Maximizing Your Savings Potential with Certificate of Deposits (CDs)
By Certificates of deposit (CDs) are an increasingly attractive option for those looking to capitalize on their savings potential.[0] With higher interest rates than traditional savings accounts, CDs currently offer more than 4% in returns and are providing some of the highest yields we’ve seen in over a decade.
CDs are a safe investment established through a bank or credit union, with a predetermined amount of time at a fixed interest rate and the ability to collect your earnings when they mature. However, when considering a CD, there are some things to consider, such as the term of the agreement, the minimum deposit amount, the interest rate, and the early withdrawal penalty.
CD terms range from three months to several years, and the longer you choose the more interest you’ll earn.[1] It’s important to note that withdrawing cash from one before it matures can result in a penalty fee.[2] Additionally, most CDs do not allow you to make additional deposits after opening an account.[3]
No penalty CDs offer more flexibility, allowing for withdrawals before the maturation date without a penalty.[0] However, the interest rate for a no-penalty CD will be a bit lower than a traditional CD.[4]
CDs can be a great way to tuck away a lump sum of money for a large purchase or future investment.[5] However, if you need cash sooner, or are looking to make more money faster, a CD may not be the right fit for you.[2] Before making any investments, doing research and even speaking to a financial advisor is always a good idea.[5]
Financial experts advise opening multiple CDs at once and staggering the terms and deposits so that you have access to some of the money sooner and avoid getting stuck in one long-term CD if interest rates begin to rise.[0] Additionally, when choosing a CD, you should pay attention to the interest rate offered and consider CD laddering if you don’t want to deposit all your money in a particular CD.
American Express offers FDIC insured CDs, with a variety of terms from six to 60 months.[0] The early withdrawal penalty for a three-month CD is up to 90 days of interest, with a maximum penalty of 545 days of interest.[6] Ally Bank is another option, with no minimum deposit and higher interest rates than most banks.
0. “Best CD Accounts of February 2023” GOBankingRates, 7 Feb. 2023, https://www.gobankingrates.com/banking/cd-rates/best-cd-rates/
1. “State Farm CD Rates February 2023 – Forbes Advisor” Forbes, 14 Feb. 2023, https://www.forbes.com/advisor/banking/cds/state-farm-cd-rates/
2. “‘You may want to think about a CD.' Some CDs pay 4.5% or more right now. Should you get one?” MarketWatch, 10 Feb. 2023, https://www.marketwatch.com/picks/you-may-want-to-think-about-a-cd-some-cds-pay-4-5-or-more-right-now-should-you-get-one-01675975850
3. “The Best 3-Month CD Rates of February 2023” Business Insider, 10 Feb. 2023, https://www.businessinsider.com/personal-finance/best-3-month-cd-rates
4. “‘Best in 15 years.’ This investment is now offering a guaranteed return of up to 4.78%. Should you bite?” MarketWatch, 6 Feb. 2023, https://www.marketwatch.com/picks/best-in-15-years-this-investment-is-now-offering-a-guaranteed-return-of-up-to-4-78-should-you-bite-01675445105
5. “CD Rates Today: Feb. 13 — 6 Month Term Bounces Back to 4.5% APY” GOBankingRates, 13 Feb. 2023, https://www.gobankingrates.com/banking/cd-rates/cd-rates-today-feb-13-2023/
6. “BMO Harris CD Rates February 2023 – Forbes Advisor” Forbes, 14 Feb. 2023, https://www.forbes.com/advisor/banking/cds/bmo-harris-cd-rates/
