In a time when financial decisions can impact personal finances and community well-being, choosing where to open a certificate of deposit (CD) can be a significant opportunity. One option that stands out for its dual benefits of financial returns and social impact is a CD with a Community Development Financial Institution (CDFI).
What is a CDFI?
Community Development Financial Institutions (CDFIs) are organizations that provide financial services to underserved communities. These institutions include community-focused banks, credit unions, loan funds, and venture capital funds, whose goal is to foster economic growth in areas lacking traditional banking services.
Financial Benefits of CDs with CDFIs
Community Development Financial Institution certificates of deposit offer a unique blend of financial and social benefits.
Competitive Interest Rates
According to the FDIC, the average national rate for a 12-month CD is 1.85%. In a recent review, CD Valet Ratewatchers found that 32% of the CDFIs listed on CD Valet have rates of 4% and higher. In a time when rates are still strong for savers, CDFIs are often exceeding mainstream banks by typically offering higher interest rates on CDs. They strive to attract deposits that support their community-driven projects. As you search for high interest rates, CDFI CDs can be a financially savvy choice.
For example, Express Credit Union in Washington State offers federally insured Social Impact CDs with rates up to 5.09% APY* that support 15 low-income Washington families with access to fair and affordable financial services. The Social Impact CD expands the credit union’s lending capacity and helps cover the cost of providing free accounts to unbanked and underbanked people in Washington state.
The CDFI fund provides a list of certified CDFIs and here are a few of the top CDFI rates on CD Valet.
FDIC & NCUA Insurance
CDs opened with CDFI banks and credit unions are typically insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA). The insurance ensures that your money is safe, providing peace of mind along with the opportunity for future earnings.
Social Benefits of CDs with CDFIs
Opening a CD with a CDFI gives you the ability to align your financial goals with your social values. The competitive interest rates ensure that you don’t have to compromise on returns while knowing that your money is being put to work in meaningful ways. It’s a win-win situation: you earn, and your community grows stronger and here’s how:
Community Reinvestment
When you deposit money into a CD at a CDFI, your funds are reinvested into the local community. This includes projects such as affordable housing, small business loans, and community facilities. Your CD directly contributes to the economic development of underserved areas, creating jobs, and improving living standards.
Promoting Financial Inclusion
CDFIs promote financial inclusion by providing banking services to those who might otherwise lack access. By supporting CDFIs, you help bring essential financial services to marginalized communities, fostering broader economic stability and growth.
Socially Responsible Investing
If you prioritize socially responsible investing, CDs with CDFIs can align with your values. Your CD will yield financial returns and support ethical and impactful projects, ensuring that your money makes a difference.
Economic Empowerment
Through their targeted programs, CDFIs empower individuals and businesses within the community. By choosing to open a CD with a CDFI, you are helping create a cycle of economic growth and self-sufficiency.
Making a Difference with Your Money
In a world where every financial decision counts, opting for a CDFI CD is a choice that benefits you and the community. Make your money work harder and smarter by supporting the invaluable work of CDFIs.
*Annual percentage yields (APY) not offered by CD Valet but based on data from various institutions as of 7/22/24 and subject to change. Early withdrawal penalty and additional restrictions may apply. Fees may reduce earnings.
FAQ
What is a CDFI?
A Community Development Financial Institution (CDFI) is a specialized financial institution that serves economically disadvantaged communities that lack access to traditional banking services.
What are the financial and social benefits of opening a CD with CDFI?
Opening a CD with a CDFI provides competitive interest rates and most offer FDIC and NCUA insurance or something similar while promoting community development and economic growth in underserved areas.
