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Inflation has been problematic for Americans for much of the last two years. Not only has it caused the prices of everyday items to surge, but it’s also resulted in a series of hikes to the federal funds rate courtesy of the Federal Reserve. And while the Fed hasn’t raised the benchmark rate since last summer, they haven’t lowered it either, causing the costs of borrowing to remain elevated until a cut is issued.
But higher rates have dramatically increased the returns on high-yield savings and certificates of deposit (CD) accounts, too. And many have taken advantage by opening short- and long-term CDs. But short-term CDs only last 12 months or less, leading some savers to wonder what their next step should be once the account has matured.
If you’re one of those savers coping with the pending maturity of your account, then it helps to know what to do now. Below, we’ll break down three things to consider if your CD is set to mature this June.
Start by seeing what new rate you could secure with a CD here now.
3 things to do if your CD matures in June
Here are three important steps to consider with your CD set to expire soon.
Start shopping for accounts
You don’t necessarily have to keep the rate you have with your current account. Rates may be higher now than they were when you opened your CD, so start shopping around to find the highest one possible. Just understand that they may require you to take your money out of your current account (once it’s matured) and deposit it with a different lender. And that lender may be solely online versus a bank with a physical address. But if you want to continue saving with CDs, start shopping now because your window of opportunity to play with those funds may be closing.
Compare CD rates and lenders online today.
Contact your lender
You’ll generally have a small time frame from when your CD matures and when it rolls over into a new account to access the funds. But, if you wait and miss that time frame, your account will automatically renew — potentially at a lower rate than you opened it with. So don’t hesitate to contact your lender to let them know of your plans and be prepared to withdraw those funds as needed (if the lender doesn’t have an attractive offer to stay). It’s important to be proactive here, because if the account rolls over into a new CD, you may get stuck paying an early withdrawal penalty to take it out again.
Consider a long-term account
The rate environment is volatile right now. While many were expecting rates to be cut by June, that seems unlikely after a series of disappointing inflation reports to start the year. Now, rate cuts look delayed and rate hikes are more possible, should inflation continue to stay stuck above the Fed’s 2% target goal. But if inflation continues to fall, rate cuts could follow and so will the returns on CDs. So, if your CD is set to mature in June, consider opening a long-term one (more than 12 months) in its place. This will lock in today’s high rates for years to come, allowing you to earn substantial returns regardless of what happens in the larger rate climate during that time.
Explore your long-term CD account options online now.
The bottom line
If your CD is set to mature in June it’s important to take some steps now. If you know you want to continue with CDs then start shopping to find an account with the highest rates and best terms today – and let your current CD lender know of your intentions, so they don’t let your account rollover, potentially with a lower rate. And consider moving your current CD into a long-term account to give yourself more and sustained protection against today’s volatile rate climate. Just don’t sit idle, as there are potentially more CD interest dollars to earn ahead.
Matt Richardson is the managing editor for the Managing Your Money section for CBSNews.com. He writes and edits content about personal finance ranging from savings to investing to insurance.
