Making the Most of Certificates of Deposit

Store extra funds in high-interest bank CDs to make the most of your savings

Now that you've opened one or more individual or business certificates of deposit accounts, consider a saving strategy. Developing a saving strategy helps when it comes to making the most of certificates of deposit. Minimum certificates of deposit amounts vary depending on the bank, ranging from $500 or $50,000. However, as with most interest-bearing accounts, the more you put toward a certificate of deposit, the better your chances of earning a high CD rate. The same also applies to business CD rates.

Another strategy to consider for high-interest bank CDs is certificate of deposit laddering. This works when you open bank CDs at different intervals and rates. For example, if you have $10,000 to invest, then you can put $2,000 each into CDs lasting for six months, one year, two years, three years and four years. The maturity dates occur at different times, which gives you the option of rolling over into a new term, or redeeming one of the certificates of deposit, plus interest.

1. Pick an account with the best CD rate for your savings goals.

2. Confirm certificate of deposit features such as maturity dates and interest rate changes.

3. Find out how certificates of deposit rates are paid.

 

Open an account with a high CD rate

Making the most of certificates of deposit includes working with banks that offer the highest, most competitive CD rates.
Try: Get help with picking a brokerage or bank CD by researching the top 25 certificates of deposit rates at Bankaholic. Capital One also offers high-yield CDs depending on the term. You should commit to depositing a large sum to get the higher rate. Brokerage firm Charles Schwab offers FDIC-insured certificates of deposit at competitive rates.

Make a ladder of bank CDs

CDs with longer maturities typically pay the highest rates, but you can maximize the return from your CDs without tying up all your money for the long term. It's called CD laddering. You divide your money equally three ways, put one pile in a one-year CD, one in a two-year CD and one in a three-year CD. When the one-year CD matures, you roll it over into a three-year and so on, raising the average return on all your money without locking it all away for too long.
Try: Bankrate.com explains how to achieve the highest CD rates through a CD ladder and provides a ladder calculator to figure it all out.

Confirm certificate of deposit features

Pay attention to account details such as callable features and maturity dates. Remember that changes to individual and business CD rates happen at any time depending on market conditions. Some firms also offer CDs that are payable to beneficiaries upon the account owner's death.
Try: Wachovia offers fixed-rate and liquid certificates of deposit. PNC offers high-yield CDs that come with automatic renewal at maturity. Online bank ING Direct allows you to set up living trust features to certificate of deposit accounts.

Be aware of how high-interest bank CDs are handled

Most banks or brokerages add interest to bank CDs daily, monthly or annually. Knowing when your interest is calculated can help you in making the most of certificates of deposit.
Try: Discover Bank pays interest toward bank CDs monthly. Customers also have the option of transferring interest to another bank account every month. Fidelity Investments pays interest earned on certificates of deposit at maturity.

 

• Problems with certificates of deposit, such as misinformation, should be handled with the bank or brokerage firm. If the problem remains unsolved and you don't get your money back, then file a complaint with the U.S. Securities and Exchange Commission, the Board of Governors of the Federal Reserve System or the National Credit Union Administration, all of which oversee financial institutions that issue bank CDs.

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