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Ask the Expert: Improving CD Rates

May 24, 2010

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

Q. I am getting 4% on a 3-year CD worth $200,000. Is there a safe way to improve on what I'm doing?

- John

A. First of all, congratulations on having locked up 4% for 3 years. It may not have seemed like a big deal at the time, but nowadays you are unlikely to find anything close to 4% CD rates. Meanwhile, by staying conservative you missed out on a particularly volatile period for stocks. You've also benefited from the increase in the FDIC insurance limit from $100,000 to $250,000 -- though be advised this is scheduled to revert back to $100,000 on January 1st, 2014. You'll want to keep that in mind when it comes time roll over your CD.

Unless bank rates rates rise considerably between now and when your CD matures, you may be in for a bit of a shock if you try to roll over your CD. 3-year CD rates now average just 1.55%. However, as safe investments go, there really isn't a clear-cut alternative, since Treasury bonds of a similar maturity are yielding even less.

The best advice, then, is to shop carefully when it comes time to roll over your CD. Based on the CD rates listed on MoneyRates.com, you should be able to do about a full percentage point better than the national average for 3-year CD rates. Also, given the size of your CD, be sure to inquire about any special rates offered for "jumbo" CDs, which are CDs in excess of $100,000.

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

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