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The Best Time to Invest in a Certificate of Deposit (CD)

The Best Time to Invest in a Certificate of Deposit (CD)

Interest earned on savings balances can add up to extra money in your pocket over time, but a savings account typically pays the lowest interest rate when considering various savings options. When you’ve successfully accumulated more money in savings than what you will need for future emergencies or expenses, it may be time to look at investing in a savings option that pays more interest. One option that can help you earn more on your savings is a product called a Certificate of Deposit, or CD for short.

A common question customers ask is “When is the best time to invest in a CD?” The simple answer to this question is when interest rates are high. However, there are a few other factors to consider when deciding when and which kind of CD to invest in, such as if you anticipate interest rates rising even more in the near future and how likely you will need extra cash due to other economic factors like the rising cost of goods.

How interest rates determine the best time to invest in a CD

The higher interest rates are, the more you will earn on the money you have sitting in a CD. Therefore, CDs are generally more popular when interest rates are high. Additionally, having an idea of whether interest rates will increase again in the near future, stay steady for some time or even begin to decrease soon may influence your decision on how long of CD term you choose. When selecting a CD, you usually have two options – short-term and long-term:

  • Short-term CD: Usually locks funds in for one to six months. This is a popular choice among customers that believe interest rates will increase again within a year and don’t want to miss out on the additional rate bumps by having their already money locked in a lower-rate CD.
  • Long-term CD: Usually locks funds in for seven to 12 months or longer. This is a popular choice among customers who believe interest rates will remain steady for several months or simply don’t want to have to reinvest in a new CD after just a few months.

Keep in mind, financial institutions do not have a crystal ball to determine if and when interest rates will increase or decrease. Therefore, it’s important for the customer to do their own research to decide which option best fits their financial situation. It’s also important to note that the duration of “short” and “long” term CDs varies by institution, and these estimates are based on Bankers Trust’s product offerings.

How other economic factors determine the best time to invest in a CD

When the Federal Reserve (“the Fed”) raises interest rates, it’s usually because the economy is experiencing rising inflation. This means the price of goods and services are high, requiring consumers to have more cash on hand to afford their regular expenses. This is an important factor to consider before investing in a CD, as this investment option locks your money in for a period of time.

If interest rates are high and you have funds on hand that you do not anticipate needing in the near future, a CD can be a great choice to earn a significantly more than if you were to leave it sitting in a savings account. Learn more about Bankers Trust’s CD products to get started, and check out Bankers Trust Benefits Banking, which earns you rate bumps just for having multiple products with us!

Steve Rodriguez

Steve Rodriguez

Relationship Banking Officer 602-224-2029 Email Steve

Steve Rodriguez is a relationship banker at Bankers Trust’s Arizona branch. He joined Bankers Trust as a consumer services representative at the Windsor Heights branch in 2001 and moved to his current location in 2008. In this role, Steve assists customers with an array of banking needs, from opening accounts to applying for loans to uncovering needs for additional financial services such as mortgages and commercial services. Steve is an active volunteer in the community and regularly attends volunteering events with Feed Our Starving Children and Nourish Phoenix.

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