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While inflation and elevated interest rates have hurt the wallets of millions of American borrowers, there has been a silver lining: high returns on savings accounts. In today’s inflationary climate, it’s not difficult to find a high-yield savings account with an interest rate of 4.5% or higher— or a certificate of deposit (CD) with a rate over 5%. Select savers may even qualify for a CD with a 6.5% or 7% rate right now.
That noted, those returns won’t last forever. Each CD matures at the end of its term, leaving savers pondering their next move. Fortunately, in today’s climate, there are multiple attractive options to choose from. Below, we’ll break down three potential alternatives savers should consider when their CD matures.
See how much you could be earning with a top CD here now.
3 things to do when your CD matures
Here are three things you may want to do when your CD matures.
Open a CD with a new term and rate
CD interest rates are the highest they’ve been in years. So if your CD is set to expire in the weeks or months to come, the simplest and most efficient way to continue earning high returns is to open a CD with a new term and rate.
While rates on long-term CDs have traditionally been higher than short-term ones,that’s not the case right now. Still, rates on both terms are competitive. But they’re likely to drop when the Federal Reserve cuts rates, which could come as soon as May or June.
So it makes sense to lock in a high rate with a new CD when your current one expires because that rate will remain the same even in the face of a changing economic environment.
Get started with a new CD here.
Ladder your CD accounts
No one knows exactly where the CD rate environment is heading (forecasts vary). While rates may fall in the future, they could stay where they are or even rise slightly if inflation remains troublesome. While you shouldn’t wait for another rate rise to open an account, it’s understandable if you want to earn the greatest return possible.
In this case, consider laddering multiple CD accounts so they mature at different times. For example, you’ll open a 3-month CD at one rate and a 6-month CD at a different rate. This will allow you to capitalize on today’s high rates while giving you the flexibility to take advantage of the rate environment in the future, too.
Open a high-yield savings account
If you’ve been happy with the returns you’ve earned on your CD account to date — but are uneasy with the restrictions preventing you from accessing your money without penalty— then there is one alternative to pursue: a high-yield savings account. These accounts operate just like traditional ones do and they come with rates only slightly below the most competitive CD accounts. And you won’t be penalized for withdrawing money early and you’ll be able to add to your account at any time.
That said, the rates on high-yield savings accounts are variable and subject to change so it makes sense to open an account now, prior to any adverse rate changes.
Get started with a high-yield savings account here now.
The bottom line
If your CD recently matured or is set to mature soon it’s important to understand your next steps.
You can simply open a new CD with a new term and rate or you can ladder multiple accounts, giving you the benefit of earning today’s high rates while being positioned for future earnings as well. Or, if you want the normal access and flexibility you’re accustomed to (but don’t want to sacrifice the high returns CDs come with) then consider a high-yield savings account, instead. Whatever you do, don’t put your money back in a traditional savings account as the average 0.46% rate most accounts come with means you’re losing money by going this route.
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.
