Since the Federal Reserve slashed the federal funds rate to near zero in March, yields on certificates of deposit have been tumbling.
“Unfortunately for savers, we will return to the ultra-low interest earnings that prevailed for years following the 2008 financial crisis,” said Greg McBride, a senior vice president and chief financial analyst at Bankrate.com.
With most CDs, you’ll face a penalty if you pull out the funds before the CD matures.
There also are ways to mitigate interest penalties for pulling money out early.
You can hedge your bets by choosing long-term CDs with minimal early withdrawal penalties. Five-year CDs from Ally Bank (ally.com; 1.60% yield), Barclays (banking.barclaysus.com; 1.85%) and Sallie Mae Bank (salliemae.com; 1.70% and $2,500 minimum deposit) have relatively light penalties of no more than six months’ interest.
Or consider a no-penalty CD. Rates are usually lower than on standard CDs, but they sometimes offer better rates than online savings accounts, and you can use them to squeeze out a little extra yield, said Ken Tumin, founder of Deposit Accounts.com.
For example, Ally’s 11-month no-penalty CD yields 1.55% on balances of at least $25,000, and the bank’s savings account yields 1.50%.
You could keep some of your savings in a no-penalty CD, then move it to the savings account fee-free if the money needs to be more accessible.
For up-to-date information on CDs offering the highest rates, visit Bankrate.com and DepositAccounts.com.
