How you can earn more with a long-term CD

When it comes to investing your money, you want to find an option that keeps your investment safe as well as gives a good return. For many people, one option fits the bill Certificate of Deposit (CD). CDs offer higher interest rates than savings accounts (even many High Yield Savings Account) and they provide similar protectionIncluding Federal Deposit Insurance.

CDs come in a variety Conditions, usually from three months to five years. By agreeing to keep your funds in the account for the duration of the term, you are able to secure a higher interest rate. A Long term CDIn particular, it can be a great way to earn a higher return on your savings for a number of reasons.

Compare current CD rates here to see how much you could earn.

How you can earn more with a long-term CD

A long-term CD is good for investors seeking solid returns for the following reasons.

They usually have high interest rates

“Historically, long-term CDs tend to have higher rates,” says Joe Marques, CFP, a wealth advisor and co-CEO of Bolin Creek Wealth Advisors. “That is, you should earn higher rates because you ‘lock up’ your money for longer.”

At this point, short-term CDs offer slightly more rate Long term ones. said, Bankrate The data shows that from 1984 to 2023, long-term CD rates generally exceeded short-term rates, sometimes by as much as 3%. And the longer you keep your funds in the account, the more you’ll earn even as the overall rate drops.

Your rate will not be lower

Your rate is usually locked in when you open a CD. This means that no matter what happens to interest rates, your return remains the same for the term. The longer the tenure, the more you can capitalize on it.

overall Interest rates are high Currently, some CDs offer APYs of 5% or more. that makes Now is a great time To lock in a higher APY before rates start to drop.

Check out today’s top CD rates to find an account that’s right for you.

Penalties discourage early withdrawal

CDs usually charge a penalty if you need to access the money before the end of the term. This penalty is usually a percentage of the interest you earn. This can prevent you from being tempted to withdraw funds early and miss out on the CD’s full earning potential.

Early withdrawal penalties “can be a feature that provides discipline for a saver,” says Tim Melia, CFP, MBA, a financial planner and founder of Embolden Financial Planning. “If they have a goal at the beginning of the term, they should stick with CDs to avoid penalties, which can help them focus on their original savings goals.”

Bottom line

Overall, long-term CDs are a smart investment option for people looking for a high-yield, low-risk investment option. Longer CD terms generally net you higher interest rates, which means more earning potential. and locks an APY While rates are still highYou can guarantee these earnings no matter what happens in a higher interest rate environment.