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Where can I find the best 6-month CD rates?

commercial-paper-for-individual-investorsQ: I have $7,000 that I can deposit and not touch for six months. How can I earn the most interest on that money in the meantime, and how much interest will I earn?

A: Banks generally offer higher interest rates on CDs in return for your commitment to deposit money for a specified period of time. So the fact that you can leave this money untouched for a period of six months means that a certificate of deposit (CD) may be the best type of account for your needs.

While a CD is a likely way for you to earn the most interest on your money over the next six months, be advised that not all CD rates are created equal. Knowing what to look for will help you find the best CD rates.

6-month CD rates today

According to the FDIC, current CD rates range from an average annual rate of 0.09 percent for 1-month CDs to 1.07 percent for 5-year CDs. The national average for 6-month CD rates is 0.24 percent.

At a 0.24 percent annual interest rate, you would earn about $8.39 on a $7,000 deposit over the course of six months. That's better than nothing, but you could do much better because the best CD rates available today are considerably higher than the average.

MoneyRates.com has a CD rate-finder tool that allows you to search CDs according to the size of your deposit and the term length you desire. A quick search with this tool found several CDs paying between 1.50 and 2.00 percent -- much better than the 0.24 national average.

As an example of how much of a difference this would make to your deposit, a 1.50 percent annual rate would earn your $7,000 deposit about $52.30 in six months, as opposed to the $8.39 you would earn with an average rate. Clearly, it pays to shop for higher rates.

How to get the best CD rates

The difference between the best CD rates and average rates is especially wide at this time, so it is wise to make an extra effort to find the best rates. Here are some tips for getting a good rate:

  1. Decide if six months is the right time period
    Your question mentions not needing to touch the money for six months. Make sure you are certain of that, because breaking into a CD before its term is up will typically entail paying a penalty. Then, if you are sure you can go six months without accessing the money, think about whether you might be able to commit for an even longer period. CD interest rates are generally higher for longer term commitments, so it pays if you can afford to opt for a longer term CD.

  2. Consider laddering CDs
    If you think you might need some but not all of your $7,000 once the initial six-month period expires, consider splitting your investment into more than one investment. You could have enough invested in a 6-month CD to cover your needs at that time, while investing the remainder in a longer CD (or multiple longer CDs) to earn higher interest rates. This is an example of CD laddering, which can be done in many different ways.

  3. Compare CD rates for the term lengths you want
    Remember, the best CD rates are considerably higher than average rates, so don't settle for average. Once you have decided on the size and length of the CDs you want, use the MoneyRates CD rate-finder tool to see which banks are offering the best rates for your needs.

Building wealth is a step-by-step process, and you are taking an important step by looking for the best interest rates for the $7,000 you've accumulated. It makes sense to have that money working hard for you while you work hard to earn additional savings.

More resources

Need more information? Read the Complete guide to setting up a CD ladder

5 moves to optimize your CD ladder investments

Using CDs for college savings

5 ways to avoid early withdrawal penalties on your CD

Calculator -- Compound interest calculator

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