Lock in rates and customize your savings strategy with CD laddering

Interest rates for savings products have officially reached their highest point in decades, allowing savers and investors the rare opportunity to lock in these high rates and guarantee their returns — all while benefiting from the security of federal deposit insurance.

Federal deposit insurance is coverage offered by two main federal agencies, the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA), on deposits held in insured banks and credit unions, respectively.

Did you know that the FDIC has never failed to pay insured depositors at failed banks since they were founded in 1933? The NCUA, which protects credit union funds, has also never failed to pay insured depositors at failed credit unions since its founding in 1970.

Compared to stocks or other forms of investments, which are vulnerable to complete loss of principal, deposits at federally insured financial institutions are extremely safe. Typically, deposits are covered up to $250,000 per depositor, per institution, per account ownership category. For joint accounts, this amount increases by $250,000 per co-owner, per institution.

While interest rates for savings products are currently very competitive, there is the possibility for these rates to decrease over time. In order to get the most potential benefit from today’s high rates, you can lock these rates in with certificates of deposit.

Certificates of deposit free you from the stress of potential stock market volatility. You choose to deposit an amount of money and commit to leaving it there for a set period of time. In exchange, you lock in an interest rate for that entire term.

This means that you will be able to calculate exactly how much interest you will earn — a guaranteed return that is all but impossible on the stock market.

A strategy that can help you take advantage of locked-in interest rates is called CD laddering. With a CD ladder, you spread cash equally across multiple CDs to capture the higher rates of longer-term vehicles, while keeping portions of that money in shorter-term accounts, so not all assets are locked up for years.

It also decreases the risk of locking in a CD rate if interest rates continue to rise during your term. Remember, CDs offer fixed rates, so while this is beneficial if rates decrease, it could also mean you’ll miss out on higher interest if rates increase before you can remove your money.

Here’s a look at how CD laddering works:

If you had $90,000 to save, you would spread out your money between three different CD accounts.

When the first CD matures after one year, you can cash out or choose to reinvest it into another three-year CD that offers a higher rate than a one-year CD. Each of the other CDs you opened will then be one year closer to their maturity dates. Best of all, 100% of these funds would be covered by federal deposit insurance.

The idea of CD laddering is to continue replacing each maturing CD with a CD rung that is farthest away. In this example, that would mean adding a new three-year CD each time an existing CD matures.

To take the example further, if you have $1 million to save and want earlier intervals to access your funds, you could spread your money in $200,000 increments across five CDs ranging from three to 15 months:

In this case, as long as each of these CDs was offered by a different federally insured financial institution — as would be easy to accomplish using the Raisin platform — you would not only have your funds growing steadily, but your funds would be secure and you would be able to rebalance every three months.

Constantly opening new bank accounts to capture the highest savings or CD rates can be complicated and time-consuming. And if you choose multiple banks, that means multiple accounts, log ins, and balances to remember and review.

Raisin lets you put your cash to work by giving you access to an exclusive network of banks and savings products, including high-yield savings accounts and CDs — all from a single, unified login.

And, all of our participating banks and credit unions are FDIC and NCUA insured, respectively, so you can rest easy knowing your deposits are insured up to the limits of federal law.

Best of all, with Raisin you don’t have to worry about fees eating into your savings — we never charge you fees to save with us.

If you’re ready to make the most of your hard-earned money, without the hassle of multiple accounts, then view our latest CD offers below, open an account in minutes, and start your CD laddering journey.