The Club PUBlication 04/15/2024

NOW IS TIME TO ACT ON A CD
By LIBBY WELLS • Bankrate.com

If you are saving money, the beginning of 2024 has been good to you: The Federal Reserve hasn't cut rates yet.  ​However, that's not going to last forever.
Experts believe the Fed will cut rates up to thr​ee times throughout the rest of the year.

 If you are thinking about opening a CD, short for certificate for deposit, it's time to act now to lock in the best rate possible.

CDs are one of the lowest-risk places to park your cash. Here's a rundown of some of the reasons why opening one can be a good fit for your financial goals:

Guaranteed return.
Rates on standard CDs are fixed. Unlike the stock market, which fluctuates, CDs offer a reliable return. This makes planning and budgeting easy since you will know exactly how much you will make and when you can withdraw the funds.


Better earning potential vs. other savings accounts.
CDs may pay more than other deposit accounts, such as savings and money market accounts.

Keeping spending in check.
CDs have early withdrawal penalties, which can act as a helpful way to reduce your temptation to spend. Because you won't want to forfeit your interest earnings, you will think twice before trying to withdraw the money.

No need to pick just one.
You can create a steady income stream for yourself by laddering CDs.

Safety.
CDs at federally insured banks and credit unions are protected.
Average CD rates steadily increased as the Fed hiked rates, and they have since leveled off. While the forecast for CD rates doesn't look quite as promising, the best CDs are still paying above 5% and outpacing inflation.
Before doing anything with your money, it's smart to look ahead to your future and determine your goals. As you think about what you want to be able to do with your money, it's equally important to be prepared for a disaster.

Make sure you have enough money in your emergency fund — typically at least three to six months of living expenses.  Don't put that cash in a CD, either. It's better off in a high-yield savings account that will let you access the funds at a moment's notice, not an account that can have a pricey penalty if money is withdrawn early.

CDs typically require that you invest your money for a specific amount of time, called a term. During the term, you agree not to withdraw the money.
CD terms can range from as brief as a month to as long as five years. Some banks even offer 10-year CDs.

You also should shop around as with any investment product. The national average for a one-year CD is just 1.81% APY, according to the FDIC's most recent data.
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Online banks often pay better rates because they do not have the overhead of maintaining branches that traditional brick-and-mortar banks have.
Financial institutions also differ on the size of the deposit required to open a CD. Some banks, such as Ally Bank and Synchrony Bank, do not have
deposit minimums.

Many banks, though, require you to put at least $500 or $1,000 in the account. Others require $5,000 or more.
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As you shop around, make sure you are doing business at a federally insured bank or credit union. At one of those institutions, your money would be protected if it fails.