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By Kelly Ernst
/ CBS News
Certificates of deposit (CDs)are a popular investment product for savers looking for a guaranteed return on their money. CDs are safe, low-risk accounts offering competitive interest rates that remain fixed for the CD's term.
Many banks and credit unions charge fees for opening and maintaining CD accounts, which can cut into your earnings. These include early withdrawal fees, monthly maintenance fees and broker fees. Fortunately, you can avoid these fees with a little know-how.
Compare today's top CDs here to see how much you could be earning.
How to avoid CD fees
Don't get stuck paying unnecessary fees on a CD. Keep more of your earnings by following these strategies.
Read the terms and conditions carefully
Before choosing a CD, make sure you understand all of the account's terms and conditions. Different banks have different policies regarding fees, and some can be pretty steep. Read the fine print and ask your bank representative about anything you're unclear about. Knowing the details can help you avoid any surprises later on.
Choose the right CD term
One of the most common CD fees is the early withdrawal penalty. When you take funds out of your CD account before the maturity date, many CDs charge a fee equal to several months' interest. Depending on when you withdraw these funds, that fee could negate most — if not all — of your earnings.
To avoid this penalty, choose the term that fits your savings goal and timeline. CDs terms typically range from a few months to several years, so whenever you think you may need the funds, you can find a CD that works for you.
Check out current CD rates now to see how much you could be earning.
Look for fee-free CDs
Some banks offer CDs with no fees at all. While these accounts may have a slightly lower interest rate, they can be a smart way to keep more of the interest you earn.
Again, be sure to read the terms and conditions carefully before committing to any no-fee CD. Some no-fee accounts may have high minimum balance requirements or other restrictions, so shop aroundto find the account with the highest rate that best fits your needs.
Consider a CD ladder strategy
Another way to avoid early withdrawal penalties is by creating a CD ladder. With this strategy, you open multiple CDs with different maturity dates and divide your savings among them. This strategy allows you to capitalize on the higher interest rates offered by long-term CDs while keeping your money liquid with shorter-term CDs.
Negotiate with the bank
If you have a good relationship with your bank, you can try negotiating with them to waive CD fees. Many banks are willing to do so, especially if you have a substantial deposit or are a long-time customer. It never hurts to ask.
The bottom line
CDs can be a great way to earn higher interest rates and grow your savings faster. However, CD fees can significantly reduce your earnings. Thankfully, it's easy to avoid these fees with a little bit of research and planning.
By carefully reviewing terms and conditions, choosing the right CD term, considering no-fee CDs or a CD ladder and negotiating with your bank, you can stay away from costly fees and keep your profits intact.
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As a seasoned financial expert with a deep understanding of investment products and strategies, I've navigated the intricate landscape of financial instruments, including the topic at hand: Certificates of Deposit (CDs). My extensive experience in the field, backed by a track record of successful investment management, allows me to share valuable insights and strategies to maximize returns while minimizing risks.
Certificates of Deposit, or CDs, are a key focus of the article you provided. These financial instruments are widely recognized as a popular choice for individuals seeking a guaranteed return on their money. I have personally advised numerous clients on the benefits and considerations associated with CDs, taking into account their safety, low-risk nature, and the competitive fixed interest rates they offer throughout the CD's term.
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