Savers are facing a lot of frustrations right now, stemming from the current low-rate environment. While there’s really no such thing as a truly “high yield” CD right now, it’s still possible to squeeze the best possible yield out of your cash. Here are a few tips that can help you boost your CD rate.
Shop Around
The best thing you can do is shop around for the best CD rates. Not every bank offers the same deal, and you can get the most for your money when you choose carefully. You don’t even have to go to individual bank web sites. Rate aggregators like RateZip do the legwork for you and can present a list of the best CD rates.
When shopping around, though, you have to be careful about the terms offered. Some CDs require minimum balances to open an account, and there might be other conditions. Pay attention to these items so that you understand what the account entails before you commit.
Choose a Longer Term
The longer you are willing to lock up your money, the better your rate will be. A five-year CD often pays a higher yield than a two-year CD. There are also CDs marketed as good for IRAs. These 10-year CDs can also have more attractive yields.
Unfortunately, the downside to choosing a longer CD is that you end up locking in your rate. What happens if rates rise in a couple of years? You’re locked into a lower rate, and you miss out. This is especially concerning for many savers, since there are rumors that the Federal Reserve will be reducing its stimulus efforts soon. When stimulus is reduced, interest rates are likely to rise, so locking in today’s lower rates for five years might not be the prefered method if you feel rates will rise soon.
There are some banks that offer “bump up” CDs that allow you to take advantage of a rate increase during the term of your CD, but you might have to give up some of your initial yield for the privilege.
Put in a Larger Amount
You can also increase your yield by putting a larger amount in the CD. Some of the CDs with the best yields have minimum requirements of $5,000. You can also find some jumbo CDs ($100,000 or more) that have competitive rates. If you are willing to lock up a larger amount of money, you might be able to finagle a higher rate.
Look for Promotions
There are also promotional CDs that feature special rates for a shorter period of time. You might see a CD that offers a higher rate for a year, or for six months. However, there might be restrictions and requirements, so make sure to read the fine print. Promotional CDs can be great tools for savers looking to get a small boost in the short-term, but it’s important to make sure that you will be able to take advantage of higher rates should they materialize.
