.39% for a 6-month Variable CD and 0.41% for a 1-year Variable CD. | $250 |
| New Dominion Bank | 12 to 30 months | CD rates are indexed to the WSJ prime rate. The New Dominion Bank Variable Rate CDs pay a base rate of interest and then if the prime rate increases during the term of the CD, the rate on the CD increases accordingly. Terms from 12 months to 30 months are available. | $3,000 |
| Brentwood Bank | 51-month | The Brentwood Index Powered CD offers an interest rate determined by the performance of the S&P 500. The CD has a 100% participation rate as the index increases and guaranteed minimum return of 1.61% per year.. | $1,000 |
| CollegeSure | 1 yr to 22 yrs | Over the term of a 4-22 year maturity CollegeSure CD, the APY is not less than the college inflation rate less 3.00%. A CollegeSure CD with a maturity of 0-3 years the APY is not less than the college inflation rate less 4.00%. For the past twenty-five years, the annual college inflation rate has ranged from a high of 14.35% to a low of 4.15%. | $500 |
* If return is negative during term of CD no interest is paid and investor receives only principal back
** Currency appreciation or depreciation applies if investor converts back to U.S. dollars.
Last Update: 7/27/11
