financial

Fact checked by Suzanne Kvilhaug
Reviewed by JeFreda R. Brown

Gross Profit vs. EBITDA: An Overview

EBITDA is “earnings before interest, taxes, depreciation, and amortization.” Gross profit and EBITDA each show the earnings of a company but they calculate profit in different ways. Investors and analysts may want to look at both profit metrics to gain a better understanding of a company’s revenue and how it operates. 

Key Takeaways

• Gross profit and EBITDA are financial metrics that measure a company’s profitability by removing different items or costs.
• Gross profit appears on a company’s income statement and is the profit a company makes after subtracting the costs associated with making its products or providing its services.
• EBITDA is a measure of a company’s profitability that shows earnings before interest, taxes, depreciation, and amortization.
• Investors and analysts can use gross profits to determine how well a company generates profit from its direct labor and direct materials.
• They can use EBITDA to analyze and compare profitability among companies and industries.

What Is Gross Profit?

Gross profit is the income earned by a company after deducting the direct costs of producing its products or providing its services.

It measures how well a company generates profit from its direct labor and direct materials.

Important

Gross profit doesn’t include non-production costs such as those for the corporate office. Only the revenue and costs of the company’s production facility are included in gross profit.

The formula for gross profit

$text{Gross Profit}=text{Revenue}-text{Cost of Goods Sold}$Gross Profit=Revenue−Cost of Goods Sold

Revenue is the total amount of income earned from sales in a period. It can also be referred to as net sales because discounts and deductions from returned merchandise may have been deducted. Revenue is considered the top-line earnings number for a company because it’s located at the top of the income statement.

Cost of goods sold (COGS) is the direct costs associated with producing goods. Some of the costs included in gross profit are:

• Direct materials
• Direct labor
• Equipment costs involved in production
• Utilities for the production facility

Example of gross profit calculation

This is a portion of an income statement for J.C. Penney Company, Inc. (JCP).

• Total revenue was $2.67 billion at this time (highlighted in green).
• COGS was $1.71 billion (highlighted in red).
• Gross profit was $960 million for the period.

This example shows that gross profit doesn’t include operating expenses such as overhead. It also doesn’t include interest, taxes, depreciation, and amortization. Gross profit is therefore effective if an investor wants to analyze the financial performance of revenue from production and management’s ability to manage the costs involved in production. EBITDA is a better financial metric, however, if the goal is to analyze operating performance while including operating expenses.

What Is EBITDA?

EBITDA is one indicator of a company’s financial performance and is used as a proxy for the earning potential of a business. EBITDA strips out the cost of debt capital and its tax effects by adding interest and taxes back to earnings.

EBITDA also removes depreciation and amortization, a non-cash expense, from earnings. It helps to show the operating performance of a company before taking the capital structure such as debt financing into account.

Note

EBITDA can be used to analyze and compare profitability among companies and industries because it eliminates the effects of financing and accounting decisions.

The formula for EBITDA

$begin{aligned} &text{EBITDA}=text{OI} + text{Depreciation} + text{Amortization}\ &textbf{where:}\ &text{OI}=text{Operating Income} end{aligned}$​EBITDA=OI+Depreciation+Amortizationwhere:OI=Operating Income​

Operating income is a company’s profit after subtracting operating expenses or the costs of running the daily business. Operating income helps investors separate the earnings for the company’s operating performance by excluding interest and taxes.

Example of EBITDA calculation

Let’s use the same income statement from the gross profit example for J.C. Penney:

• Operating income was $3 million.
• Depreciation was $141 million but the $3 million in operating income includes subtracting the $141 million in depreciation. Depreciation and amortization must therefore be added back into the operating income number during the EBITDA calculation.
• EBITDA was $144 million for the period ($141 million + $3 million).

We can see that interest expenses and taxes aren’t included in operating income but are instead included in net income or the bottom line.

Special Considerations

The above examples show that the EBITDA figure of $144 million was quite different from the $960 million gross profit figure during the same period.

One metric isn’t better than the other. They both show the profit of the company in different ways by stripping out different items. Operating expenses are removed with gross profit. Non-cash items like depreciation as well as taxes and the capital structure or financing are stripped out with EBITDA.

EBITDA helps to eliminate management decisions or possible manipulation by removing debt financing while gross profit can help analyze the production efficiency of a retailer that might have a lot of cost of goods sold as in the case of J.C. Penney.

Depreciation isn’t captured in EBITDA so it has some drawbacks when analyzing a company with a significant amount of fixed assets. An oil company might have large investments in property, plant, and equipment. The depreciation expense would be quite large as a result and the earnings of the company would be inflated with depreciation expenses removed.

Can EBITDA Be Higher Than Gross Profit?

Gross profit should be greater than EBITDA because it doesn’t consider the operating expenses built into the EBITDA calculation. EBITDA and gross profit are designed to measure different things. Gross profit measures how well a company can generate profit from labor and materials. EBITDA is better for comparison among industry peers.

How Do You Convert Gross Profit to EBITDA?

It’s not a matter of converting one to the other because the calculations measure different factors. The EBITDA calculation uses operating income which is gross profit minus operating expenses such as overhead.

Why Is EBITDA More Important Than Profit?

It’s not necessarily more important but it’s more useful to investors in certain contexts. Gross profit limits analysis to a company’s ability to turn labor and materials into profit. EBITDA also takes operating performance into account. EBITDA also has drawbacks such as inflating earnings for companies with many fixed assets that depreciate.

The Bottom Line

EBITDA and gross profit are ways that analysts or investors can look at a company. One isn’t necessarily better than the other because each is designed to measure something different. EBITDA strips interest, taxes, depreciation, and amortization from operating income. Gross profit strips the cost of labor and materials from revenue.

Fact checked by Katrina Munichiello
Reviewed by Pamela Rodriguez

Very few financial products have generated as much controversy as variable annuities. Many brokers and planners view them as indispensable retirement planning tools, while other financial experts warn consumers to avoid them at all costs.

There is no black-and-white answer to this issue. You need to understand the advantages and disadvantages of these investments before making a decision.

Key Takeaways

• Pro: They aren’t subject to contribution limits.
• Pro: The money in them grows tax-deferred.
• Pro: Many states protect them from creditors.
• Con: They usually come with high fees.
• Con: They are complex and hard to understand.
• Con: They can end up generating significant taxes.

How Variable Annuities Work

A variable annuity is a type of retirement account. The owner of the account has an investment fund that is intended, after retirement, to provide a regular monthly income in an amount that is subject to the fluctuations in the value of the investments selected for the account.

Variable annuities probably rank second only to variable life insurance in terms of complexity. They resemble their fixed annuity and indexed annuity cousins in that they are issued as contracts that grow on a tax-deferred basis regardless of whether they are placed inside an individual retirement account (IRA) or another tax-deferred retirement plan.

There is a 10% early withdrawal penalty for distributions that are taken before the contract owner is 59½, with certain exceptions for death, disability, or other factors.

However, variable contracts are unique in that they offer a preselected group of mutual fund subaccounts into which you allocate the premiums you pay. The values of the funds rise and fall with the markets, with no guarantee of principal.

Most variable products also contain living and death benefit riders that guarantee either a minimum account value or a stream of income (see below).

Nevertheless, even this information is not enough to allow you to make an educated buying decision. You also need to know the pros and cons of these unique products.

Important

Variable annuities can provide superior returns over the long haul, but it is prudent to learn about the tax treatment of this financial product before you invest.

The Advantages of Variable Annuities

Variable annuities offer a package of benefits. Here are their main selling points.

Unlimited Contributions

As mentioned previously, there is no limit to the amount of money that can be placed inside a variable annuity. For this reason, they are popular with wealthy investors who are looking for tax shelters. (Most carriers impose a limit for initial purchases.)

Tax Deferral

Like all other forms of annuities, variable annuities grow from year to year on a tax-deferred basis. The distributions are taxable in the year that they are made.

Insurance Protection

Most variable contracts today offer an array of living and death benefit riders that promise a guaranteed stream of income or a minimum account value.

