How does a CD work?

with Inflation Still present and capital market With unexpected returns, many Americans are looking for reliable ways to protect and grow their money.

Courtesy of rising interest rates Federal Reserve Hitting homebuyers and those looking to refinance, the move helped boost its appeal High yield savings And Certificate of Deposit (CD) Both account types will protect account holders’ money and offer favorable interest rates to grow it over time.

For those looking for a CD, it helps to first understand how this type of account works (and what kind of interest one can potentially earn). You can check today’s CD interest rates here or use the table below to explore some local options.

How does a CD work?

CD Easy to operate and understand. You can either open a new account from scratch or withdraw funds from an existing account and transfer them to a CD instead. CD terms vary from three months to six months, potentially, years. You cannot withdraw before the expiry date (unless you are willing to pay the withdrawal penalty).

CDs offer protection against the steady withdrawals that a regular savings account can withstand and market volatility – the annual percentage yield (APY) you get on a CD will stay the same until maturity, regardless of any market activity during that time. Generally, the longer your CD term, the more interest you’ll earn, although that’s not always the case in today’s unpredictable market.

You have a few options when the CD expires. You can renew it (at the rate available at the time), withdraw it (and the interest earned) in full, or put the money in a different account (perhaps a regular savings or high-yield savings account). Just make a plan before the expiration date appears on the calendar because if you don’t take action, the CD may automatically renew after a certain period of time (think 10 days or more).

Start exploring your CD options online today or use the table below if it sounds convenient to your personal financial situation.

How much interest does the CD earn?

March 2023 is a good time to open a CD. CD interest rates range from 3% to 5% depending on the lender and the tenure you choose. Compare that to the 0.33% that most current traditional savings accounts have, and you quickly realize that you’re leaving money on the table by not opening a CD.

How much money are you losing? Using a $5,000 deposit for reference, a regular savings account would earn $16.50 a year (at a 0.33% interest rate). A CD at 4.5% would earn $225 over the same period. Just remember that if you earn $10 or more in this type of account, there will be tax reporting items to deal with when it’s time to file your return, so make sure you have all your CD paperwork before filing.

Use the table below to easily find a CD with a high interest rate

Bottom line

In an economic climate plagued by inflation and market unpredictability, CD accounts offer a safe and reliable way to protect your money and grow it at a favorable interest rate. CDs come in different lengths and different rates, although they are currently significantly higher than what you’ll get with a regular savings account. You can open a CD with many lenders at their physical location or you can easily open one online. Explore your options now and start making more money!