Get the most out of your short-term investment.
A six-month certificate of deposit helps you save money by locking it away at a higher rate than you’ll find with a traditional savings account. But watch out: If you do end up needing your money before your CD matures, you’ll pay a hefty penalty.
Popular choices for 6-month CDs
- Citi CD: 2.25%
- Ally High Yield CDs: 1%
- CIT Bank Term CDs: 0.72%
How does a 6-month CD work?
When you open a six-month CD, you agree to tuck away your savings for half a year. CDs can offer stronger interest rates than standard savings accounts as a reward for leaving it alone. You’ll pay hefty penalties for accessing your CD early, even for emergencies.
Interest payments for 6-month CDs
Most six-month certificates of deposit pay your interest when the term matures — that is, after the six months end. With select CDs, you could see interest paid monthly, but that’s more common with terms of a year or longer.
When you set up your CD, you select a bank account you’d like your interest payments deposited into. Some CDs allow interest paid into any US bank account, while others require an account within the same financial institution.
Some CDs compound interest, which means the interest is paid directly into the CD account, effectively helping you to earn interest on interest.
How do I compare 6-month CDs?
Main points to keep in mind when deciding on a CD include:
- The interest rate. Rates vary among banks, so find the strongest rate you’re eligible.
- How interest is paid. With short-term deposits, the interest earned on your balance isn’t deposited until your CD reaches maturity. If you’re looking for monthly interest payments, consider a CD term of a year or longer.
- Minimum investment. Some banks require a minimum deposit amount, particularly for high-interest CDs.
- No fees. If you’re looking at a bank that’s quoting high ongoing fees, move on to a bank that doesn’t.
Compare the best 3-month CD rates
What are the pros and cons of a CD?
The benefits
- Fixed interest rate. CDs provide steady way to grow your cash, helping you to work out exactly how you’ll earn when the term matures.
- Forced savings. With penalties for early withdrawals, CDs provides an incentive to keep your money where it is until you meet your goal.
- Low-risk investment. If you invest with an FDIC-insured bank, your deposit is backed by the government for up to $250,000.
The drawbacks
- Lack of liquidity. If you need access to your cash before the term is up, fees can wipe out any interest gained.
- Automatically rolls over. You might find this one a benefit. You must instruct your bank to withdraw your money when the term is up or risk automatic rolling over into a new CD — possibly one with a lower interest rate.
How did we choose the best CDs?
Six-month certificates of deposit can be a useful short-term investment, as they allow you to lock away your money in exchange for more interest than a standard savings account. But some certificates of deposit are better than others, so we analyzed a number of accounts to find out which ones are best for saving. We looked into important factors like APY, early withdrawal penalties, interest compounding period, fees, deposit requirements and where interest is paid.
Bottom line
A six-month certificate of deposit can be a useful short-term investment, especially if you’re planning a big purchase after it matures.
You’ll find a range of CD terms designed to help you save and meets your financial goals.
Frequently asked questions
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