The living benefit riders pay out a guaranteed stream of income that is based upon a hypothetical guaranteed rate of growth from the subaccounts. You will still get this payout even if the subaccounts fall short of this rate of growth.

The typical death benefit rider promises the beneficiary the largest of three factors: the current contract value, its highest value on the date of the contract anniversary, or a value based on a guaranteed hypothetical rate of growth.

Potential for Superior Returns

People who put their money in stock subaccounts and leave it there for 20 years or more will probably see a higher return on their investment than can be had from any other type of annuity.

Most variable contracts also offer basic money management services, such as periodic rebalancing.

The fixed accounts that are available in many variable contracts are often higher than the rates offered by comparable fixed products.

Avoidance of Probate

As with fixed and indexed annuities, variable annuity contracts are unconditionally exempt from probate. That allows the beneficiaries to get their money quickly.

Protection from Creditors

Although this benefit varies somewhat by state, many states mandate that money placed inside variable or other types of annuity contracts cannot be attached by creditors. Florida, for example, offers such protection.

Initial Bonuses and High Guaranteed Rates

Many variable annuity contracts will pay an instant bonus on money that is paid into the contract, or they may offer a dollar-cost averaging program that pays a high fixed rate on the initial balance and then moves the money into the subaccounts of your choice over a set period of time, such as six or 12 months.

The Disadvantages of Variable Annuities

Despite their versatility, variable annuities are not all things to all people and do have some real limitations.

Poor Cost Basis

Unlike stocks and other securities, the cost basis of variable annuities does not step up when they are inherited. Beneficiaries will pay tax on the entire contract value that has grown from the date of the initial purchase.

Poor Tax Treatment

Although variable contracts grow tax-deferred until retirement, they impose the same 10% early withdrawal penalty as traditional IRAs and qualified plans.

All distributions from these contracts are taxed as ordinary income unless the contract was placed inside a Roth IRA.

A similar long-term investment in index funds that do not pay dividends could yield similar growth, but with total liquidity and lower taxes on long-term gains.

High Fees

Variable annuities, like L share annuities for example, are one of the most expensive financial products in the marketplace. They come with myriad fees and charges, including mortality and expense fees, mutual fund subaccount management fees, contract maintenance fees, and other miscellaneous costs. Some contracts will charge transaction fees after a certain number of transactions have been made within the contract.

Living and death benefit riders also subtract periodic fees from the contract balance.

Most contracts also come with a substantial back-end surrender charge schedule that may not expire for 10 years or longer.

Complexity

As mentioned previously, variable annuities are one of the most complicated financial instruments available today, and they are often poorly marketed and understood by both salespersons and consumers.

What Is an Annuity?

An annuity is a contract between an annuity owner and an insurance company. It offers a steady stream of income, typically for retirement.

What Is an Annuitant?

An annuitant is the individual that the annuity’s life expectancy calculations are based on. They are not necessarily the same person as the annuity owner.

What Is a Variable Annuity?

A variable annuity is an annuity with a payout that is ultimately based on the performance of the market, via mutual fund subaccounts.

The Bottom Line

Variable annuities can offer you benefits that would require a combination of several other types of investments and accounts to duplicate. However, you need to be thoroughly educated on their drawbacks.

The value of these products can only be evaluated in the context of your tax situation, investment and retirement objectives, and time horizon.

According to the most recent U.S. Census Data, there is more than a $45,000 swing in median income between the wealthiest and poorest household income states. The top-earning states for 2023 are Massachusetts, New Jersey, Maryland, New Hampshire, California, Hawaii, and Washington. 

What about these states’ educational opportunities, cost of living, and industries that help their residents bring home the bacon? 

Key Takeaways

• 4 of 7 wealthiest states are in the northeastern U.S.
• Access to high-quality education correlates with higher median income. 
• States with higher median income also typically have higher cost of living and housing prices.

1. Massachusetts ($99,858)

A rising tide lifts all boats, and the economic prosperity of the Boston area is one example where the metaphor rings true. The Massachusetts economy positively impacts neighboring states like New Hampshire. Massachusetts is also consistently ranked one of the highest-educated states in the country and #1 in education. Additionally, employment opportunities in industries like health care, biotechnology, and financial services bring high earners to the state. 

2. New Jersey ($99,781)

New Jersey sits between New York City and Philadelphia, making New Jersey a commuter dream for those wanting to make city money without living in a city. According to the U.S. Census Bureau, New Jersey is the most densely populated state with much of the population living in the suburbs. New Jersey also has several high-earning industries like life sciences, financial services, transportation, and logistics. 

3. Maryland ($98,678)

Maryland regularly ranks as one of the wealthiest states. The state neighbors Washington D.C., providing residents with abundant federal jobs and contracting opportunities. Maryland also ranks high in two other key economic indicators: lowest unemployment rate and highest educational attainment levels. The state also boasts miles of ocean coastline, including the Port of Baltimore and the Chesapeake Bay, creating a strong coastal economy. 

4. New Hampshire ($96,838)

Approximately 80% of New Hampshire’s residents live and work in their home state in one of the state’s various growing industries. Additionally, New Hampshire’s proximity to Boston, Massachusetts, attracts commuters in high-paying industries to the state. 

5. California ($95,521)

California leads U.S. tourism. Additionally, it is a global leader in two high-profile, high-value industries: technology and entertainment. Driven by Silicon Valley, the tech sector in California offers some of the highest average salaries in the nation. Most recent data from the California Budget & Policy Center reveals that 1% of California’s population earns 30.5% of the income, likely keeping them from ranking higher among the wealthiest states. Income inequality and the high cost of living make California a nice place to visit but an expensive place to live. 

6. Hawaii ($95,322)

Hawaii’s tourism industry is a significant source of income for many of Hawaii’s residents. Income from tourism, combined with government contracts and military spending, keeps the islands of Hawaii not only economically afloat but prosperous.

Warning

Before you hop on a flight to Hawaii in search of high-paying jobs and white sandy beaches, you should note that Hawaii’s housing prices are the highest in the nation. 

7. Washington ($94,605)

Washington consistently ranks in the top wealthiest states in the U.S., thanks partly to hosting 17 Fortune 500 companies. The state’s biotechnology, clean energy, and aerospace developments also contribute to Washington’s residents’ high median average income. While Washington is one of the wealthiest states, residents of Washington pay higher than average home prices. 

The Bottom Line

These states boast robust, wealthy economies thanks partly to their industry, proximity to natural resources, and educational opportunities. They also have something else in common: a high cost of living. 

Reviewed by Chip Stapleton
Fact checked by Timothy Li

Reinvestment can increase long-term returns. The interim income you generate is put back into the investment when you reinvest your money but some investors opt to receive periodic payments from their investments instead.

Periodic coupon or interest payments from bonds which are debt instruments and regular dividends which are cash payments from stocks and mutual funds can offer investors a steady stream of income. These eight dividend mutual funds pay dividends regularly.

Key Takeaways

• Many mutual funds offer aggregate dividends from multiple stocks that are either reinvested or paid out to account holders.
• Dividend funds are paid out after fees so the best dividend mutual funds should have low expense ratios and high yields.
• Dividend-paying mutual funds tend to focus on large, well-established companies with strong track records of paying dividends or that are expected to increase their dividend payments.
• A company’s dividends are typically paid from its retained earnings.

How Do Mutual Funds Pay Dividends?

Mutual funds often contain a basket of securities that include equities or stocks which may pay dividends. Dividends are paid to shareholders at varying times.

Mutual funds that follow a dividend reinvestment plan (DRIP) reinvest the received dividend amount back into the stocks. Other funds follow the dividend payment plan by continuing to aggregate dividend income over a monthly, quarterly, or sometimes six-month period then making a periodic dividend payment to account holders.

A fund pays income after expenses. Those expenses can be covered fully or partially by dividend income if a fund gets a regular yield from the dividend-paying constituent stocks. Dividend income may be tax-free depending on local laws and this can add to an investor’s overall return.

