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MoneyWatch: Managing Your Money
By Jake Safane
Edited By Matt Richardson
/ CBS News
With the Federal Reserve once again holding rates steady following its March meeting, savers have a continued opportunity to benefit from high interest rates on certificates of deposit (CD) accounts. In today's environment, savers can find CDs paying above a 5% annual percentage yield (APY). However, the Fed still foresees three rate cuts happening later this year, and that could cause CD rates to fall too.
Thus, savers who want to take advantage of high CD rates before they potentially drop may want to make moves this spring. Not only might that involve opening new CDs but also being strategic about factors like what CD terms they choose.
With that in mind, it's worth considering the below five expert-backed strategies that you might use to try to maximize your CD returns this spring. Some strategies can be used in combination with one another, while others require a choice of one over the other.
Start by exploring today's CD rates here to see how much more you could be earning on your money.
5 expert strategies for maximizing your CD returns this spring
Here are five moves experts recommend for boosting your CD returns this season.
Match CD terms with liquidity needs
To start, it's important to choose a CD maturity that you're confident you can commit to. Otherwise, early withdrawal penalties can eat into returns.
"To maximize returns, consumers should evaluate their individual liquidity needs when determining the most suitable CD term length that fits their needs. For example, if planning for a large purchase in the near term, a shorter-term CD may be best, while longer-term CDs can be a great yield option for those with excess funds this spring," says Steve Goodman, managing director, and head of product and consumer banking at Chase.
See what CD term could work best for you here now.
Use short-term CDs
Another strategy is to open short-term CDs to try to maximize yield, and then when the CD term ends, do a CD rollover into another short-term CD. Or you might then choose a longer duration once the short-term CD matures, depending on the situation.
"Opting for a shorter-term CD, such as a 3-month one, allows for more frequent re-evaluation of rates, potentially taking advantage of rising rates sooner. However, this strategy requires actively monitoring the market and may result in lower overall returns if rates decrease," says Cliff Ambrose, founder and financial advisor at Apex Wealth.
Lock in long-term CD rates
While you might find higher rates right now with short-term CDs, it's possible that you'd be better off with a long-term CD.
"The most attractive CD rates in the market are for terms between 6 and 12 months, which isn't normally the case, but the market is expecting rate cuts, so if someone is confident they don't need access to the money immediately, they should look at the longest term that fits their personal situation," says Derik Farrar, head of deposits at U.S. Bank.
Doing so could result in higher overall returns if rates fall, compared to rolling over short-term CDs.
Explore both short-term and long-term CD account options here today.
Shop for the best CD account rates
Regardless of which CD term you choose, it helps to shop around for the best CD rates to maximize your returns.
"Knowing what is offered by your current trusted bank gives you the foundation to start shopping for better rates. After that, it's time to shop for your best deal much like you would looking for discounts on any other purchase — to see if a better offer is out there," says Jennifer White, senior director, banking and payments intelligence at J.D. Power.
"Looking online can highlight offers from online-only banks. These online-only banks may be offering the highest rates if you are comfortable parking your money and don't need a branch to visit," she adds.
Build a CD ladder
Lastly, if you're not sure which CD rate to choose, you can spread out your risk and gain consistent income by building a CD ladder.
"In this case, you open several smaller dollar amount CDs of different durations — say, 6-month, 12-month, 18-month, and 24-month CDs — so that every six months some portion of your savings is available should you need it. This helps balance earning the highest interest rates while offering access to your deposits should the need arise, without penalty," says White.
The bottom line
CDs offer savers an opportunity to earn high interest rates in this environment and there are multiple ways to take advantage of these rates this spring. However, what works for one person won't necessarily be best for you, as you wouldn't want to be in a position such as having to terminate a CD early for a penalty, due to not having enough cash, for instance.
"If you're looking to make the most of your money with your CD this spring, it's most important to think about your own needs and goals in what you are comfortable locking into a CD for a duration," says Courtney Shotto Mitchell, head of consumer deposit and payment products at TD Bank. "It really depends on your financial needs and time horizon of the investment you are making."
