Don’t Miss Out – CDs Offering Peak Interest Rates Worth Grabbing Now
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Summary:
CDs now offer high-interest rates, making them an attractive investment option. Consider your time horizon, find the best deals, and utilize CD laddering to maximize returns. Stay adaptable and capitalize on this opportunity before rates decline.
The financial landscape is changing, and certificates of deposit (CDs) have emerged as the go-to option due to their high-interest rates. To make the most of your money, act fast and secure these attractive rates before they decline. Read on to find out why CDs are the current top choice and how you can capitalize on this opportunity.
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The Rise of CDs
As Series I bond rates fall below 4% and Treasury bills slip, CDs have taken the lead in the interest rate world. Some offers are still at 5%, such as CIT Bank’s CDs (as of 04/15/2023), making CDs an enticing investment option.
Why are investors turning to CDs
Previously, when fixed-income interest rates climbed, investors turned to I-bonds, Treasury bills, TIPS, and high-interest savings accounts for maximum short-term yield. However, shifts in economic conditions, slowing inflation, and banking crises have impacted demand, making CDs more attractive.
CD yields reflect a bank’s desire for deposits. Banks flush with deposits may not raise rates, while those competing for deposits will be quicker to raise payouts. Consequently, CD rates have increased significantly, but only for those who know where to look.
Are we at the peak for CD rates?
Nobody knows for sure, but it’s possible that CD rates are at or near their peak for this cycle. Over the first three months of 2023, the average online 5-year CD yield has fallen slightly each month. If the economy slips into a recession, the Federal Reserve could cut interest rates, affecting loan demand and the need for banks to raise deposits.
Choosing the right CD for you
Before locking your money into a CD, carefully consider your time horizon. If you need the funds for an emergency or a down payment on a house, a two-year CD might not be the best choice. On the other hand, locking away large amounts of cash for longer periods—like five or seven years—might not be wise when you could be investing in broad-market ETFs instead.
Finding the best CD deals
Several online banks currently offer short-term CDs with yields in the low 5% range, but these rates may soon drop below 5%. Most terms for 5%-plus CDs range from 10 to 27 months. You can sometimes score better deals on brokered CDs, which are purchased through a brokerage house. However, be aware of potential difficulties if you want to withdraw early.
Building a CD ladder
One age-old strategy is to build a ladder of different CD maturities, allowing flexibility when cash becomes available. This approach is especially useful for retirees or those nearing retirement, relying on spending income as each CD matures. Now is a good time to line that up if you’re looking to maximize your returns.
Stay adaptable
As the economic situation changes, it’s crucial to keep shopping around and paying attention to money markets. Shift your cash as needed to secure the best deal possible. Remember, you can’t be set in stone, and you deserve to get the most for your money.
Don’t let this opportunity slip away. Investigate your options and take advantage of the peak interest rates on CDs while they last.
Key takeaways
- CDs are emerging as a go-to investment option due to their high-interest rates.
- Economic shifts have made CDs more attractive than other fixed-income investments.
- CD rates may be at or near their peak for this cycle, so act quickly.
- Consider your time horizon before locking your money into a CD.
- Shop around for the best CD deals and keep an eye on changing rates.
- Utilize CD laddering to maximize returns and maintain flexibility.
- Stay adaptable and keep an eye on money markets to make the most of your investment.
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