Companies aren’t obliged to make dividend payments on their stocks so dividends aren’t guaranteed. Investors who are looking for dividend income may find dividend-paying mutual funds a better bet than individual stocks because stocks aggregate the available dividend income from multiple stocks. A mutual fund also helps with diversifying risk from depreciating stock prices because the invested money is spread among dozens of companies.

Important

A useful benchmark for gauging the dividend-paying performance of a fund is to compare the mutual fund yield with the yield of the benchmark S&P 500 index. The 30-day SEC yield is a standard measurement in the industry that’s mandated by the U.S. Securities and Exchange Commission (SEC) to help investors compare funds before investing.

1. Vanguard High Dividend Yield Index Admiral Shares (VHYAX)

Vanguard’s High Dividend Yield Index Admiral Shares is an index fund that attempts to replicate the performance of the FTSE High Dividend Yield Index. This index contains stocks of companies that usually pay higher-than-expected or greater-than-average dividends. VHYAX replicates the benchmark stock constituents in the same proportion. This fund has maintained a consistent history of paying quarterly dividends since its inception on Feb. 7, 2019.

The VHYAX has one of the lowest expense ratios because it’s an index fund: 0.08% as of Feb. 27, 2024. Its SEC yield was 2.47% as of Nov. 30, 2024. The fund has a $3,000 minimum investment requirement. It may be a perfect low-cost fund for anyone who’s looking for higher-than-average dividend income.

Vanguard offers this fund as an exchange-traded fund (ETF) which has many similar characteristics. The ETF version is the Vanguard High Dividend Yield ETF (VYM).

2. Vanguard Dividend Appreciation Index Admiral Shares (VDADX)

The VDADX is an index fund that attempts to replicate the performance of the benchmark Nasdaq US Dividend Achievers Select Index. This unique index consists of stocks that have been increasing their dividend payouts over time. The VDADX replicates the benchmark stock constituents in the same proportion. This fund is also a consistent payer of quarterly dividends since its inception on Dec. 19, 2013.

VDADX also has one of the lowest expense ratios. Like VHYAX, it only charges 0.08% as an expense ratio with an SEC yield of 1.58% as of Nov. 30, 2023. The fund has a $3,000 minimum investment requirement.

Vanguard offers this fund as an ETF which has many similar characteristics. The ETF version is the Vanguard Dividend Appreciation ETF (VIG).

3. Columbia Dividend Opportunity Fund (INUTX)

Columbia Threadneedle Investments’ Dividend Opportunity Fund focuses on delivering dividends by investing in the stocks of companies that have historically paid consistent and increasing dividends. The fund offers a diversified portfolio of holdings that include common stocks, preferred stocks, and derivatives for both U.S. and foreign securities of various-sized companies.

INUTX had an expense ratio of 1.07% as of Dec. 1, 2024 and an SEC yield of 2.07% as of Nov. 30, 2024. The fund’s inception date was Aug. 1, 1988 and it has a $2,000 minimum investment requirement.

4. Vanguard Dividend Growth Fund (VDIGX)

The Vanguard Dividend Growth Fund primarily invests in a diversified portfolio of large-cap and occasionally midcap U.S. and global companies that are undervalued relative to the market and have the potential for paying dividends regularly. The fund research attempts to identify companies that have high earnings growth potential leading to more income as well as the willingness of company management to increase dividend payouts.

VDIGX has an expense ratio of 0.29% and an SEC yield of 1.62% as of Nov. 30, 2024. The fund’s inception date was May 15, 1992 and it has a $3,000 minimum investment requirement.

Warning

Any fund that invests in stocks, bonds, or other securities can realize gains in losses due to the price movements of the holdings. The market gains can lead to enhanced capital gains in addition to the SEC yield but market losses can also occur. These losses can be so significant that not only can the SEC yield be wiped out but a loss of the initial investment is also possible.

5. T. Rowe Price Dividend Growth Fund (PRDGX)

The T. Rowe Price Dividend Growth Fund is based on the principle that increasing dividends over a period are positive indicators of a company’s financial health and growth. This fund looks to invest mostly in stocks of large companies with some midsized companies folded into the mix. The fund seeks companies that have a strong track record of paying dividends or that are expected to increase their dividends over time.

PRDGX contains mostly stocks of large U.S. companies that pay quarterly dividends. It has an expense ratio of 0.64%. The fund’s inception date was Dec. 30, 1992 and it has a $2,500 minimum initial investment requirement.

6. Federated Strategic Value Dividend Fund (SVAAX)

The Strategic Value Dividend Fund from Federated Hermes offers monthly dividends. The fund’s investment strategy includes generating income and long-term capital appreciation by focusing on higher-dividend-paying stocks than that of the broader equity market. The fund also seeks companies with dividend growth potential and is primarily benchmarked to the Dow Jones U.S. Select Dividend Index.

SVAAX contains mostly stocks of large U.S. companies, with some foreign securities. It has a net expense ratio of 1.06% and an SEC yield of 3.54% as of Sept. 30, 2024. The fund’s inception date was March 30, 2005 and it has a $1,500 minimum initial investment requirement.

7. Vanguard Equity Income Fund Investor Shares (VEIPX)

The Vanguard Equity Income Fund Investor Shares focuses primarily on established U.S. companies that are consistent dividend payers. The fund’s holdings tend to be slow-growth but high-yield companies. The stock price gains may be limited compared with other funds as a result.

VEIPX pays regular quarterly dividends and has an inception date of March 21, 1988. The fund has an expense ratio of 0.27% and an SEC yield of 2.32%, as of Nov. 30, 2024. The fund requires a minimum investment of $3,000.

8. Neuberger Berman Equity Income Fund (NBHAX)

The Neuberger Berman Equity Income Fund looks to earn dividend income and capital appreciation by investing in high-dividend-paying equities that include common stocks, utilities, real estate investment trusts (REITs), convertible preferred stock, convertible securities such as bonds, and derivative instruments like call and put options.

The fund’s inception date was June 9, 2008. It has a $1,000 minimum initial investment requirement. It paid dividends with an SEC yield of 1.50% as of Dec. 27, 2024 and had an expense ratio of 1.09%.

Are Dividend-Paying Mutual Funds a Good Investment Idea?

Dividend-paying mutual funds give investors a chance to put their money into an investment vehicle that tends to perform well. They usually offer great returns and low volatility while allowing investors to diversify their holdings.

Dividend-paying companies that make up a mutual fund portfolio provide investors with a steady income stream and capital appreciation but there are fees and initial investment minimums that investors should keep an eye on.

What Is a DRIP?

A DRIP is a dividend reinvestment plan that allows investors who receive dividends to use them to purchase more stock in the company. This allows the investor’s investment in the company to grow over time.

How Do Dividends Work?

A dividend is a distribution made by a company to its shareholders, normally common shareholders. It represents a portion of the company’s earnings. Dividends are distributed regularly. They’re most commonly paid quarterly, monthly, or annually. Recipients can take dividends as cash or they can reinvest them back into the company.

Not all companies pay dividends to their shareholders. Dividends are usually offered by more established corporations.

The Bottom Line

A company’s dividend payments are typically paid from the company’s retained earnings which represent the saved profit from prior years. Companies may be better off reinvesting the dividend money back into the business, however, leading to higher revenue and an appreciation of their stock prices.

Dividend payments also limit the reinvestment gains due to compounding. Investors looking for regular dividend income should weigh both the benefits and the limitations of dividend income before investing in high-dividend-paying mutual funds.

Disclosure: This article is not intended to provide investment advice. Investing in securities entails varying degrees of risk and can result in partial or total loss of principal. The trading strategies discussed in this article are complex and should not be undertaken by novice investors. Readers seeking to engage in such trading strategies should seek extensive education on the topic.

