How Long Should the Term of Your CD Be?

You have probably decided to invest your money in a Certificate of Deposit account because of its low risk and high return. Investing in a CD makes sense when you don’t need the liquidity of a traditional savings account and would like to make more money than a checking or savings account interest rate would. However, did you know that the length of your term affects the interest rate?

When you commit to investing your money for a year, you will be sure to get some value from your CD. Three- and six-month CDs are also available, but the longer your money remains committed, the higher the interest rate. Most people can stand to have some of their money tied up for a year if it means a greater return int he future. Multi-year options are possible as well. Consider also that interest rates rise and fall, and the longer your CD term, the greater the possibility you will miss out on rising interest rates. Locking your money into a CD will prevent you from taking a loss as rates decline, but also from making a higher return as they rise.

When you turn to Florence Banking Rates for access to the most up-to-date information on CD interest rates, consider the above before determining your desired length of your CD. Your desired level of risk versus reward should be a strong determining factor.