You Have Choices When Your CD Matures

If you have a CD reaching maturing soon, have you given thought to what you’d like to do with the funds in it? Deciding what path to take when a CD matures isn’t as easy as coming to a fork in the road. There are actually quite a few options available. It’s just a matter of weighing all those options, and then choosing the one that’s right for you.choices-when-your-cd-matures

Before exploring your choices, it’s important to note that your financial institution is required to notify you in advance before your CD matures. Once you receive that notification, you typically have only a week or two to decide what you’d like to do with your funds. If you don’t instruct your bank on what to do with your CD when it matures, they will make the decision for you. In most cases, the financial institution will automatically roll over the funds to another CD with a term length similar to your old one. But beware – the new CD may have a lower interest rate than your old CD. To prevent your money from ending up stuck in a CD with an undesirable rate, it’s a good idea to make your own informed decision about your funds when your CD matures, rather than letting your bank make the choice.

  • One option available to you is to deposit additional funds into the CD and then roll it over into a new term. Unless your CD is an “add-on” CD, your maturity period is likely your only opportunity to add funds to your existing balance. If you decide to go this route however, be sure that you know what rate you will receive for the new term before you agree to it.
  • If you have a big purchase on the horizon, it may be a good time to withdraw the funds. Typically, CD maturity is the only time you can pull your funds out of a CD without incurring an early withdrawal penalty. Taking your money out of a CD once it matures can be ideal if you have specific objective in mind, such as placing a down payment on a house or buying a new car.
  • If you think you may need the funds in the not-too-distant future, but don’t have an immediate need for them, your best bet may be to withdraw the money and place it in an interest-bearing savings or checking account. By taking the money out of your CD, it will no longer be tied up for a locked-in time period, and you’ll have the flexibility of withdrawing it without penalty whenever you’re ready.
  • Another option is to pursue a different investment vehicle, depending on your level of risk tolerance, and your financial goals. Other investment opportunities could include stocks or bonds, retirement accounts, or college savings plans. Just remember that it’s always a good idea to consult with a tax professional or an investment advisor before making any major investment decisions.
  • If you’d like to keep your money in a CD, another possibility is to choose an entirely different CD to roll your money into. You could go with a different CD at the same financial institution, or you could open a new CD at another bank or credit union. Sites like DepositAccounts.comAs a courtesy, you will be leaving Blog.Bank5Connect.com and going to another website. We have approved this site as a reliable partner, but you will no longer be under the security policy of Bank5Connect.com. Come back soon! and Nerdwallet.comAs a courtesy, you will be leaving Blog.Bank5Connect.com and going to another website. We have approved this site as a reliable partner, but you will no longer be under the security policy of Bank5Connect.com. Come back soon! can useful when comparing CDs across multiple financial institutions.
  • Depending how much money is in the maturing CD, you may want to consider splitting the funds and placing them into two or more new CDs with varying term lengths. This strategy is referred to as “CD laddering”. Generally speaking, CD laddering involves buying a series of CDs with different terms so they mature at different intervals. So over the course of the CDs’ various term lengths you’ll have access to funds on an ongoing basis, because you’ll have a CD regularly reaching maturity.

No matter where you are in your financial journey, if you have a CD reaching maturity it’s important to think proactively about your goals and immediate financial needs before determining what to do with your funds. A little planning goes a long way, and you’ll thank yourself later!

Have You Considered an Add-On CD?

If you think you know your way around certificates of deposit (commonly referred to as CDs), here’s a twist to this savings product you may not be aware of – an add-on CD.add-on-cd

As a quick refresher, a CD is also known as a “time deposit” or a “term deposit” because it’s set for a certain period of time. The depositor can choose which term they want to go into. CDs are a great way to earn a competitive interest rate (rates for CD accounts are typically higher than traditional savings accounts or money market accounts) and know that the rate will remain in place for the entire duration of the CD term.

But what if you want to see your savings grow faster? Wouldn’t it be a shame if you came into some money and wanted to take advantage of a great CD rate you locked in 6 months ago? Well, if you opened a traditional CD, you’d be out of luck. Once you make your initial opening deposit with a traditional CD, you can’t add money to it during the CD’s term. But that’s not the case with an add-on CD. With an add-on CD, you can continue to pump money into the account throughout the locked-in time period.