Find the difference between an expert and a beginner platform

Fact checked by Will Baker

Fundrise and CrowdStreet are two of the most popular real estate crowdfunding platforms, each with over 300,000 investors. However, the companies serve very different markets. Fundrise is more of a beginner’s platform, accepting non-accredited investors with a minimum contribution of just $10. Thanks to its ease of use, accessibility, low fees, and more, Fundrise is Investopedia’s best overall real estate crowdfunding platform, as well as the best platform for beginners and the best for low fees.

CrowdStreet, on the other hand, caters to wealthy, experienced real estate investors. You must be accredited to use CrowdStreet, and the minimum investment is at least $25,000. In exchange, CrowdStreet offers a greater real estate investment selection and more options to customize your portfolio, including the option to buy into individual deals. Read on for an in-depth comparison of Fundrise vs. CrowdStreet.

Key Takeaways of Fundrise

• Minimum investment of just $10
• Accepts non-accredited investors
• Runs a venture capital fund as well as real estate funds

Key Takeaways of CrowdStreet

• Requires a $25,000 minimum investment
• Good selection of projects for portfolio customization
• Only offers real estate investments

Account Setup

Fundrise and CrowdStreet both have quick and simple account setup processes. Fundrise estimates it takes about five minutes to get started. You create an account through the Fundrise website or mobile app. From there, you pick an investment plan from choices that include Growth, Income, and Balanced Portfolios. Fundrise will then invest your money to follow this strategy across dozens of real estate investments.

You can also register for a Fundrise Pro account. This allows you to pick between different real estate investment funds to build your own portfolio.

CrowdStreet’s onboarding process is also quick and efficient, though qualified investors should be prepared to submit proof they meet the accredited investor income or net worth requirements. After CrowdStreet verifies your credentials, you can log into the marketplace to review possible deals for your portfolio. 

Final Verdict

While both platforms make it easy to get started, Fundrise is a little simpler because it does not go through the process of verifying your accreditation status. 

Key Features

Fundrise accepts both accredited and non-accredited investors, while you must meet the accredited investor requirements based on your income or net worth to use CrowdStreet. Fundrise requires a minimum investment of just $10 for regular investment accounts and $1,000 for individual retirement accounts (IRAs). The CrowdStreet minimum investment is at least $25,000, but individual deals can require even larger minimum contributions.

Fundrise and CrowdStreet both offer curated portfolios pre-designed for investors. Fundrise has pre-built portfolios for different goals like growth or income. You can buy into these portfolios, and Fundrise picks the investments for you. CrowdStreet offers diversified funds, allowing you to buy into different property types, project sponsors, and regional markets.

You can also build your own customized portfolio on each platform. With CrowdStreet, all investors have the option to buy into individual deals. At Fundrise, you need to pay for a Fundrise Pro account for the option to create a customized portfolio. However, you can only choose among real estate funds, not individual properties.

Both Fundrise and CrowdStreet pay dividends for your real estate investment. Fundrise gives you the option to reinvest the dividends in other projects automatically. Fundrise and Crowdstreet only accept investors in the United States.

Final Verdict

Fundrise is much more accessible to regular investors, as it accepts non-accredited investors and only requires a $10 investment minimum. CrowdStreet focuses on the wealthier, accredited investor market and has a much higher minimum. Fundrise is a better option for pre-designed curated portfolios, while CrowdStreet gives you more options to customize your portfolio with individual deals.

Fees

Fundrise and CrowdStreet use different approaches for fees. There are more upfront Fundrise fees. It charges 0.15% per year of your assets on the platform for its advisory fee. This covers the cost of the technology, tax management processing, and customer support. If you buy into one of the Fundrise real estate or venture capital portfolios, you also owe an annual management fee:

• Income Real Estate Fund and all eREITs: 0.85%
• Fundrise Innovation Fund: 1.85%

If you want to access Fundrise Pro to design your real estate portfolio, it costs $10 a month or $99 per year. 

CrowdStreet does not charge investors an upfront platform fee. Instead, it charges a 1.5% technology fee to sponsors listing investment deals on the platform. Each investment deal will then list the fees you owe as an investor in the project. If you buy into the CrowdStreet REIT, it charges a 1.5% annual management fee plus any sponsor fees.

Compare Fees

Final Verdict

Fundrise charges more fees upfront to use the platform and browse investments. CrowdStreet waits until you invest to start charging fees, and the cost depends on what the project sponsor decides. While the companies use different approaches, the overall fees are similar.

Transparency

We considered how transparent Fundrise vs. CrowdStreet were in disclosing key information for investors regarding investment liquidity, fees, and the reporting options/frequency for investment performance. Both platforms were highly transparent and did an excellent job of providing this information to potential investors.

Liquidity

Real estate crowdfunding typically restricts liquidity and your ability to cash out early. Fundrise’s real estate investment funds have a five-year lock-up period for your money. However, every quarter, it gives the option for early redemption. You submit a redemption request to cash out some of your shares ahead of schedule. Fundrise redeems shares on a first-in-first out basis, meaning it will cash out the shares you owned the longest first. It also does not guarantee you can cash out early.

While Fundrise does not charge a penalty for early redemption of its flagship fund, it could charge up to 1% as an early redemption penalty for cashing out of its eREIT or eFund early.

CrowdStreet’s real estate deals also have a lock-up period of three to five years, though some can last as long as 10 years. Each deal has its rules for the lock-up period and possible redemption options. In general, CrowdStreet does not provide much liquidity. This is one reason it limits access to wealthy accredited users who can afford to make long-term investments. 

Final Verdict

Fundrise provides more liquidity and early redemption options than CrowdStreet, though both platforms expect you to make long-term investments without flexible access to your cash.

Investment Selection

Fundrise primarily offers real estate funds and REITs. It provides two flagship funds: a real estate fund focused on long-term appreciation and an income real estate fund focused on more immediate income and dividends.

If you have a Fundrise Pro account, you can choose between real estate funds for some portfolio customization. However, you can’t select individual real estate projects. Outside of real estate, Fundrise offers private credit investments and an Innovation Fund using venture capital to invest in tech startups.

The CrowdStreet marketplace allows you to search through real estate opportunities. You can filter investments through the following criteria:

• Investment strategy: CrowdStreet’s strategies range from Core (least risk) to Opportunities (most risk)
• Investment structure: CrowdStreet offers debt (collateralized investments), equity, mezzanine debt, portfolio, preferred equity, and REITs
• Geographic region: Options throughout the United States

CrowdStreet only provides real estate investments. It doesn’t offer any other type of alternative investment.

Final Verdict

CrowdStreet has a better real estate investment selection because it allows you to pick and choose between individual projects. Fundrise limits your investing to managed funds. However, Fundrise allows you to invest in venture capital while CrowdStreet only has real estate investments.

Sectors and Domains

Fundrise’s investments span the full range of sectors and domains. Its investments include single-family homes, apartment buildings, industrial properties, storage facilities, and commercial real estate.

CrowdStreet concentrates on commercial and industrial projects. These include offices, parking garages, storage units, and hospitality projects like hotels. If CrowdStreet invests in residential deals, it focuses on large multi-family projects. It generally does not invest in single-family construction or rentals because the projects are too small.

Final Verdict

Both companies cover a wide range of sectors and domains for their possible investments.

Educational Offerings 

Fundrise’s education center includes frequently asked questions (FAQs), articles, and a podcast. These cover investing in private real estate, credit, and startup markets. Fundrise also has a YouTube channel with a few short videos covering real estate investing. The Fundrise educational offerings are a mix of general investing articles and market commentary.

CrowdStreet has a substantial educational library. It also provides training on real estate fundamentals, market commentary, and a solid FAQ section. In addition, CrowdStreet runs live webinars and events to teach its users about potential deals. 

Final Verdict

Fundrise and CrowdStreet both have decent educational offerings, though CrowdStreet’s selection is more extensive thanks to its events and webinars.

Customer Support 

Fundrise and CrowdStreet both depend on technology-based customer support. You can submit any questions by contact form or email with both companies. Neither platform allows you to call customer support by phone.

