Latest news with #CDaccounts
CBS News
21-07-2025
- Business
- CBS News
$20,000 short-term CDs: 3 things to consider this July
Traditionally, interest rates were often higher on certificate of deposit (CD) accounts with longer terms and lower on those with short terms. And the logic was clear. Since savers were being asked to part with their money in the account for a longer period, they were frequently rewarded with better rates than they'd otherwise receive by just keeping their money in an account for a few months. But the volatile rate climate of the last five years, in which rates dropped to near zero and then surged multiple times higher during the peak of inflation, has caused this dynamic to change. Now, with lenders unsure about the long-term trajectory of the rate climate, rates are often higher on short-term CDs than long-term ones. This means you can get an interest rate of around 4.50% with a CD that will mature in six months or less, making it an attractive home for your money and especially so if you're looking for a place to park a large, five-figure sum like $20,000. Before getting started with a $20,000 short-term CD this July, however, there are some considerations that savers should account for. Below, we'll break down what to focus on right now. Start by seeing how much interest you could be earning with a top, short-term CD here now. Don't put $20,000 (or any amount of money) into a short-term CD this month before first familiarizing yourself with these items: The inflation rate rose to 2.7% in June, the Bureau of Labor Statistics revealed last week, after also creeping up in May. With high interest rates remaining frozen and concerns over inflation, economic policies and the stock market pertinent now, then, it could be smart to give your $20,000 some short-term protection against market fluctuations ahead. With a CD that matures in 12 months or less, you can do just that, earning a fixed interest rate in the interim while also giving yourself time to better gauge the economic outlook. This is always an advantage a CD can provide, but it's a particularly advantageous one to have right now. Get started with a short-term CD online today. Yes, short-term CDs come with slightly higher rates than long-term CDs do currently. Thanks to the extended interest-earning timeline the latter type comes with, though, you'll make more there than you would with the higher rate, short-term alternative. In other words, don't let the short-term CD rate blur your judgment. If your end goal is to earn as much interest as possible, even if it requires more time to do so, then you'll generally be better with the long-term option. That said, the interest rate climate is fluid, and if rate cuts are issued later this summer, things could change. So be prepared to act now while high-rate CD opportunities are still plentiful. Regardless of whether you ultimately decide to park the $20,000 into a short-term CD or a long-term one, either decision will likely see you having to forego the use of your regular bank. The local bank that you frequently visit is unlikely to have the high CD rate offers that online banks do. And if your goal is to earn as much interest as you can on your money, then you'll likely need an online bank to accomplish that. This can be tricky when depositing a large amount, like $20,000, into an account with a bank that you can't visit in person, so take the time to compare your options before jumping in. With most lenders requiring CD account holders to pay an early withdrawal penalty to regain access to their funds, it's important to make the right decision here. It may have been a painstaking and lengthy process to save $20,000, so don't automatically jump at the first short-term CD offer you receive this July. Instead, understand the realistic protections it can (and can't) offer against today's market fluctuations, calculate the interest earnings against what's available with long-term options and understand the reality that the best rates and offers may only be available online. By taking this informed approach this month, you can maximize your chances of CD success with your $20,000 or any amount of money that you're contemplating putting into a CD now.
CBS News
01-07-2025
- Business
- CBS News
What to do if your CD account matures this July
Savers with CD accounts set to mature this July will want to make some strategic moves now. Getty Images If you opened a certificate of deposit (CD) account in the past two years and are approaching a July 2025 maturity date, then you likely already know that the interest rate climate has changed significantly since your initial deposit. In 2023 and 2024, for example, some savers were able to lock in CD interest rates over 5% and sometimes as high as 6% or 7%. That was due, in part, to a high federal funds rate designed to combat inflation. Now, however, inflation is multiple points lower than it was and the federal funds rate has been cut three times in the last year, with more rate cuts expected in the upcoming months. As a result, the top CD rates generally don't go much higher than 4.50%. And the economic landscape that your CD account is set to mature in is markedly different than what it was when you first opened it. That doesn't mean, however, that you still don't have viable options to explore, including with new CD accounts. It just means that you may need to be a bit more strategic in your approach. That begins with knowing what to do if your CD account is set to mature this July. Below, we'll detail three steps savers should consider taking this month. Start by seeing how high your current CD rate offers are here. What to do if your CD account matures this July Do you want to continue earning a high rate of return on your money? Then consider taking these three steps if your CD account is set to mature before July 31, 2025: Don't let it automatically rollover Many CD accounts come with a grace period, after the maturity date, in which you can withdraw the funds penalty-free or transfer them into a different account type. But if you don't take advantage of that period (typically one to two weeks), your account could automatically roll over into a new CD account with what almost assuredly will be a new, lower rate than your initial one. And, if that happens, you'll get stuck paying an early withdrawal fee to regain access to your money. So, take advantage of the grace period and don't let it automatically roll over. There are still viable CD options available, especially if you look to use online banks and institutions. Compare your CD account options online now. Take the time to shop for high rates High CD rates will not be as readily available as they were six or 12 months ago, so you'll want (and need) to take the time to shop around. Fortunately, this July is a good time to do so. With expectations that the Federal Reserve will keep its federal funds rate frozen at its July meeting, but with predictions surrounding a rate cut growing for when the central bank meets again in September, it's critical that you use this time wisely. So, look around online to see what rates and terms are available and compare those to what you can get with your local branch to see what makes the most sense. But don't wait too long to act, either. Banks don't need to wait for formal rate-cutting action to reduce what they offer savers and if the chances of a rate cut continue to grow, CD rates could fall later in July and in August in anticipation. Consider a long-term CD over a short-term one Long-term CDs may have slightly lower interest rates than short-term CDs have had in recent years (a reversal from historic trends), but the extended interest-earning timeline still generally favors long-term CD account holders. And with rate cuts appearing imminent, CD rates already lower than they were in 2022 to 2024, and alternatives like high-yield savings accounts coming with variable rates subject to decline based on market conditions, a long-term CD could be the ideal way to maximize today's high rates for multiple years to come. Just be sure to only deposit an amount that you can comfortably afford to leave in the account untouched or you could risk having to pay that penalty to get it back. The bottom line Savers are entering a new rate climate this July than the one they first got into when they opened a CD in recent years. But that doesn't mean that they still can't include a CD as part of a diversified and valuable savings strategy. By taking the above steps this month, savers with a CD account set to mature in July can position themselves for additional, substantial earnings in the months and, potentially, years to come, even if rate cuts are issued during their next CD's term.
