Savers can’t change the fact that CD rates are low. Even the top-paying CDs are only earning around 3.00% today. And that’s only if you extend your CD out to five years.
This can be frustrating because inflation can whittle away at your savings when CD rates are this low. But instead of looking for riskier investments that are not backed by FDIC insurance, you should stick with CDs. The plan should be to squeeze as much out of your CDs as you can. RateBrain makes this job easy. Here are ten tips that will help you earn more from your CDs:
1. Ladder your CDs
A great way to boost your savings is to use a CD ladder. By spreading out your maturities in a regular interval, you can take advantage of higher CD rates without locking up all your money in a single CD. Spread out your CD maturities from 90 days out to 5 years to start maximizing your income.
2. Avoid mega-banks
Nothing personal against the big banks, but they tend to charge us higher fees than local banks or online banks. Bank of America and Chase Bank have both raised various monthly banking fees this year, and more big banks are expected to follow. If you can, try to avoid keeping your CDs at one of the large national banks.
3. Set up your account alerts
It is important to keep track of what days your CDs mature because many banks will automatically roll-over your CD if they don’t hear from you. Sign up for account alerts if your banks offers it, otherwise set up a CD maturity reminder on your personal calendar. You can also set up rate alerts on RateBrain for individual bank rates, so you know when the rates change.
4. Use online banking
You can earn more money if you have the ability to transfer your funds quickly. Sign up for online banking so that you can easily sweep money out of your checking or savings account into new CDs.
5. Remember less is more
You may be tempted to spread out your money at several banks to stay diverse, but this isn’t always necessary. Keep the number of banks that you use at a minimum. Unless you are setting up a CD ladder, it’s better to keep $25,000 on deposit at one bank, than to keep $5,000 at five different banks. Your total fees and charges will be lower this way.
6. Reinvest interest
Make sure that all your CDs are set up to reinvest interest. This way you can earn interest on interest as your savings grow. The exceptions to this rule are if you need your CD income to pay bills or if your CD balance is approaching the FDIC insurance limit of $250,000.
7. Keep it simple
Banks are advertising many different types of CDs these days with teaser-rates. Research carefully any kind of variable or step-rate CD to make sure that a plain-vanilla fixed-rate CD isn’t a better deal in the long run.
8. Find banks with easy penalties
You never want to plan on tapping into your CD savings, but a financial emergency can crop up unexpectedly. Stick with banks with low early withdrawal penalties. This makes it less painful if you have to cash out early.
9. Don’t be a rate guesser
Don’t plan on predicting accurately when interest rates are going to change. Nobody can say for sure what rates will be in the future. While it’s smart to plan on a general trend of rising rates over the next couple of years, don’t get locked into investing your CDs based on anticipated rate movements.
10. Track rates at RateBrain
If you are going to earn as much as you can from your CDs, you need to find the highest CD rates. RateBrain strives to have the most accurate and thorough rate information. Sign up for our Weekly Top 10 Rates email and track the latest CD rates on our site as they change.