How to make a CD ladder work for you

Learn How Ally Bank CDs Could Work Hard 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. Deposits are also insured by the Federal Deposit Insurance Corporation (FDIC) to the maximum allowed by law when you choose an FDIC-member bank such as Ally Bank. But their simplicity sometimes belies sophistication when you begin to understand the power of a CD ladder strategy.

A CD ladder is simply a way to use several CDs together in order to achieve some advantages over a single CD by itself. Instead of opening a single, large CD at one fixed rate for the term of the account, using a CD ladder works like this:

  1. Divide your initial deposit into smaller sums.
  2. Divide your accounts into different terms.
  3. As each CD matures, roll it into a new one.

So, for example, instead of taking $10,000 and putting it into a five-year CD, you might:

  1. Divide the sum into five equal portions of $2,000 each
  2. Open one CD each:
    • $2,000 in a five-year CD
    • $2,000 in a four-year CD
    • $2,000 in a three-year CD
    • And so on

Then, once your first CD (the one-year CD) reaches maturity, you might 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. This is just one example. You could adapt the idea using different amounts and different maturities — all to achieve different results.

Using a CD ladder gives you a few advantages depending on the circumstances:

  • 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 how you want to handle 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 interest rates in the country, as published at

At Ally Bank, we don't offer great rates to only a select few who make a huge deposit. We offer them to everybody. Plus, the Ally Bank Ten Day Best Rate Guarantee for CDs means that when you fund your CD within 10 days of opening or renewing your CD, you automatically get the best rate we offer during those 10 days starting with your open or maturity date.

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

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