We’ll walk you through how to shop for CDs and how to build a CD ladder.
Certificates of deposit are seeing renewed interest with rising interest rates.Updated Aug. 1, 2023 9:54 am ETAfter years of hovering near record lows, interest rates have climbed sharply in the past year. That’s prompted some investors to give a long-overlooked investment a fresh glance: certificates of deposit.in that you can park your money in one, risk-free, and earn interest on that deposit.
Beginning in March 2022, the Federal Reserve embarked on an aggressive rate-hiking campaign to drive down inflation that was hovering at four-decade highs. Higher interest rates make it more expensive to borrow, effectively constraining the amount of money coursing through the economy which can be used to pay for goods and services.
The Fed’s declared willingness to keep interest rates high is good news for CD investors looking to lock in rates. The unusual interest rate environment means you need to look closely to make sure you are getting the best possible CD deal. “Consumers need to spend a little bit of time and due diligence,” says David Frisch, president of Frisch Financial Group.
. For instance, Andrews Federal Credit Union has a nine-month CD with a 5.75% APY, and USAlliance Federal Credit Union has an 18-month CD with a 5.7% APY. “With this laddering concept, you don’t necessarily need six months of expenses [because] you don’t need all the money at the same time,” Frisch says. You should keep enough money in a savings account—you can search for a high-yield savings account to maximize the amount of interest you can earn—to cover the period of time until your next CD matures.
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