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During a recent podcast, renowned finance guru Suze Orman shared valuable insights on why considering a certificate of deposit (CD) now could be beneficial. With interest rates showing signs of decline, Orman stresses that current market trends might offer an advantageous moment for investing your savings in a CD. For those contemplating this financial move, it could indeed be a strategic opportunity.
Here’s why this could be a perfect time to follow Orman’s suggestion and what you should know about CDs and current interest rates.
Understanding CDs and Their Benefits
A certificate of deposit, frequently called a CD, is a financial tool available at banks and credit unions that acts as a robust savings mechanism. Unlike standard savings accounts, funds deposited in CDs are typically set aside for a specified term, offering higher interest returns as a result. Ordinarily, earlier access to your funds comes with a penalty fee, which varies depending on your bank or credit union’s policies.
CDs come with varying term lengths, often between three to 60 months. Although the predetermined interests are set by banks, broader economic factors like inflation and the federal interest rate play a crucial role. Thus, examining existing market trends before committing to a CD is prudent.
Current Interest Rate Scenario
Recently, the Federal Reserve made headlines by decreasing interest rates for the first time since 2020, affecting the federal funds rate which was at a 23-year peak. This action can spell good news for various financial ventures such as mortgages or loans. However, if you’re considering a CD, time might be of the essence. Orman highlights that delaying could lead to missing out on better CD rates as further rate reductions might occur.
With likely decreased rates in the future, this season presents a chance to explore options like refinancing or debt consolidation for increased budgetary flexibility. Investing in a CD could be a wise step to secure future financial growth.
Orman admits there might be a chance rates could soar again, but the consensus amongst financial experts leans towards continued reductions over time.
CD Rates Trends in October 2024
As federal interest rates fluctuate, CD rates tend to follow suit, implying that your returns will be influenced by the bank or credit union and your locality. With some establishments offering annual yields up to 5% for short-term CDs, the landscape appears attractive. When selecting a CD, remember, your current bank isn’t the only choice. Compare and explore promotional deals to potentially secure higher returns.
Take action soon to lock in favorable CD terms before future interest rate dips occur!
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