Saving money is important, but let’s be honest—it’s not always exciting. Watching a portion of your funds grow in a traditional savings account is an important part of your overall financial health, but it may not be as fast-paced as you’d like.
That’s where Certificates of Deposit (CDs) come in. Think of them as a “fast lane” for earning more interest while keeping your money safe.
CDs offer fixed interest rates over a set period, meaning your savings grow predictably, without any surprises. And let’s face it—when it comes to money, surprises aren’t always welcome. But not all CDs are created equal, and knowing how interest rates work can help you make smarter financial moves.
How Do CD Interest Rates Work?
CDs are a bit different from your standard savings account. Instead of fluctuating interest rates, CDs lock in a fixed rate for the entire term. That means the rate you start with is typically the rate you keep, making it easier to predict how much you’ll earn by the time your CD matures.
The length of your CD term also plays a significant role in how much interest you earn. Generally, the longer the term, the higher the interest rate. So, if you don’t need immediate access to your savings, opting for a longer-term CD could be a smart move.
Another bonus? Interest on CDs is usually compounded—meaning you earn interest on your interest. Compounding can vary between annually, quarterly, or monthly, and some CDs even compound daily. The more frequently interest is compounded, the faster your savings grow.
What Impacts CD Interest Rates?
A few key factors determine CD interest rates, and while you can’t control all of them, understanding how they work can help you time your investments better.
Economic Conditions & The Federal Reserve
The Federal Reserve plays a significant role in setting the tone for interest rates. When the Fed raises rates, banks usually follow suit, offering higher returns on CDs. On the flip side, when interest rates drop, CD rates tend to decline as well. That’s why it’s important to keep an eye on the market before locking in a CD.
Bank-Specific Offers
Different banks offer different CD rates, depending on their financial goals and customer incentives. Some may run special promotions, or limited time offers with boosted rates. SouthEast Bank regularly provides competitive rates and promotional CDs, so it’s worth checking our current CD rates to see the best options available.
Deposit Size & Jumbo CDs
The amount you deposit can also impact your interest rate. Larger deposits often qualify for higher yields, and some banks offer Jumbo CDs, which require a higher minimum balance but come with better returns. If you have extra cash to set aside, a Jumbo CD might be the way to go.
Finding the Right CD for Your Goals
Not sure which CD is right for you? It all depends on your financial goals and how soon you’ll need access to your money.
Short-Term CDs (3-12 months): Perfect for those who want to earn more interest than a regular savings account but still need access to their funds relatively soon.
Long-Term CDs (2-5 years): A smart choice if you can afford to set money aside for a while. These typically offer higher interest rates, making them ideal for long-term savings goals like buying a home or funding future travel.
For even more flexibility, CD laddering is a strategy that helps balance access to funds with high returns. This involves splitting your savings into multiple CDs with different maturity dates, so you have money becoming available at regular intervals while still earning higher long-term rates.
Another option is a bump-up CD, which allows you to increase your rate if interest rates go up during your term. While this adds a layer of flexibility, bump-up CDs typically start with slightly lower rates than standard CDs.
Ready to Grow Your Savings?
CDs are a powerful way to put your savings to work without the risk of market fluctuations. Whether you’re looking for short-term flexibility or long-term growth, a CD helps you start earning interest on your money immediately.
Opening a CD can be easier than you might expect, because it’s similar to opening other bank accounts. One you’ve determined how much you want to invest and your preferred term, you can typically choose between CD options online or visit your nearest branch to open an account.
At SouthEast Bank, we offer competitive CD rates designed to fit your savings goals. Whether you’re stashing cash for a big purchase, building an emergency fund, or planning for the future, the right CD may help you get there faster. If you have questions about which CD is right for you, our team is happy to help. A financial conversation today could mean stronger savings tomorrow!
