A certificate of deposit, commonly referred to as a CD, is a popular savings tool. A CD typically earns a higher interest rate than a regular savings account, but one potential downside is that you usually cannot add money to a CD after it’s opened. Rather, you open a CD with the full amount you’d like to invest and leave that money in the account for the designated CD term. CD terms can range from a couple of months to several years. While it’s possible to withdraw funds from a CD before the term is over, doing so will typically result in an early withdrawal penalty.
However, if you’re looking to grow your savings with regular deposits, you do have options. Let’s review some of the possibilities available to you:
- Consider an Add-On CD. While you can’t add money to a traditional CD after account opening, it’s possible to lock in a CD rate and grow your savings with regular deposits through an “add-on CD”. An add-on CD is like a regular CD in that you lock in a specific rate for the full CD term length, and must keep your funds in the account until the term is over (when the CD “matures”). However, unlike a traditional CD, an add-on CD allows you to make additional deposits at any time. By locking in a favorable interest rate and having the ability to make additional deposits throughout the CD term, you can grow your savings faster. Bank5 Connect is proud to offer an add-on CD with a 2-year term. Our 24 Month Investment CD offers a fixed, competitive rate and allows for additional deposits throughout the 24-month term so you can maximize your earnings.
- CD alternatives to consider. There are alternative savings options that are just as safe as a CD, and can still provide you with a competitive interest rate, but don’t require you to commit to a specific term. While there is typically no guarantee that the rate on a high-interest savings account won’t change due to market conditions, there are banking products available that are aimed at providing a competitive rate. For example, some banks offer savings accounts with higher rates for higher balances. Other banks offer savings accounts or money market accounts with rates that are specifically tied to current market conditions. Bank5 Connect’s Accelerator Money Market account, for example, features a variable interest rate that adjusts monthly based on the Federal Home Loan Bank of Boston’s one-month interest rate, minus a 0.60% margin. This means you can depend on a relevant, competitive rate each month, based on market conditions.
No matter what savings vehicle you choose, you should pat yourself on the back for even thinking about additional contributions. Committing to saving money on a regular basis is one of the best ways to meet your savings goals. Even small contributions can add up over time and lead to significant savings. So, whether an add-on CD or a CD alternative is the right fit for your financial situation, you can enjoy watching your savings and your net worth grow.