As you can imagine, an add-on CD can be extremely helpful during a period of time when interest rates are expected to fall. For instance, say you opened a 24-Month Traditional CD last year, and you’d like to open another, but the interest rate has taken a nose dive. You could end up earning a much lower interest rate for those new funds compared to the money already sitting in your initial CD. If you had opened a 24-Month Add-On CD however, you could invest your additional funds there, and earn interest on them at the same higher rate you locked in at account opening.

An add-on CD can also be a good option if you don’t necessarily have a large amount of money to place in a traditional CD all at once. Maybe at the beginning you only have $1,000 to open the CD, but you know that you’ll have extra funds to devote to it in the coming months. Having one add-on CD can also be easier to manage and track than having your funds scattered across a multitude of CD products with varying expiration dates.

As is the case with traditional CDs however, it’s important to note that with an add-on CD you’ll typically be charged a penalty if you withdraw your funds before the CD matures.

At Bank5 Connect, we offer an add-on CD with a two year term, called the 24-Month Investment CD. This add-on CD requires a $500 minimum deposit, and after that you can add funds to it any time you’d like, in any amount. And all Bank5 Connect CDs, regardless of term length, are insured up to $250,000 by the FDIC, and insured past $250,000 by the Depositors Insurance Fund (also known as DIF). This means that at Bank5 Connect, your CD deposits are insured in full. To learn more about all of the CDs offered at Bank5 Connect, visit http://www.bank5connect.com/home/cds.

For many people, an add-on CD can be a great way to save, but keep in mind that it’s always a good idea to consult with a tax advisor or financial professional before making any major investment decisions.

Deciding on a CD Term Length

If you’ve made up your mind that you’re going to invest some money this year, you might be considering a CD, or certificate of deposit. CDs are commonly viewed as a safer alternative to potentially higher-yielding investment vehicles such as stocks or mutual funds, because fixed-rate CDs have a set, guaranteed interest rate, and they’re protected by FDIC insurance. Bank5 Connect CD accounts are actually covered by both FDIC and DIF insurance. The DIF coverage at Bank5 Connect ensures that all deposits are 100% insured, even past traditional FDIC coverage limits.cd-term-length

Not surprisingly, the safety of CDs, coupled with the fact that they generally offer higher interest rates than traditional savings accounts, makes them popular choices for saving money. If you’ve chosen a CD as one of your investment tools, it’s just a matter of deciding how long you want to tie up your funds. With CDs, you have several fixed term lengths to choose from. They can range from as little as 3 months to up to 10 years. The term you select will depend on your unique financial circumstances and needs.

When considering CDs, it’s important to note that they’re intended to be held until maturity. When they mature, you have the option to withdraw the money, along with any accrued interest, but if you withdraw any money before the entire term length is up, you’ll usually be hit with an early withdrawal penalty fee. The policies regarding early withdrawals vary, so it’s always wise to check with your financial institution prior to opening an account to see what kinds of penalties you could incur.

To avoid early withdrawal penalties, it’s a good idea to choose a CD term based on how long you think you can go without needing access to the money. If you anticipate needing to tap into the funds within a few months, then a 3- or 6-month CD will probably be the way to go. Keep in mind however, that typically the shorter the term length, the lower the interest rate.

Generally, multiple year terms offer the highest CD rates. If you know you won’t need to tap into the funds for several years, a multi-year term could be a good fit, but it’s a good idea to consider current interest rate trends and predictions first. Think about it. How angry would you be if you locked in a 2.00% rate on a 5-year CD only to find that the rate on that exact CD increased to 2.50% a few weeks later? Once you’ve opened a fixed-rate CD, your rate won’t change, even if the bank starts to offer the same CD at a higher rate. To help avoid this kind of scenario, it’s a good idea to stay on top of interest rate news, so you have some kind of idea of when rates could fluctuateAs a courtesy, you will be leaving Blog.Bank5Connect.com and going to another website. We have approved this site as a reliable partner, but you will no longer be under the security policy of Bank5Connect.com. Come back soon!.

