As a saver, opening a certificate of deposit (CD) account has been a smart way to protect your money and earn interest. With interest rates significantly higher than in previous years, it’s a great opportunity to lock in high returns. However, if you’re approaching maturity in 2024, there are three critical mistakes to avoid to maximize your earnings.
Firstly, be aware of the automatic rollover trap. If you opened a CD with an initial rate of 5.50%, but today’s rates top out at 4.50%, letting it automatically roll over could result in a substantial loss of interest. Instead, explore CD rates and terms available to you online and consider withdrawing your funds upon maturity.
Secondly, avoid assuming that the same interest rate will apply again. Inflation has been dropping, and two interest rate cuts have already occurred this year, with a third likely soon. Don’t assume you’ll be able to lock in the same high rate; instead, factor in potential changes and calculate your earnings tied to different rates and terms.
Lastly, don’t open a short-term CD to replace an approaching one. Short-term CDs offer only slightly higher interest rates than long-term counterparts, which may not be worth it for just a few months. Instead, move your funds into a long-term account, where you can potentially earn more with longer lock-in periods.
By avoiding these mistakes and being strategic in your approach, savers with accounts set to mature before 2025 can better position their money for additional interest-earning success.
Source: https://www.cbsnews.com/news/mistakes-to-avoid-if-your-cd-matures-in-2024