What to know about CD interest rates

when Inflation and one resulting in a corresponding effort to alleviate it Increase in interest rates, the news has not been all negative. Yes, current rates have discouraged potential homebuyers and owners looking to refinance, but they’ve also increased interest in traditional mortgage vehicles. High yield savings And Certificate of Deposit (CD) The interest rates on these accounts are exponentially higher than what you can currently secure with a traditional savings account, making now a great time to act.

As with many financial products, interest rates are one of the key considerations. To get the most out of this type of account, it helps to know the nuances of CD interest rates.

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What to know about CD interest rates

Here are three important things to know about CD interest rates.

Rate is locked

dislike Interest rates on high yield savings accountsThe CD rate is locked for the duration of the CD duration. So if you can secure a good rate now, it’s worth pursuing. Even if economic factors change and interest rates on such accounts drop, you’ll still be locked-in at the rate you opened the account with.

Just be aware that if interest rates go up, your CD rate won’t. So if you think you might get a better rate by waiting, consider that consideration carefully. Or you can open different accounts at different times and Ladder is your CD To take advantage of the current rate environment. Either way, you won’t have to worry about your rate going down when you store your money in a CD.

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Different posts have different rates

Traditionally, the longer you lock up your money with a bank or lending institution, the higher the rate they’ll pay you for your CD. While this is still usually the case, the volatility in today’s rate environment does not guarantee it.

So shop around and do your research before signing on the dotted line. You can get a better rate for a longer term, but it’s also possible (if not possible) that a bank will give you a better rate for a three- or six-month term instead.

It may renew at a different rate

When your CD expires, you have a few options. You can withdraw money and close the account, transfer money to another account or renew it automatically. If you choose the third option, be aware that your CD may renew at a different rate. CD interest rates change often, and chances are you won’t get the same rate you started with.

This doesn’t mean it’s gone down (it may have gone up since you first opened it). But it may not be exactly the same. Factor this into your financial planning and consider shopping around for value before a CD expires so you’re in a position to transfer money to a higher-interest-earning CD.

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Bottom line

Certificates of Deposit are a smart way to protect and grow your savings. To do this effectively, it helps to understand the CD interest rate.

The rates on these accounts are locked in, providing some much-needed protection against market volatility Different terms come with different rates, so be sure to explore all of your possible options. And understand that your CD will most likely renew at a different rate than what you started with, so if you’re unhappy with the potential new rate, start exploring options before the expiration date.