The rates of CDs are determined by two main factors, the length of time until the maturity date of the CD and the current interest rate. Generally you will find that there will be an increase in the CD rates as the length of the maturity period increases. This is because once the investor has committed in leaving his money in the form of a CD, the institution has more flexibility with the money and can use it for a variety of productive purposes.

Similarly, banks and other financial institutions consider competitive rates of interest while setting their own CD rates. Other factors that determine CD rate include profitability of the institution, bulk buying of CDs etc. Usually credit unions, which are non-profit organizations, offer slightly higher rates of interest when compared to those offered by commercial banks because credit unions can afford to offer a little more to their customers at the cost of higher margins.

Some institutions are very particular about meeting the minimum requirement. If the customer meets the requirement fairly by buying the CDs in bulk, then he will be in a position to get the best rates of interest on his investment. In case of bulk purchase, the institution can use large amounts of the customers funds for investment purposes.

Sometimes other factors also influence bank CD rates. For example, some banks try to win some short-term business by offering higher rates of interest on their CDs than their competitors. Banks are eager to sell CDs to everyone, even people who do not have accounts with the institution.

CD rates increase and decrease over time and between financial institutions. Buyers should seek out CD rates that best meet their investment needs.