Certificates of deposit (CDs) can be an important part of a solid financial portfolio, and understanding how CDs work is essential to making the most of your money. Take a look at the following terms associated with CDs.
1. Maturity Date. The maturity date is the date the term of your CD ends and you can withdraw your principal and interest penalty free. CDs can have term lengths of anywhere from a few months to several years. For example, a 5-year CD opened today has a maturity date five years from today. On that date, you can withdraw, transfer or redeposit the funds.
2. Laddering. Combining long- and short-term CDs is known as CD laddering. For example, rather than put $40,000 into a four-year CD, you might put $10,000 into four separate CDs—a one-year, an eighteen-month, a three-year and a four-year. When the first CD matures, you reinvest it in a four-year CD, repeating the process with the others as they become due. This CD rotation provides you with regular access to your money and allows you to take advantage of current CD interest rates.
3. Early withdrawal penalty. Most CDs have an early withdrawal penalty that you pay if you withdraw your funds before the CD matures. One exception is the Ally Bank 11-month No Penalty CD, which allows you to withdraw all your money, including interest earned, without penalty, any time after the first six days following the date you fund your account.
Ally Bank offers CDs in a wide range of terms to help you reach your savings goals. There's no minimum deposit to open and all of our CDs are backed by the Ally Bank Ten Day Best Rate Guarantee. Whether you're interested in our High Yield CD, No Penalty CD or Raise Your Rate CD, you'll get rates that are among the most competitive in the country and customer service that makes managing your CDs as simple as possible. Learn more at Ally.com or call live, 24/7 customer care at 877-247-ALLY (2559) today.