You can request a callback from Fundrise’s customer support. It also offers a live chat tool during business hours, Monday to Friday. CrowdStreet does not provide live chat. Fundrise has its own mobile app whereas CrowdStreet does not, although you can log into CrowdStreet’s website using your mobile device and the functionality is decent.

Compare Customer Support Offerings

Final Verdict

Fundrise provides more support options through its live chat, mobile app, and the option to request a callback by phone.

The Bottom Line

Fundrise and CrowdStreet are two of the best real estate crowdfunding platforms, though the right fit depends on your situation as an investor. Fundrise makes more sense for smaller investors, especially beginners new to real estate. It accepts non-accredited investors, allows a minimum investment of just $10, and makes it easier to cash out of an investment ahead of schedule. For these reasons, we rated Fundrise as the best platform for beginners and the best overall crowdfunding platform.

On the other hand, if you’re an accredited investor with a sizable portfolio and plenty of real estate investment experience, consider CrowdStreet. It offers more types of real estate investments as well as more information about the projects themselves through live webinars. CrowdStreet also makes it easier to customize your portfolio because you can buy into individual deals, whereas Fundrise limits you to managed real estate funds. CrowdStreet is ideal for savvy investors who can identify profitable opportunities.

Is Fundrise Legit?

Yes, Fundrise is legit. It has been in business since 2012 and has nearly 400,000 investors. Three of its central funds are registered with the Securities and Exchange Commission (SEC). Fundrise ranks favorably compared to other real estate crowdfunding platforms and is one of the best overall platforms and the best platform for beginners. 

How to Withdraw From Fundrise

Fundrise accepts redemption requests for shares every quarter or every month, depending on the investment fund. If it approves your request, Fundrise will cash you out for the value of your shares. You can then withdraw the money out of Fundrise to your bank using ACH transfer.  

Is CrowdStreet Legit?

Yes, CrowdStreet is a legitimate company. It has more than 300,000 investors who have invested over $4.2 billion across more than 798 real estate deals. CrowdStreet has been in business since 2014. It is one of the largest real estate crowdfunding platforms around. It uses strict screening criteria to decide what projects are listed on the platform, accepting only around 5% of possible deals.

How Does CrowdStreet Make Money?

CrowdStreet makes money by charging fees to the sponsors listing real estate investment deals on the platform. CrowdStreet also charges investment management fees for investors using its REITs. Finally, CrowdStreet charges advisory fees for designing individual portfolios for investors.

Is CrowdStreet or Fundrise Better?

The choice between Fundrise vs. CrowdStreet comes down to the type of investor. Fundrise is better for smaller, non-accredited investors new to investing in real estate. Fundrise accepts non-accredited investors and requires a minimum investment of just $10. CrowdStreet is better for larger, accredited investors. It provides more types of real estate investments with more options to create a customized portfolio vs. Fundrise and other CrowdStreet competitors. 

How We Review Real Estate Crowdfunding Platforms

To evaluate and review real estate crowdfunding platforms, Investopedia’s team of researchers, data collectors, and industry experts spent nearly two months conducting in-depth industry research, company survey data collection, and hands-on evaluations of 19 companies. We grouped the 38 criteria that we collected, like investment selection and minimums, holding periods, and curated portfolios, into eight categories. We then scored these criteria and weighted the categories to determine which real estate crowdfunding platforms are best for both accredited and non-accredited investors:

• Fees: 15%
• Account Services: 15%
• Investment Selection: 15%
• Liquidity: 12.5% 
• Transparency: 12.5%
• Sectors and Domains: 12.5%
• Customer Support and Usability: 10%
• Educational Offerings: 7.5%

Through this all-encompassing data collection and review process, Investopedia has provided you with an unbiased and thorough review of real estate crowdfunding platforms. Read our full process for more information on how we review real estate crowdfunding platforms.

Go digital in our step-by-step guide to buying a car online

Fact checked by Brendan Harkness
Reviewed by Anthony Battle

If your old car has served you well and you’re considering trading it in, you may be wondering if buying a car online is the right choice. Fortunately, shopping for a new vehicle on the internet is both convenient and simple, and it’s also become more common thanks to digital car-buying services like Carvana and CarMax. Here’s a step-by-step guide for how to buy a car online. 

Ready to apply for a car loan? See the best auto loan rates to get started, or narrow it down to the best used car loans.

1. Create a Budget

Whether you opt to buy a car online or in person at a dealership, it’s essential to create a budget beforehand. Consider how large of a down payment you’d like to make, the monthly loan payments you can afford, and other expenses like taxes and insurance costs. Use our auto loan calculator to get insight into how different down payments and rates will affect your monthly payment; if you have a trade-in, include the value as part of the down payment. 

Thinking ahead about maintenance costs is also wise, as maintaining and repairing a car can be costly. According to data from Kelley Blue Book’s parent company Cox Automotive, consumers pay an average of $548.32 at the mechanic every year (but some makes and models end up being much more expensive). While your repair costs may not be that high with a new vehicle, it’s still important to keep these expenses in mind as you’re budgeting for a car. 

2. Review Your Credit

Your credit will also impact the cost of your auto loan, as better credit tends to result in lower loan rates. If you haven’t checked your credit in a while, review it before you shop for a loan. You can review your credit reports for free at annualcreditreport.com, though those reports won’t include your credit scores. Other services, like Credit Karma, Credit Sesame, and Credit.com let you check your credit scores for free. Your credit card issuer’s online portal may also give you free credit score access. 

If your credit isn’t great, it can be helpful to have realistic expectations regarding your potential loan rates; you may want to explore auto loans for bad credit or auto loans for fair credit. On the other hand, if you have excellent credit, you can seek out lenders that offer the lowest rates available to save as much money as possible.

3. Research Cars

Once you understand potential costs, it’s time to research cars to find one that suits your budget, needs, and preferences. Besides vehicle features and appearance, consider factors like reliability and average maintenance costs as you narrow your options. 

Understanding the type of car you want can help save you time and hassle when you shop. Plus, you’ll have insight into expected sale prices on the cars you’re considering, which can help you determine if the car-buying service offers fair prices. 

4. Get Pre-Approved for an Auto Loan

After you’ve found a vehicle you’d like to purchase, getting pre-approved for one or more auto loans is a good next step. Getting pre-approved with a few different lenders can help you understand the rates and loan amounts you’re likely to qualify for. You can then opt for the lender offering the best rates and terms for your situation. 

Although most dealerships will be happy to let you apply for a loan through their own partner lenders, third-party lenders may offer better rates or terms than you’d find at a local dealership or online car-buying service. Rate shopping is the only way to find the lowest possible rate and save money. 

However, pre-approvals will usually result in hard credit inquiries, which can hurt your credit score slightly. To minimize the impact of these inquiries on your credit score, aim to complete your loan shopping within a two-week period. The FICO credit score model, which is commonly used by lenders when evaluating prospective borrowers, will count multiple hard inquiries as one if you shop within a 14-day window (or longer windows, for certain FICO score versions).  

If you only plan to use the vehicle for a short time, leasing could be a more affordable alternative to buying a car. Generally, your monthly payments with a leased vehicle will be slightly cheaper, and there’s usually no need to make a down payment. But there are fees and potential penalties associated with leasing, so weigh the pros and cons to see if it’s right for you. 

Compare the Best Auto Loan Rates

If you’ve examined your budget, checked your credit, and researched some vehicles, it might be time to start loan shopping. Learn more about our top auto loan lenders to see why they’re the best.

5. Explore Local Dealerships and Online Retailers

You can shop online for a car through many local dealerships’ websites and online retailers. Compare options from businesses nearby and sites like CarMax, Carvana, TrueCar, AutoTrader, Kelley Blue Book, and Cars.com. 

Keep an eye out for possible deals and discounts as you shop, including cash rebates, low-interest financing, and holiday sales. Certain times of year tend to be better than others for car shopping, like the end of the month, quarter, or year; you may find better deals on used cars at the beginning of the year, as well.

