meg schutte Nov 11, 2022

Find the changing economy challenging? You’re not alone. Marketplace volatility is making it harder to decide where to invest money. But, right now, compared to high-yield savings accounts, the stock market, and other investments, Certificates of Deposit (or CDs) continue to offer a safe, predictable and relatively risk-free option. You get a guaranteed, higher rate of return on your deposits in exchange for allowing banks to hold your funds for a defined length of time. No matter what you’re saving for, you’ll know exactly how much money you’ll earn over your CD term, whether it’s months or years.

Why 2022 is Different
While interest rates have been low for years, the Federal Reserve has increased the fed funds rate five times to combat the rising inflation that continues to define 2022. The result? CD interest rates have risen from close to 0% to over 3.0%. If you’re looking to round out your financial portfolio, earmark funds for a long-term goal, or just jumpstart your savings, today’s market couldn’t be better for opening a CD.

Here’s what you need to know.

Deposit: This is how much you commit to putting away in a CD. Know that you can’t withdraw earlier than the agreed upon term, or you will pay a price.

Term:
This is the length of time you’re willing to lock up your cash to earn interest over a defined period of time, or term. CD terms typically range from three months to five years, with longer term CDs typically offering a higher APY (Annual Percentage Yield).

Short Term CDs:

  • Lower rates but more frequent availability to withdraw cash or renew a CD.
  • Good solution for more immediate financial needs.

Long Term CDs:

  • Higher rates, but you will incur a penalty if you withdraw funds earlier.
  • Better choice if you’re saving for a future goal, like a wedding, college tuition, dream vacation, new car, moving costs, or down payment on a car.

Maturity Date: This is the date your CD term ends and you can withdraw funds plus interest. You can also renew the CD, deposit more money, and keep or change the term length. Take the time at renewal to re-evaluate, as your initial rate might no longer be competitive.

Early Withdrawal Penalty: If you find you need your cash before the end of the term, you can withdraw your money early but will incur a penalty -- anything from many months or years worth of interest.

Choose the CD that Fits Your Financial Plans

From fixed-rate or variable rate CDs to ones that respond to the marketplace, you have a wide variety of choices. For each type listed below, APYs, flexibility and penalties will vary. So do your research, figure out what exactly you’re saving for (short or long-term needs), and get honest about your comfort level with how long your money will be tied up.

  • Fixed-rate CD - In this traditional choice, your money earns the same interest rate, so you'll know exactly how much money you'll earn during the term.\
  • No-penalty CD - Also known as "Liquid" or "Breakable," this CD allows you to earn money at a fixed rate but you can make a penalty-free withdrawal, generally after the first few days of opening or funding the CD. Good option if you want to try out a CD.
  • Variable CD - Offers a fixed term but a fluctuating interest rate, which is determined by several factors, including the prime rate, the Consumer Price Index (CPI), Treasury bills, or a market index.
  • Bump-up CD - Great for when interest rates are on the rise, like now, because you can request one or more interest increases during the CD term and earn a higher yield on an existing deposit.
  • CD Laddering - Just like its name, this is a strategy that can help your savings "climb" by dividing your deposit between several CD terms at once. Each CD matures at staggered intervals (i.e., one-year, two-year, and three-year, or 3-6-9-months). The advantage is that the longer term CDs can lock in higher APYs (that won't be affected if the APY drops during the term or the promotional rate ends) and better returns, while shorter term CDs allow you to access and/or reinvest money on a more frequent basis. Ideally, you reinvest each CD every maturity date and keep building your balance. 

 

Think of CDs as Forced Savings
This is a good thing. When your money is locked up in a CD, it’s not in your pocket, accessible on your debit card, or easy to withdraw from your savings account. CDs are a smart way to make more of the money you’ve earned, saved, or inherited. Be sure to shop around (banks, credit unions, online banks) for the best rate, a term you can get behind, and which offer the services and features that are important to you.

CD Checklist:
Before you commit your money, and depending on the CD you choose, find out about the following:

  • Opening Deposit required
  • Minimum Balance to Earn Interest
  • Length of Term
  • Security: Just like savings accounts, CDs are FDIC-insured up to $250,000
  • Access: 24/7 telephone and online banking availability
  • Maintenance Fee: If any

 

Bank of Hope: Two Ways to Put CDs to Work For You
At Bank of Hope, we’re always looking for new ways to help our customers succeed in life. That’s why we’re always prepared to meet marketplace changes. We’re proud to offer a new Step Up CD that allows you to lock in a guaranteed rate now with the opportunity for a better rate later. Or choose from of three new Promo Plus CDs, offering some of the highest APYs in years. Make the most of your money with these limited time, competitive CD offers. Don’t wait, apply today.

1. NEW! Promo Plus CD
 - Minimum deposit of $10,000.** Start earning more for your cash.

12 Month CD - 4.15% APY*

8 Month CD - 3.93% APY*

6 Month CD - 3.68% APY*

 

*The Annual Percentage Yield (APY) is accurate as of 11/7/2022. APYs vary based on term of account: 6 Month term earns 3.68% APY, 8 Month term earns 3.93% APY, and 12 Month term earns 4.15% APY. The rate will not be changed for the term of the account. A minimum opening deposit of $10,000 is required to earn interest. Fees could reduce earning on the account. A penalty may be imposed for early withdrawal before maturity.

**To qualify for this offer, you must open an account with new money. New money is defined as funds not currently on deposit with Bank of Hope. The account must be funded within 10 calendar days from the account opening date.

 

2.NEW! Step Up CD - Minimum deposit of $1,000.** Rate adjustment built right in (on a quarterly basis), so your interest rate will rise if the WSJ Prime rate goes up during the term of the CD.

12 Month CD - 3.25% APY*

9 Month CD - 3.11% APY*


*The Initial APY (Annual Percentage Yield) of 3.11% for a term of 9 months and 3.25% for a term of 12 months are accurate as of 10/17/2022. The minimum balance of $1,000.00 is required to obtain the stated APY and maintain the account. The initial interest rate will be fixed until December 31, 2022 and is subject to change on or after January 1, 2023 without any notice. The interest rate on your account will be adjusted every 1st day of each quarter (“Adjustment Period”) based on the Indexed rate. At the time of Adjustment Period: If the Indexed rate is higher than the interest rate in effect, then the interest rate will be increased to the Indexed rate. If the Indexed rate is equal to or below the interest rate in effect, the interest rate will remain at the interest rate in effect. The Indexed rate is calculated as the interest rate in effect plus 25% of the change from prior quarter’s Wall Street Journal (WSJ) Prime Rate to the WSJ Prime Rate at Adjustment Period. Interest will not be compounded. A penalty may be imposed for early withdrawal before maturity. 


Find the CD that’s Right For You.

Visit our website through the following links to learn more:

Online Promo Plus CD

Online Step Up CD

 

Meg Schutte is a Bank of Hope Blog contributor.    

The views and opinions expressed in this article do not necessarily represent the views and opinions of Bank of Hope. 

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