CBS News
07-05-2025
- Business
- CBS News
Should you renew your maturing CD account if rate cuts look likely?
An interest rate cut may not be as detrimental for CD account holders as it seems on the surface. Getty Images/iStockphoto In the interest rate climate of recent years, the decision to open a certificate of deposit (CD) account was an obvious choice. With interest rates on these savings vehicles exponentially higher than they had been in 2020 and 2021, for example, and with that rate fixed in the face of market uncertainty, savers stood to earn hundreds or even thousands of dollars in interest simply by moving some of their funds into one of these account types. But in the interest rate climate of 2025, does it still make sense to open a CD account? And what should existing CD account holders do if they have an account set to mature this May or later this year? With a cut to the federal funds rate looking increasingly likely for June or July and, thus, a cut to what savers can earn with a CD, some may be wondering about their next steps. Specifically, should you renew your maturing CD account if rate cuts look likely? In many circumstances, it can still be the smart and cost-effective move. Below, we'll explain why. See how much interest you could earn with a high-rate CD online here. Should you renew your maturing CD account if rate cuts look likely? Sure, Fed rate cuts look imminent. The CME Group's FedWatch tool has a cut listed at around a 30% likelihood for June and around 75% for July. But that shouldn't discourage savers from renewing their maturing CD accounts. Here's why: The rate cut trajectory could easily change Optimism from borrowers was high last September when the Fed issued a larger-than-anticipated 50 basis point cut to its benchmark interest rate. And that optimism remained in the final months of the year when the central bank issued additional cuts in November and December. But that rate cut campaign was halted when inflation became problematic again, and now rates will remain the same for at least the first half of 2025. In other words, the rate cut trajectory could easily change in the weeks and months ahead. So, avoiding a high-rate CD account on a "maybe," particularly when rates are still available close to 5% now, doesn't make sense for savers. Instead, many would benefit from renewing their maturing CD account with a new one, which will allow them to earn high returns regardless of what happens in the broader rate climate. Get started with a CD online today. Rate cuts, when they come, are likely to be small The rate cut issued last fall was an anomaly and shouldn't be expected to be repeated in the same increment anytime soon, barring any major economic factors that cause the Fed to become more aggressive. In other words, when a rate cut is issued again, it's likely to be by just 25 basis points, which won't do much to reduce today's CD rate offers. Cumulatively, however, interest rate cuts will add up over time, so it makes sense to offset this by opening the highest-rate long-term CD available now. Consider speaking to your current bank (and review online ones) to determine which will be better for your maturing funds now, so you're ready to act when the account moves into its grace period. You'll lose the interest-earning opportunity in the interim Emptying your maturing CD account to put it somewhere else only really makes sense if you urgently need access to the funds … or if you have somewhere equally as beneficial to store it. But the alternatives right now are not nearly as good as another CD will be, even if rates look like they may be cut soon. High-yield savings accounts have comparable rates, but they're variable and will change when a rate cut is issued (and perhaps before then, depending on the lender). A traditional savings account, meanwhile, has an average rate of just 0.41% currently, making it multiple times less advantageous than a 4% CD rate. So don't lose the interest-earning opportunity in the interim. A CD could still be the smart move to make for your maturing funds now. The bottom line Renewing your maturing CD account in today's unique rate climate is a personal decision that will need to be weighed carefully against your economic needs and the opportunity to continue to earn elevated interest on your money. But, considering that the rate cut trajectory could change, that rate cuts (when they do arrive) are likely to be small and the lost interest-earning opportunity if the funds are moved out of a CD, it can still make sense to pursue new CD accounts now. Just be sure to do so with an amount of money that you can comfortably part with for the full CD term or you'll need to pay an early withdrawal penalty to regain access.