6. Inspect and Test-Drive the Vehicle

If you opt to buy a car online, it may be local or several hundred miles away. Read vehicle descriptions and specifications thoroughly and inspect the images provided. Most companies allow you to inspect and test-drive a local vehicle, but this process can be more complicated if your car is a significant distance away. Some services will require you to come to the vehicle for a test drive, while others will deliver it to your home.

CarMax allows you to test-drive a vehicle for 24 hours, an exceptional offer when most test drives last 15 minutes or so. Carvana doesn’t allow a typical test drive, but if you decide to make a purchase, you’ll get a full seven days to decide if you really like the vehicle; if you don’t, you can get a full refund.

If you’re buying a used car, it’s also wise to request a vehicle history report to verify the car’s condition, accident history, and ownership details. You may be able to do this through the car-buying service itself. If you can’t see the car in person before purchasing, you may want to arrange a virtual video call so you can do a real-time inspection of the car’s exterior and interior.

Browse a variety of car-buying websites and review sites (including YouTube) to find digital walk-throughs, demonstrations, and reviews of the make and model you’re interested in.

7. Negotiate the Price

Online vehicle negotiations can be less stressful than in-person negotiations, so buying a car online may be a more comfortable process. It may be easier to ask dealers to beat your best offer, and to walk away if you’re not getting a good deal.

Compare prices from different local dealerships and online sellers, and make note of any differences in cost. Doing so can give you some valuable leverage for possible negotiations. For instance, if Carvana offers a better price than your local dealership, you might see if your dealer is willing to meet or beat that price in order to earn your business. There may be more wiggle room in the price than a good salesperson will let on.

Negotiating a vehicle’s purchase price is tricky, and there are many differing opinions on best practices. Read more about how to get a great deal on a new car or a used car.

8. Close the Deal

Once you’ve found a car, it’s time to close the deal. But before you sign a contract, carefully read the terms and conditions. There may be additional fees or service charges you didn’t expect. Depending on the online dealer you used, you may need to finalize the paperwork for your new car at a local dealership; if so, bring your finalized pricing information, trade-in information, and pre-approved loan information or offer to the dealer’s financing team. 

Online car-buying sites may have their own financing processes. For instance, Carvana lets you select third-party financing as an option when you reach its online payment page. You can then select that option and enter the information from your lender to move forward.

No matter where you’re buying your car, be prepared to provide a valid driver’s license, proof of insurance, and copies of any financing or leasing agreements to your dealer or online seller. 

9. Take Delivery of the Car

Depending on where you buy your car, you may be able to pick it up at the dealership or have it delivered to your home or office. Inspect your vehicle once more when you pick it up or upon delivery. 

Ask about potential delivery fees if you plan to have your car delivered to your home or office. Some dealers may charge a flat rate or per-mile fee for this service. 

Once you receive your new car, you’ll need to register it (if the dealer hasn’t done so already) and you may need to get license plates from your local Bureau or Department of Motor Vehicles. Many states offer a 30-day window to get your new car roadworthy, but some states may have shorter grace periods. 

How Long Does It Take To Buy a Car Online?

The length of time it takes to buy a car online depends on your situation and the vehicle you want to purchase. For instance, if you know which vehicle you want to buy, where you want to buy it from, and where you plan to get financing, the process could be fairly quick. But if you don’t have this information yet, it may take a week or more to figure it out. Once a decision or purchase has been made, the delivery or pickup time depends on the particular service you’re using.

Where Can You Buy a Car Online?

You can buy a car online through many local dealerships and online car-buying sites like CarMax, TrueCar, and Carvana. Compare options from different retailers to find the best prices available.

Can You Buy a Car From a Dealership Online?

Yes, many dealerships allow you to start the process of buying a car online. You may even be able to secure financing and negotiate with an online team instead of taking these steps in person. But even if your dealership offers these options, you’ll likely need to visit the dealer to finalize the purchase. Having a trade-in vehicle could require you to visit the dealership as well.

Is It Safe to Buy a Car Online?

It’s generally safe to buy a car online if you purchase a vehicle from a reputable dealership or car-buying site. Always do your due diligence before you share your personal information or sign a contract with a seller, including requesting or buying a thorough vehicle history report.

Is There a Fee If You Buy a Car Online?

Depending on where you buy your car, a flat-rate or per-mile delivery fee may apply. Ask your seller about potential fees before you finalize your vehicle purchase. Other than that, you may be asked to pay many of the same fees you’ll pay when buying a car in person, such as documentation and title fees.

Fact checked by Hans Daniel Jasperson
Reviewed by Katie Miller

A growing number of Americans are working for companies that employ them on a freelance or independent contractor basis. According to one 2023 study, over a third (38%) of respondents worked as a freelancer in the past year.

Sites like Upwork empower gig workers to write copy, design websites and more. Airbnb enables people to rent out their home as an additional income stream. And Uber and Lyft empower anyone with a car to turn their vehicle into a metered cab. 

With the exploding gig economy (aka the freelance economy) comes a decision: to freelance or not to freelance. To many, it might sound attractive. But before shrugging off salaried employment altogether, it’s time for a reality check.

Key Takeaways

• Today’s workers can undertake freelance gigs for a wide range of industries, from just about anywhere on earth.
• However, freelancers may lack access to many benefits that full-time employees have, such as health insurance and 401(k) matching.
• Though freelancers may have more flexibility in their work life, they also may have less security.
• Freelancing can also be lonely.

Full-Time Benefits

There’s much more to freelancing than flexible hours and being your own boss. One of the biggest pluses of full-time employment is employer-provided benefits, such as health insurance, 401(k) plans, sick days and paid vacation time. A staff job often comes with all of these perks, while freelancers must fend for themselves on all counts.

You’ll also have to manage your taxes yourself, including the self-employment tax . And if you’d like to start saving for retirement, or for a major purchase like a home, you’ll have to figure out how to on your own.

Flexibility vs. Security

For many, the financial security of having full-time employment is pretty much mandatory. Freelancing offers no such security. It’s also not necessarily something you can rely on for regular income. For instance, Airbnb income is dependent upon bookings, and revenue from Etsy is dependent upon making sales. If you don’t sell anything, you don’t make anything. Gigging can be a risky business.

Per-Gig Pay vs. Paycheck

One of the major advantages to full-time employment is knowing that you have a regular paycheck coming in without fail, every pay cycle—which can be crucial for budgeting and saving. This isn’t the case in the world of freelancing. As a freelancer, you’re paid as the gigs are completed or products are sold, however frequently (or infrequently) that is.

Important

One of the biggest challenge freelancers face is ensuring there are enough jobs/gigs lined up to generate the cash flow to survive.

Special Considerations

How old you are bears considerable influence over which direction you might take. For instance, if you’re fresh out of college, chances are you don’t have the financial safety net to risk relying on gigs, nor enough on-the-job expertise to embark on a freelance career. If that’s the case, you might be better off exploring gigs and freelance opportunities on the side, in addition to a day job. Becoming a freelancer is like starting a business, so you need to be up for the responsibility that comes with it.

If, on the other hand, you’ve been in the working world for several years; acquired solid skills; identified a services niche; and established contacts with potential clients, then you could have the foundation to establish a solid gig workflow and a successful freelance career.

How Many People Work as Freelancers?

According to a 2023 Upwork study, over a third of the U.S. workforce (38%) performed freelance work in the previous year.

Is Freelancing Lonely?

Yes, freelancing can be lonely. The freelance life generally lacks the social interaction and bustle of an office job. Then, of course, there’s missing out on gatherings like holiday office parties. On the flip side, as a freelancer, you won’t be forced to spend hours with others in meetings—at least in person.

How Can You Make Freelancing Less Lonely?

You could consider sharing an office with someone else, or renting a space in a co-working site. One other solution can be to become active in professional organizations where you can meet others in your field, both consultants and full-time employees.

The Bottom Line

If the entrepreneurial call is too loud to ignore, it is possible to forge a great work/life balance, and even carve a lucrative career with a lot of commitment and the right mindset. However, unless you’re established enough (or have a big enough safety net) to throw caution to the work winds, it could pay to play it safe with a day job, and experiment with a few gigs on the side. If they take off, great. And if not, at least you’ll still be able to pay the bills.

