Interest rates remain painfully low – historically low – but they are rising slowly. Governmental units should review the earning rates on their certificates of deposit (CD) to ensure they are not at the low end. As I recently discovered, there is a wide range in the low category; between a high of 1.05 percent to a low of .1 percent. With interest rates being anemic for so long, CDs have often been renewed automatically. Accepting an automatic renewal may cost as much as $4,000 on a $500,000 CD.
Now is a great time to start shopping around for better CD rates and to strategize how to take advantage of the expected gradual increase. CD laddering is one such strategy to consider, in which you have multiple CDs with staggered maturity rates. The result is every few months, a CD matures and you can potentially roll the cash into a new CD with a higher yield. With CD laddering, you will want to watch the yields more closely on both your long and short term CDs to ensure you are maximizing the earning potential.
Strategizing and shopping around when CDs mature could be a good return on the time spent.