6-month CD benefits to know this March
With inflation on the rise, some consumers are focused on ways they can save money to combat the higher cost of goods and services. That being said, inflation is one of the reasons the Federal Reserve has halted rate cuts for the time being. The Fed's rate pause means certificates of deposit (CDs) have managed to maintain their relatively high interest rates, opening the door for savers to earn a return even as they tighten their spending amid inflation.
If you haven't had the chance to take advantage of the high-rate environment CDs have enjoyed recently, 6-month CDs allow you to do that right now. These accounts offer fixed rates, guaranteed returns and other advantages that make them a smart investment in the current economic climate.
See how much you could earn with a 6-month CD here now.
6-month CD benefits to know this March
Not sure if a 6-month CD is the right move for you going into this March? Here are three timely benefits to know now:
A higher rate than most other CDs
Right now, 6-month CDs tend to offer better rates than other CD terms. Here's what today's top APYs look like for several short- and long-term accounts:
- 6-month CD APY: 4.45%
- 9-month CD APY: 4.35%
- 1-year CD APY: 4.40%
- 18-month CD: 4.16%
- 2-year CD: 4.15%
There was a time when long-term CDs offered the highest rates, but that's changed over the past few years. An unpredictable rate climate (among other things) has led banks and credit unions to offer their best rates through shorter CD terms, generally speaking. Today's top rate for 6-month CDs is a good example of that — it's 0.29% and 0.30% higher than 18-month and 2-year accounts, respectively.
Short-term protection against market volatility
Over the past few months, several significant things have impacted the market. From September to December, the Fed implemented three rate cuts. Inflation rose each month from October to January. Still, experts believe that the Fed could start rate cuts as early as June, according to the CME Group's FedWatch tool. In short, we could be in for more changes from now through the summer.
Six-month CDs offer protection in the current unpredictable rate environment. The APY you earn from your short-term CD is fixed — your rate won't fluctuate if the Fed cuts rates this summer — and your returns are guaranteed. And because you're committing your cash for a relatively short amount of time, you have the flexibility to explore other savings options if the market warrants it when your CD matures in six months.
A quick return unavailable in many other places
Right now, 6-month CDs can provide a level of short-term returns you can't find with many savings accounts. For example, you can earn $220.08 at maturity from a $10,000 6-month CD at today's top rate. Meanwhile, putting $10,000 in a traditional savings account for six months would earn $20.48 at the current average rate.
High-yield savings accounts, meantime, have APYs that compete with short-term CDs at the moment. However, those returns are less reliable because they're variable. If rates fall later this year as predicted, a high-yield savings account's rate could drop, too, resulting in lower returns.
Find out what your 6-month CD rate is right now.
The bottom line
With so much uncertainty surrounding the economy and interest rates, a 6-month CD offers a low-maintenance way to earn guaranteed returns at a fixed interest rate. You can maximize your returns by leaving your deposit untouched until maturity. If you make a withdrawal, some CDs will levy an early withdrawal penalty that could impact your returns. If it's important to you to have access to your CD deposit, no-penalty CDs are easy to find. However, they tend to offer lower rates in exchange for their liquidity.
