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Over the past year, savers have been reaping the benefits of the Fed’s interest rate hikes as APYs on savings accounts have skyrocketed, blowing past national averages. And the Fed hasn’t ruled out additional increases this year, meaning that CD rates could get even higher.
One of the highest 1-year CD rates available right now: Forbright Bank’s 12-month CD.
Forbright Bank: 1-year CD offers 5.20%
Forbright Bank, formerly known as Congressional Bank, is a Maryland-based bank that offers community banking, lending, and business banking products with an eye toward supporting sustainable businesses and clean energy projects.
For customers who want to visit a physical branch location, Forbright has a handful of branches across Maryland and Virginia. Currently, Forbright’s 1-year CD is offering one of the highest APYs on the market.
Minimum opening deposit: $1,000
APY: 5.20%
Early withdrawal penalty: 3 months’ worth of interest
Once your CD matures, it will automatically renew (at the current rate) unless you withdraw the funds from your account at maturity or within the 10-day grace period after that date. Forbright also offers a range of other CD terms, including a 24-month CD, 36-month CD, and a 60-month CD.
Why a CD could be a worthwhile investment
A certificate of deposit (CD) is just one of many different types of savings vehicles you can use to hit your savings goals. The benefit of a CD is that, unlike other deposit accounts like a high-yield savings account or money market account, CDs offer fixed APYs. In today’s environment, it’s hard to predict what the Fed will do next and how rates will change over time. Locking in a fixed rate on your CD will give you peace of mind, knowing that no matter how rates change, your money will continue to grow.
On the flipside, if rates continue to rise, tying all of your savings up in a CD could mean missing out on higher rates in the future. However, there are ways to hedge against this.
CD laddering is one strategy you can use to take advantage of the high APYs available on the market today without locking all of your money up for the long haul.
A CD ladder involves opening multiple CDs with varying term lengths. Say you have $5,000 in your savings and want to put that money into a CD. Rather than putting the entire $5,000 into one CD, you’d spread that money out into different CDs:
- $1,000 into a 1-year CD
- $1,000 into a 2-year CD
- $1,000 into a 3-year CD
- $1,000 into a 4-year CD
- $1,000 into a 5-year CD
Opening up a handful of CDs means that you’ll regain access to a portion of that money sooner and you’ll be able to use it to cover expenses or savings goals, while the rest of your money continues to earn interest. Or, if you still don’t need to tap into your savings when your first CD matures, you could roll it over into a higher APY CD depending on how rates have changed.
The takeaway
A 1-year CD is one of the shortest terms offered by most banks and credit unions. And, if you’ve never had a CD, it can give you a taste of what it’s like to lock your money away for a set amount of time. An added benefit: shorter term CDs are paying off for many savers, with some accounts boasting APYs that are well over 5% as financial institutions react to Fed rate hikes. If you’re looking for a lucrative, short-term savings strategy, a 1-year CD could make sense for you.