Another consideration with CDs is how often you’ll be looking to stash away more money. Generally, once you open a CD you can’t add money to it until it matures. Therefore, if you think you’ll want to add money every few months, a shorter term length might be best. Another option is to choose an add-on CD. Add-on CDs are special fixed-term CDs that allow you to deposit additional funds throughout the entire term length. These types of CDs can be hard to find, but Bank5 Connect does offer one. Bank5 Connect’s 24-Month Investment CD allows for additional deposits at any time, in any amount. Plus, there is only a $500 minimum deposit required to open an account, and no monthly maintenance fees.

If you have enough money to open several CDs, another way to allow for ongoing deposits is to invest in multiple CDs with various term lengths. This approach is known as CD laddering. With CD laddering, you end up with a collection of CDs that will mature at regular intervals. With a CD regularly reaching maturity, you’ll regularly have an opportunity to make additional deposits, or withdraw your funds.

No matter what CD term length best suits your needs, just remember to read all of the fine print associated with the account before opening one. This will help you to understand exactly what you’re getting into, and help you to avoid costly early withdrawal penalty fees. And, keep in mind that it’s always a good idea to consult with a tax advisor or financial professional before making any major investment decisions!

CD Investing Strategies: Things to Consider

Anyone interested in investing has heard of a certificate of deposit, or CD. It’s a financial product similar to a savings account. Where a CD differs, however, is that it has a specific, fixed term, and a fixed interest rate. It is intended for a CD to be held until maturity, at which time the money may be withdrawn together with the accrued interest, or rolled over into a new CD term.cd-investing-strategies

Most banks offer a variety of CD terms. Term lengths can range anywhere from six months to 5 years or more, depending on the financial institution.

At Bank5 Connect, we offer CDs with terms of 6, 12, 18, 24, and 36 months. And the minimum deposit to open a Bank5 Connect CD is only $500.

While CDs provide a safe, guaranteed return on your investment, getting the most out of them requires you to think strategically. Here are some tips to help make your CD work for you:

  • Give thought to the length of your CD term. When your money is tied up in a long-term, multi-year CD, you run the risk of missing out on higher-yielding opportunities. A lot can change over the course of several years, and rates are no exception. The Federal Reserve meets every six to seven weeks about whether or not to change interest rates. Think of how disappointing it would be to see rates rapidly increasing around you, and all of your investing dollars are locked up in an underperforming CD for 4 more years.
  • Don’t withdraw your money from a CD before it matures. It’s important to understand all of the penalties associated with taking your money out of a CD before it reaches maturity. Doing so can take a huge bite out of your earnings. For a CD with a term of a year or more, the average penalty for early withdrawing your funds early is six months’ worth of interest. In some cases, early withdrawal penalties can even dip into your principal if the CD hasn’t been opened long enough to cover the penalty fees through interest.
  • Know when your CD is nearing maturity. Most financial institutions will automatically roll the funds in your CD over to a new CD with similar terms once it matures, unless you instruct them otherwise. However, allowing a CD to automatically roll over to a new term could be a costly mistake if you haven’t evaluated all of your other options. It pays to assess other investment opportunities to ensure you’re putting your money in a place that makes sense for you given your current situation and financial goals.
  • Use CD laddering to help generate a stream of interest income. A CD ladder could be a great was to prevent your funds from being unnecessarily tied up. This type of investment strategy involves setting up a collection of CDs that will mature at different intervals so you regularly have funds becoming available. For example, if instead of putting all of your investment dollars into an 18-month CD, you split those dollars three ways and open a 6-month CD, a 12-month CD, and an 18-month CD, you will have funds becoming available every 6 months, and a third of your money will still be earning interest at an 18-month rate!

 
With a little strategic thought, investing in CDs could be a great opportunity to earn some extra cash. But remember that it’s always best to consult with a tax advisor before making any major financial decisions. To learn more about the CDs offered by Bank5 Connect, visit http://www.bank5connect.com/home/cds.