But when is CD renewal a good idea?
Its a tough decision.
Well explain it all to help you weigh the options.
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Some terms are as low as three months, others are for five years or more.
Theinterestyou scored on that original investment also is rolled into the new CD.
And you dont have to go with the default CD renewal term.
Aamir M. Chalisa, MBA, LUTCF, MDRT, serves as the general manager atFuturity First Insurance Group.
But this is reflective of the industry as a whole.
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This is a long list, so dont get overwhelmed.
Well keep it updated as offers changes or expire.
Here are some tips to help you see to it youre making the most of your savings.
Once it renews, youre locked in for another term.
Its important to set a reminder so you wont miss the expiration date.
Some lenders charge penalties equal to only a couple of months of interest.
These costs could offset any potential savings from a higher interest rate offered by another institution.
Understand Your Options
There are various types of CDs available.
They are:
3.
Choose a Term
Your biggest choice when purchasing a CD is your term length.
Normally, a longer term pays higher interest rates, but that isnt the case right now.
That means youll currently find better rates for a six- or nine-month CD than one with a five-year term.
But a higher interest rate isnt always the best idea.
Doug Carey, CFA atWealthTrace, still thinks a longer-term CD is worth the lower interest rate.
Within the next year, the Federal Reserve will begin cutting interest rates.
They have told us this many times now and we should believe them.
Its tempting to go with the same term you had previously because automatic CD renewal is so easy.
Its easier than ever to move funds from one lender to another.
In most cases, youll simply set up an account and initiate a lender-to-lender transfer.
As your CDs expiration date approaches, note the rates your lender currently offers.
Then shop around to seecurrent CD ratesat other lenders.
Consider Other Investments
Dont limit your comparison shopping to other CDs.
Another low-risk investment may give you a better return on your money.
Chalisa recommends annuities for risk-averse consumers.
I am seeing rates as high as 6% for a three- or five-year annuity, Chalisa said.
Additionally, yo understand that annuities offer tax deferral, which CDs dont.
So, the equivalent yield, even at the same rate, will be much higher on an annuity.
As the date for CD renewal approaches, youcouldlet the auto-renew go through.
But a little extra time on research can help you maximize your earnings over the coming months or years.
Stephanie Faris is a professional finance writer with more than a decade of experience.
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