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After a four-year period in which interest rates reached historic lows and then rose to multi-decade highsthe Federal Reserve began to reduce interest rate again in September. A reduction of half a percentage point, triggered by Cooling inflation figureswas released on September 18. And with unemployment and inflation Also falling in September, additional cuts of 25 basis points each appear likely for the Fed’s next two meetings in November and December.
While this is good news for borrowers, it would hurt the strong returns savers have been accustomed to in recent years. This is especially true for those who have opened or are considering opening a certificate of deposit (CD). That said, CD Interest Rates have not diminished to the point of rendering these unique savings instruments unworthy of utility. Savers can still win hundreds and potentially thousands of dollars with the correct CD account – even now.
But there are smart steps savers should take now, before the next rate cut, to get that big return. Below, we’ll break down three of them.
Start by seeing how much more you could make for your money with a premium CD here.
3 Smart CD Moves to Make Before the Next Rate Cut
Even if CDs remain a on and predictable to earn a substantial return on your money, this cycle of high rates may soon be coming to an end. Savers who have not yet benefited from it, or those considering another accountshould take the following actions now – before the Fed takes further action:
Determine your budget
The more you deposit into a CD, the more you will earn. However, this simple calculation does not take into account any early withdrawal penalties you will have to pay if you withdraw your money prematurely. These penalties vary from lender to lender, but they can easily wipe out the income you’ve accrued to date. So, start by determining your budget. Determine exactly how much you can afford to deposit and how long you can lock it in. Once you have this amount and duration (CD term), determined, you will be ready to take the next steps.
Get started now with an online CD.
Shop for lenders
Don’t just go to your local bank branch to open a CD. Often the best CD rates and terms are found at online banks compared to those with physical locations. But even not all online lenders are the same, as some will have higher minimum deposits or other requirements to get a high rate. So research lenders to find one offering the best rates for the amount of money you’re comfortable putting down. And make sure you understand early withdrawal penalties and any other fees or maintenance costs that could affect your returns. Before to start.
Open a long-playing CD
A Long term CD will mature between 18 months and 10 years. Once you’ve determined how much money you can comfortably afford to deposit, consider one of these accounts now rather than a short-term account. Currently, short-term CDs have slightly higher rates than long-term ones. But these accounts will be mature in just a few months, after which rates will likely be lower. But long-term CDs now have competitive rates (in the 4 to 5 percent range), allowing savers to get big returns for years to come, even if the higher-rate climate cools during this period. period. And because of the rate-locked nature of these accounts, you’ll be able to accurately determine your exact income when the account matures.
The essentials
Rate-cutting action by the Federal Reserve should spur savers who have not taken advantage of the current high-rate climate (or those who wish to continue to do so) to act now – and they should do so with a CD. Specifically, savers should determine their budget in order to deposit as much as they can afford. But they should also research lenders to find one offering the highest rates, especially for long-term CDs, which can help savers weather what appears to be a cooling climate.
Do you have any other questions? Learn more about your current CD options here.
