3 smart CD moves to make before March
The interest rate environment has been volatile in recent years, hitting record lows during the height of the pandemic in 2020 and 2021 and surging to decade-highs in 2022 and 2023. Inflation rose to the highest point in more than 40 years in June 2022 and the benchmark interest rate range set by the Federal Reserve hit a 23-year high last summer. This has resulted in a tremendous turnaround for borrowers who paid almost nothing to borrow money a few years ago but are now paying exponentially more for mortgages, credit cards, personal loans and more.
The recent turmoil has been a boost for savers, however, thanks to tremendous returns on high-yield savings and certificates of deposit (CD) accounts. Both account types, however, derive their benefits from the interest rate climate. As that adjusts they may revert to the norms of recent years.
This is why it's so important to time the opening of these accounts just right. And CDs, in particular, need to be opened at the opportune time. With inflation still stubborn and another Federal Reserve meeting on the horizon next month, there are some smart CD moves savers may want to make before March. Below, we'll break down three of them.
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3 smart CD moves to make before March
Here are three strategic CD moves to make before March.
Shop around for lenders
Not all banks and lending institutions will offer you the same CD rate. You're much more likely to find a competitive rate with an online bank versus one with physical locations, for example. Since the former type doesn't have the overhead costs that the latter one does, they're often able to offer savers higher rates.
But even online banks will offer different rates from one another so, before committing to any specific one, first shop around for lenders to see what you can find. Ideally, you'll be able to secure an account with a high APY and no fees.
Start shopping for CDs online today.
Know your options
Not only do CDs come with different rates and fees, but they also come in different lengths (or terms). So it behooves savers to know these options before getting started. Right now, short-term CDs (which mature in 12 months or less) typically have higher rates than long-term CDs (which can last for multiple years).
That said, in the face of presumed rate cuts later this year, there's a compelling case to be made for opening long-term CDs now. By opening one of these account types now, you'll lock in a high rate for the future, even if rates come down in the interim. However, you'll need to be comfortable leaving your funds untouched for the duration of the CD term or you could risk being hit with an early withdrawal penalty. But research your options first before acting.
Get started
Once you've shopped around for lenders, reviewed your options and picked a CD term, it's important to get started. Today's CD rates won't be around forever and many are forecasting a drop later this year, possibly as soon as May or June.
With this context, it's important not to delay opening an account. While a rate drop isn't likely to dramatically reduce the returns you can get with a CD (at least not in 2024), every dollar counts and it would be counterproductive to wait for that to happen. So get started today.
And if you're concerned about missing out on potential rate increases, don't be. Even if rates do jump in the future, you can ladder multiple accounts with different maturity dates now so that one or more expire in time to take advantage of rate opportunities in the future.
The bottom line
When it comes to savings vehicles like CDs, the timing is crucial. And right now is a great time to get started, before the next Federal Reserve meeting and possible rate reductions to come later in 2024. Savers should start shopping for lenders this month and know what kind of term they're looking for before opening an account. Once they've taken those two steps, they should feel comfortable acting quickly to open an account. Since these high rates are unlikely to stay this high much longer, it's beneficial to be proactive, even before the start of a new month.
