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The rate environment of recent years has not been favorable for borrowers but it has been a boost for savers. Thanks to decades-high inflation and a rapid rise in interest rates meant to tame it, savers have seen their returns increase exponentially.
It’s not difficult to find a high-yield savings account over 5% right now while select savers can secure certificate of deposit (CD) accounts up to 7%. With hundreds and potentially thousands of dollars to be made on these accounts, it’s important to know what to do when the CD term ends and the account has matured.
Today’s rate climate is unique — and changes are inevitable. Rate cuts are on the horizon. That said, a compelling case exists for savers to renew their current CDs after they mature. Below, we’ll detail three reasons why it’s worth doing.
Start by seeing what new CD rate you may qualify for here now.
Why you should renew your CD after it matures
Here are three reasons why you should renew your CD when it matures.
You may be able to get a better rate
CD rates have been elevated for much of the last two years, but that doesn’t mean that you can’t get an even higher one than what you initially secured. You may be able to get a better rate for the same CD length or if you move it to a shorter or longer term.
It pays, then, to shop around to see what better rate you may be able to get. This may require you to leave your current lender to get a better rate somewhere else (online banks are highly competitive right now). But the move could be worth it to earn more interest. That said, don’t just look at the interest rate as fees could easily diminish what you think you’ll earn.
See what better rates you may be eligible for here today.
Today’s rates are higher than usual
Today’s CD rates are higher than usual, especially compared to the pandemic-era lows savers had been accustomed to. But with interest rate cuts likely for later this year and 2025, it makes sense to lock in today’s elevated returns long-term.
Since CD rates are locked — meaning they can’t change after the account has been opened — it may be beneficial to renew your CD at a longer term than what you currently have. This will guarantee that higher rate for months and years to come, regardless of any activity that results in a lower rate environment overall.
The alternatives may not be as advantageous
Let’s say you elect not to renew your CD account. Where would you move your funds then? Regular savings accounts are falling far behind the pace of inflation, averaging just 0.47% currently. High-yield savings accounts, meanwhile, have rates comparable to the best CDs, but those rates are variable and subject to change. And, rates on these accounts will fall when the benchmark interest rate does.
High-yield checking accounts, meanwhile, are scarce and come with specific requirements to earn that yield. With these popular alternatives not as advantageous as CDs, for many, it makes sense then to renew your CD upon maturity.
The bottom line
Savers with expiring CD terms have multiple reasons to renew their accounts. Not only may they be able to get a better rate, but that rate be significantly higher now thanks to today’s elevated environment. And when stacked against popular alternatives like traditional and high-yield savings accounts, it becomes clear that the best way forward to earn big returns is by renewing a CD. That said, savers will have a limited grace period — the time between their CD matures and it automatically renews — to act. So it’s beneficial to understand your next steps nowbefore that date approaches.
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.
