7 Tips to Maximize Your Earnings With CDs


A CD, or certificate of deposit, is sort of like a savings account with a timed vault. You put money into it, let it mature, and when the time limit is up, you get your money back, ideally with a lot of interest on top.

When rates are high — like they are now — CDs can be an excellent way to make your money grow. Here are a few tips to help you make the most of a CD.

1. Don’t jump on the first CD you see

Lots of great banks and credit unions have raised their CD APYs (annual percentage yield) in response to national rates increasing. Many banks and credit unions…have not.

The very best CD rates are around 5% (and higher). However, the national average rate on a 6-month CD is 1.49%.

That isn’t even enough to outpace inflation, let alone make a profit. (And an “average” means many places have rates much lower.) While it may be more convenient to open a CD with your current bank, it could also cost you a lot of money if you aren’t comparing rates first.

2. Compare rates from a variety of sources

When you’re looking around for the best rate, make sure you’re considering a variety of financial institutions. Big national brick-and-mortar banks are great for lots of things, but they don’t often have the best rates.

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Some of the best CD rates I’ve seen come from online-only banks with no physical branches. It’s convenient — you can open an account online — and perfectly safe as long as you choose a reputable bank.

And don’t forget your local credit union. Unlike banks, credit union profits go to members in the form of better rates and lower fees.

3. Choose the best term to maximize rates

All CDs have a maturity term that tells you how long you need to wait before you can get your money back. Since pulling out your money early comes with hefty penalty fees, make sure you choose a term you can handle.

Generally, shorter-term CDs have higher rates, while longer-term CDs have lower rates. (It’s a lower risk for everyone if they can react to changes in the market.) Most banks offer the best rates for 6-month and 12-month CDs.

But don’t just assume. Most banks offer rate charts that show the APY you can earn for each maturity term. Don’t forget to look for promotional terms, too.

4. Deposit as much as you can…

Most — though not all — high-yield CDs will have a minimum deposit requirement. On the low end, this could be $100 to $500. At the high end, you’ll need at least five figures.

Typically, the more you can deposit, the better the rate you’ll get. And, as always, the more money you deposit, the more money you can earn on interest.

5. …but not more than you can do without

One thing to watch out for is over-investing in a CD. Remember, there can be extremely steep penalties for taking money from your CD early. You could lose up to half of your interest income.

Any money you need constant access to should be kept in a high-yield savings account. You may not even lose out on much interest income. The best high-yield savings accounts offer APYs that are pretty comparable to the top CDs.

6. Roll over your earnings into a new CD

When your CD matures, it will automatically be rolled over into a new CD with the same maturity period. (If you have a 6-month CD, it’ll roll over into another 6-month CD. If it’s a 4-year CD, it’ll roll over into another 4-year CD.) This includes the interest you earned during the first CD term.

Provided you can still do without that money — and the new rate is still competitive — let it roll over. It will grow even faster since you now have a larger principal.

7. Withdraw your funds during the grace period

If you’d rather use your money elsewhere, be sure to withdraw it as soon as your CD matures. CDs have a grace period of seven to 10 days after the maturity date for you to withdraw your money with no penalties.

If you don’t withdraw those funds within the grace period, you’re locked into that new CD. At that point, you’re once again subject to the withdrawal rules — and penalties — of that CD. (To be clear, the penalty would be on interest earned during the new CD, not both CDs.)

With rates as high as they are now, it’s definitely possible to use CDs to grow your savings. Just make sure you find the best rate, plan ahead for your money needs, and keep maturity dates in mind.

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