Learn how much you can earn with a CIT Bank certificate of deposit

Fact checked by Michael Rosenston

CIT Bank is one of the nation’s most popular online banks. In addition to its other bank services, CIT Bank offers certificates of deposit (CDs), with terms ranging from six months to five years. The bank’s CDs have interest rates of up to 3.5%, which is fairly good, but not as competitive as some of the best CD rates.

Compare CIT Bank CD Rates

When it comes to choosing the right CD rate, it’s important to consider more than just APY. Before putting your money in a CD, consider how much you plan to deposit and how long you want your money locked up. Those factors can help you choose the right bank.

Another consideration is the early withdrawal penalty. Many banks impose a penalty when you withdraw the funds from your CD before the maturity date. These penalties are often based on a certain number of months of interest, as is the case with CIT Bank.

Like CIT Bank, some banks may also offer a penalty-free CD. If you think you may need to access your funds before your CD matures, looking at your penalty-free options may be a good idea.

CIT Bank CDs: Key Features

In addition to its standard and jumbo term CDs, CIT Bank offers an 11-month no-penalty CD. With an attractive interest rate and a minimum deposit of $1,000, this CD allows you to access your funds at any time before maturity without penalties.

Pros and Cons of CIT Bank CDs

Pros

• No-penalty CD option

• Fairly competitive rate

• Varying terms

Cons

• Potentially better rates elsewhere

• Minimum deposit

Pros Explained

• No-penalty CD option: CIT Bank offers an 11-month CD that has no penalty for early withdrawal.
• Fairly competitive rate: CIT offers rates as high as 3.50%, which is higher than rates on many other CDs.
• Varying terms: CIT Bank offers CDs in different term lengths, which can provide flexibility.

Cons Explained

• Potentially better rates elsewhere: CIT Bank CDs are fairly competitive, you can most likely find even higher rates by shopping around.
• Minimum deposit: Like many CDs, CIT Bank CDs have a minimum deposit requirement. You will need to invest at least $1,000. For Jumbo CDs, you will need at least $100,000.

About CIT Bank

CIT Bank, a subsidiary of First Citizens Bank, is an online-only bank. CIT Bank doesn’t have an ATM network. However, it doesn’t charge its customers any ATM fees, and it provides reimbursement of up to $30 per month for other banks’ ATM fees.

CIT Bank also offers savings accounts, a money market account, and an e-checking account.

Alternatives to CIT Bank CDs

• High-yield CDs: There are many nationwide providers of CDs, and although some of CIT Bank CD rates are decent, you can potentially find better CD rates. There are many online banks and credit unions offering excellent APYs for a wide variety of terms, giving you more investing flexibility.
• High-yield savings accounts: If you don’t want to commit to locking your money in an account for months or years, another option is a high-yield savings account (HYSA). HYSAs offered by banks and credit unions have rates similar to those of top CDs, yet they provide more flexibility since your money is easily accessible.
• Money market accounts: Money market accounts (MMAs) are another common investment tool; they’re like savings accounts, but they allow you to write checks and sometimes they come with ATM and/or debit cards. The best MMAs have rates similar to those of the best CDs and savings accounts.
• Series I bonds: CDs have locked-in APYs for their term duration, but if you’re worried about how fluctuating interest rates will affect your overall CD strategy, consider opening a Series I bond instead. These bonds are designed to protect you against inflation. They earn both a fixed rate of interest and a rate that changes every six months to adjust for inflation. 

Frequently Asked Questions (FAQs)

Is CIT Bank CD FDIC Insured?

Yes, CDs at CIT Bank are FDIC-insured. Like most banks, CIT Bank’s deposits are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000. If you have CDs or other deposit accounts at multiple banks, you’ll have up to $250,000 of coverage at each bank.

Are CIT Bank CD Rates Competitive?

CIT Bank has some of the best maximum CD rates on the market. But whether they are best for you depends on the CD term you are interested in. CIT Bank has high APYs for its CDs with terms of six months, 13 months, and 18 months. However, for its one-, two-, three-, four-, and five-year CD terms, CIT Bank is much less competitive.

How Do You Get the Best CD Rate With CIT Bank?

You’ll get the best CD rate with CIT Bank by choosing the six-month term and leaving your money in place until the CD matures. 

However, because of the short term on this CD, you may have a new interest rate—and possibly a lower one—when your CD renews. If you anticipate interest rates may go down, and you want a longer term, you may have the best return by opting for the 18-month CD.

Are There Fees That CIT Bank Charges to Maintain Your CD?

CIT Bank doesn’t charge account opening or maintenance fees on its CDs. The only fee you may be subject to is an early withdrawal fee if you take your money out of the CD before it reaches maturity.

How Do You Open a CD With CIT Bank?

Because CIT Bank is an online-only bank, you can easily open a CD online in just a few simple steps. First, you’ll provide personal information like your name, Social Security number, and contact information. Next, you’ll need to transfer at least $1,000 via electronic transfer, a mailed check, or a wire to open the account. Once your transfer has been received, your CD account will be opened, and you’ll receive a confirmation email.

Your Guide to CDs

• What Is a Certificate of Deposit (CD)?
• What Is a Brokered CD?
• What Is a CD Ladder?
• Pros and Cons of CDs
• How to Invest With CDs
• How to Open a CD
• How to Close a CD
• CDs vs. Annuities
• CDs vs. Stocks
• CDs vs. Mutual Funds
• CDs vs. ETFs
• CDs vs. Savings Accounts
• Short-Term vs. Long-Term CDs
• CD Rates News
• Best 1-Year CD Rates
• Best 18-Month CDs
• Best Jumbo CD Rates
• Best 6-Month CD Rates
• Best 3-Month CD Rates
• Best Bank CD Rates

We independently evaluate all recommended products and services. If you click on links we provide, we may receive compensation.

American Express offers a simple CD with decent rates

Fact checked by Michael Rosenston

Although American Express is primarily known for its credit cards and charge cards, it also has several savings options, including high-yield savings accounts and a certificate of deposit (CD). 

American Express CD rates are up to 3.75%, higher than the national average for some term lengths. It has no minimum balance requirement, making it particularly useful for those without substantial savings. Compare American Express CDs to some of the best CDs on the market today.

American Express CD Overview

American Express’ CD accounts have fixed interest rates. Other options, such as variable-rate and no-penalty CDs, are not available through American Express. 

Compare American Express CD Rates

Several banks have rates higher than American Express, particularly for certain longer terms. And they often offer longer options, allowing customers to lock in their interest rate for as long as 10 years. 

However, some banks have minimum balance requirements that can be quite high. American Express doesn’t, so it may be more attainable for those with limited cash reserves.

American Express CD: Key Features

While some banks require you to deposit at least $2,500 or $5,000 to earn a higher yield on your CD, American Express has no minimum balance requirement. That feature makes it a good option for those who may have limited amounts to tuck away and so may not qualify for other CDs with high minimum balances. 

American Express CD rates vary by term length, and it offers high rates on specific terms. Other terms have much lower rates. 

Like other CDs, you cannot touch the money in the American Express account until its maturity date. Otherwise, early withdrawal penalties can range from 90 to 540 days’ interest.

However, American Express does allow you to withdraw some or all of the interest that’s been credited to the account before its maturity date. You can request a one-time payment of the interest to your savings account or opt to receive a check.  

Important

American Express’ CDs require an upfront deposit, and you cannot add to the CD before its maturity date. If you want an account with more flexibility, you may want to consider a high-yield savings account.

Pros and Cons of American Express CD Rates

Pros

• Various terms

• No minimum deposit requirement

Cons

• Early withdrawal penalties

• Potentially better rates elsewhere

Pros Explained

• Various terms: You can find CDs of various term lengths of up to five years with American Express.
• No minimum deposit requirement: Unlike many other CDs, you won’t face a minimum deposit requirement with American Express CDs.

