How do I get the most out of my CD?

Published: Mar 1, 2017 5:02:00 PM

How do I get the most out of my CD?
CDs or ‘certificates of deposits’ have been around for years but do you really understand how they work? Do you have to wait until your CD maturity date to get a better rate? Read below to find out these answers and more.

How do CDs work?
When you open a certificate of deposit, you agree not to withdraw the funds until a specified maturity date. This date could be several months or several years from when you open your CD. Keep in mind, if you decide to withdraw your funds prior to the maturity date you may have to pay a penalty. The size of these penalties varies by financial institution.

What has changed?
Most people think that you have to wait until maturity to get higher interest rates. CD interest rates have been rising. This allows depositors opportunities to make more money on their existing CDs by taking action before maturity. Most banks don’t want depositors to know this. We are not most banks, so we are getting the word out.  

How do I upgrade my current CD?
If you currently hold a certificate of deposit at a financial institution, you could have a unique opportunity to upgrade your CD in this new rate environment. Similar to how homeowners refinance their mortgages when interest rates decrease, CD holders can refinance their old contracts for new ones as interest rates increase. The best approach is to open a new contract that matures on the same date as the original contract. This approach eliminates any risk to the depositor as you can choose between old or new based on which one gives you the most money at the same future maturity date.  Even after paying a penalty you could be like many others today who come out ahead! 

How do I know if I can get a better CD rate?
Call your local community banker and let them know you want to upgrade your current CD in this new rate environment. You and your loved ones could be wasting thousands of dollars by waiting until your maturity date. It costs you nothing to run the numbers. Call today!

Questions about CDs or how to refinance your current CD*? Call The Bank of Tioga at (701) 664.3388.

*Not all certificates of deposit will qualify. Fees may reduce earnings. Penalty for early withdrawal. Minimum deposit may be required. Personal accounts only.