How to Make a CD Ladder Work for You

Learn How Ally Bank CDs Could Work for You

October 2012

Certificates of deposit (CDs) are one of the "old standbys" in banking because they're a simple way to save money. Plus, CD deposits (and all deposits) are insured by the Federal Deposit Insurance Corporation (FDIC) to the maximum allowed by law when you choose a member bank like Ally Bank. A great way to get the most out of your CD savings strategy is to build a CD ladder.

Instead of opening a single, large CD at one fixed rate for the term of the account, you can open several CDs with varying maturity dates. For example, instead of taking $10,000 and putting it into a single five-year CD, you might put:

  • $2,000 in a five-year CD
  • $2,000 in a four-year CD
  • $2,000 in a three-year CD
  • $2000 in a two-year CD
  • $2000 in a one-year CD

Once your first CD (the one-year CD in the example above) reaches maturity, you can take the money plus interest earned and open a new five-year CD. If you continue doing this as each CD reaches maturity, you'll always be no more than a year away from having a CD maturing on the next "rung" of your CD ladder. You can adapt the idea using different amounts and different maturities—all to achieve your own goals.

Using a CD ladder has a few advantages:

  • If CD interest rates rise, a CD ladder can be one way to make sure you can take advantage of the trend. Without a CD ladder, your money might be tied up in a longer-term CD that earns a lower interest rate.
  • If CD interest rates fall, and you'd rather put your money elsewhere, that shorter window to maturity can come in handy.
  • If you want to create a stream of income, you might withdraw only the interest you earn as you reach each rung of your CD ladder, putting the rest into another CD.

So, a CD ladder gives you overall flexibility when it comes to long-term, fixed-rate saving. And if you're looking to build a CD ladder of your own, Ally Bank has some of the most competitive CD rates in the country, as published by Bankrate.com. Plus, the Ally Ten Day Best Rate Guarantee for CDs gives you the best rate we offer for your CD term during the ten days starting with your CD open date, provided you fund your CD within that time.

Get started by checking out the full line of Ally CDs at AllyBank.com or call live, 24/7 customer care at 877-247-ALLY (2559) today.

Ally Bank, Member FDIC

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