Cons Explained

• Early withdrawal penalties: Early withdrawal penalties can range from 90 to 540 days’ interest.
• Potentially better rates elsewhere: American Express CD interest rates are fairly competitive, but you could likely find even better rates by shopping around.

About American Express

American Express is a major financial institution that offers credit cards, savings accounts, checking accounts, and personal loans. While the company is probably most well known for its credit cards, its savings accounts have become increasingly popular as well.

American Express also offers business financial services, including small business credit cards, business checking accounts, business lines of credit, and payment solutions.

Alternatives to American Express CDs

• High-yield savings accounts: If you’re willing to open an online savings account elsewhere, you may be able to earn higher rates. See the best high-yield savings account rates to compare how much you could earn.
• High-yield checking accounts: You may find relatively high rates with some checking accounts. Be aware of their requirements and limits. The best high-interest checking accounts give you easy access to your money.
• Certificates of deposit (CDs): You can also choose from a range of CDs from other financial institutions.
• Money market account: Money market account can also provide a return on your savings. Check the best money market account rates to see how it compares.
• Treasury securities: These government-backed bills, notes, and bonds sometimes offer even higher rates than CDs and may be more liquid.

Frequently Asked Questions (FAQs)

How Do You Get a CD With American Express?

You can open a CD online with American Express if you meet the following requirements:

• You must be at least 18.
• You must be a U.S. citizen or a resident alien with a valid Social Security number or an individual Taxpayer Identification Number with a U.S. address.
• You must use the account for personal use only.

The CD must be funded within 60 days. Otherwise, American Express will close the account.

Are American Express CDs Worth Investing In?

As of publication, the rates on American Express CDs with certain terms were significantly higher than the national average. And because American Express doesn’t require a minimum balance, you can open a CD with a relatively small amount to take advantage of the higher yield or build a CD ladder. For other term options, other banks may offer better rates.

Are American Express CDs FDIC-Insured?

Yes, American Express CDs are backed by FDIC insurance on deposit amounts up to $250,000 per customer.

How Do You Get the Best CD Rate With American Express?

American Express CD rates depend on the term length rather than the amount of your deposit. Unlike many banks, a longer term doesn’t necessarily mean you’ll get a higher APY. Currently, American Express offers the best CD rates on CDs with relatively short terms.

If you’re looking for the highest APYs on the market, check out our picks for the best CD rates.

Your Guide to CDs

• What Is a Certificate of Deposit (CD)?
• What Is a Brokered CD?
• What Is a CD Ladder?
• Pros and Cons of CDs
• How to Invest With CDs
• How to Open a CD
• How to Close a CD
• CDs vs. Annuities
• CDs vs. Stocks
• CDs vs. Mutual Funds
• CDs vs. ETFs
• CDs vs. Savings Accounts
• Short-Term vs. Long-Term CDs
• CD Rates News
• Best 1-Year CD Rates
• Best 18-Month CDs
• Best Jumbo CD Rates
• Best 6-Month CD Rates
• Best 3-Month CD Rates
• Best Bank CD Rates

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Get an overview of Citizens Bank’s CD and see if it’s right for you

Fact checked by Michael Rosenston

While many banks offer CDs with multiple terms and APYs, Citizens Bank, which offers rates as high as 4.00%, doesn’t offer many CD options. Let’s look at Citizens Bank CD rates, account features, and how Citizens’ CDs compare to some of the best high-yield CD accounts.

Online CD Overview

Compare Citizens Bank CD Rates

Citizens Bank offers fairly competitive CD rates on its highest paying CD, which has a term of 12 months. Compare terms and interest rates from other banks before determining which CD best fits your needs and offers the highest rates.

Citizens Bank CD: Key Features

The Citizens Bank’s online CD has a strong APY, but some competitors do even better, and may offer APYs of 4.50% or greater. Its minimum balance requirement of $1,000 is fairly standard. But its early withdrawal penalties are relatively steep, so ensure you can afford to leave the money deposited in the CD until it matures. 

If you’d like to receive monthly interest disbursements by check or transfer, you’ll need to make a minimum opening deposit of $5,000.

In the past, Citizens offered a breakable CD that allowed account holders to make a partial withdrawal before their CD matured. However, it doesn’t offer this account type any longer. You must keep your funds in the CD for the entire term to avoid penalties.

Pros and Cons of Citizens Bank CDs

Pros

• Competitive rate

• Some flexibility

Cons

• Limited options

• Potentially higher rate elsewhere

Pros Explained

• Competitive rate: Citizens Bank’s 12-month CD offers an interest rate of 4.00% which is fairly high for CDs and its higher than you can get on the average savings account.
• Some flexibility: Citizens Bank’s CD terms range from 8 months to 14 months. While you can easily find CDs with longer terms, the varying lengths provides some flexibility.

Cons Explained

• Limited options: Citizens Bank does offer some flexibility, but the maximum term length you can get is 14 months. If you want a CD with a longer term, you’ll have to look elsewhere.
• Potentially higher rate elsewhere: You can get a competitive rate on Citizens Bank’s 8-month CD. However, you can likely find even higher interest rates by shopping around.

About Citizens Bank: Other Options

Citizens Bank, based in Providence, Rhode Island, offers a range of products and services. As a customer, you can also open a checking account, savings account, money market account, or IRA retirement savings account.

You can apply for a credit card, student loan, or home loan as well. Citizens Bank offers a range of resources for financial education and wealth management.

Alternatives to Citizens Bank CDs

• High-yield savings accounts: If you’re willing to open an online savings account elsewhere, you may be able to earn higher rates than what Citizens Bank offers. See the best high-yield savings account rates to compare how much you could earn.
• High-yield checking accounts: You may find relatively high rates with some checking accounts. Be aware of their requirements and limits. The best high-interest checking accounts give you easy access to your money.
• Certificates of deposit (CDs): Citizens Bank offers fairly competitive rates on its CDs. You can also choose from a range of CDs from other financial institutions.
• Money market account: Money market account can also provide a return on your savings. Check the best money market account rates to see how it compares.
• Treasury securities: These government-backed bills, notes, and bonds sometimes offer even higher rates than CDs and may be more liquid. 

Frequently Asked Questions (FAQs)

Is Citizens Bank’s CD Rate a Good Deal?

Citizens Bank’s CDs may have APYs higher than many savings accounts, but they tend to be fairly low compared to some competitors’ CD offerings. As with any new bank account, it’s smart to compare rates before applying. Start by checking out the best savings account rates and best CD rates today.

Is It Better to Get a Citizens Bank CD or a Savings Account?

Whether a Citizens Bank CD or savings account is right for you depends on your unique situation. If you have some extra money to deposit and are comfortable leaving it in an account for a while, a Citizens CD may be a smart choice. You’ll get a higher APY than you would with a Citizens savings account. 

But with a Citizens savings account, you can access your money anytime without penalty. While you’ll get a lower APY than you would with a CD, this accessibility can be useful if you need money to cover day-to-day costs or if an unexpected expense arises. Learn more about Citizens Bank and its various offerings.

Is Citizens Bank’s CD FDIC Insured?

Yes, Citizens Bank deposit accounts, including its CDs, are FDIC-insured for up to $250,000.

Your Guide to CDs

• What Is a Certificate of Deposit (CD)?
• What Is a Brokered CD?
• What Is a CD Ladder?
• Pros and Cons of CDs
• How to Invest With CDs
• How to Open a CD
• How to Close a CD
• CDs vs. Annuities
• CDs vs. Stocks
• CDs vs. Mutual Funds
• CDs vs. ETFs
• CDs vs. Savings Accounts
• Short-Term vs. Long-Term CDs
• CD Rates News
• Best 1-Year CD Rates
• Best 18-Month CDs
• Best Jumbo CD Rates
• Best 6-Month CD Rates
• Best 3-Month CD Rates
• Best Bank CD Rates

We independently evaluate all recommended products and services. If you click on links we provide, we may receive compensation.