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Ask the Expert: Rolling Over a CD

June 17, 2010

By Richard Barrington | MoneyRates.com Senior Financial Analyst, CFA

Q: I am 73 years old, newly widowed, and inexperienced with money. I have a $5,000 CD maturing which was at 1.24% for one year. Can I do better elsewhere?

A: Like anyone rolling over a CD these days, you may be in for a little bit of rate shock. 1.24% may have seemed low when you signed up for it a year ago, but CD rates (and bank rates in general) have dropped to even lower levels since then.

According to the FDIC, the national average for one-year CD rates was 0.75% as of mid-June. Even so, you do have some choices that can help you do a little better than that. Given your situation, it might be helpful to review some basics of buying CDs:

  • Since bank rates change all the time, you can't judge current CD rates by the rate on the CD that is rolling over. A year ago your 1.25% would have been about average. Now, it would be much better than average.
  • Consider whether a longer-term CD might be right for you. One option you have that could raise your CD rate would be to choose a longer-term CD. This may be appropriate if you don't have any specific need for that $5,000 in the next few years, since most CDs charge a penalty for early withdrawals. Longer-term CD rates are typically higher, but keep in mind that if bank rates rise, you will be locked into your rate for the duration of the CD.
  • Shop around for the best CD rates in the category you choose. Once you decide on the length of the CD you want, shop on MoneyRates.com for the highest CD rates.
  • Be sure to bank with an FDIC-insured institution. Visit the FDIC's "Bank Find" page to check.

Got a financial question about saving, investing, or banking? MoneyRates.com invites you to submit your question to our "Ask the Expert" feature. Just go to our home page and look for the "Ask the Expert" box on the lower left.

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