An Easy Way to Boost Your CD Rate

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Are the current interest rates on 12-month certificates of deposit not doing it for you? Try adding a month.

While average interest rates on standard 12-month CDs are still hovering around 0.4%, some banking institutions offer a significantly higher rate when adding just a month to the term.

MoreBank of Philadelphia, for instance, is offering a 12-month CD with a 0.75% APY – a bit on the high side, but nothing out of the ordinary. Yet consumers willing to tack on another month to the term can double their annual percentage yield to an exceptional 1.5% according to RateWatch (though they’ll need a minimum deposit of $5,000 versus $2,500 for the standard 12-month option). While most banks won’t offer a rate that high, there are still dozens of banks and credit unions that will give you a significant bump for tacking on the extra month. 

As the great disparity between the 12- and 13-month rates might indicate, this is not a simple matter of getting a better rate because you’re willing to part with your money for a bit longer. Indeed, Citibank offers a 13-month CD with a slightly higher rate than its 24-month CD, and some banks even offer 11-month CDs with higher rates than their 12-month counterparts. So what is so special about that one month?

It’s all about the timing, says Michael Moebs, CEO of the economics consulting firm Moebs $ervices. “CD activity is very high in October,” he says, since many people roll over six-month CDs that they opened with April tax refunds. “If [the banks] can do a 13-month CD, they push it into next November, and you’re not going to have the same level of competition.” Less competition at the time of maturity means that banks can afford to lower interest rates a bit, forcing consumers who wish to roll over their CDs to do so when rates are more favorable to the bank.

That means that if you’re looking to score a 13-month CD with a beefed-up rate, act fast while banks still offer them. Many of the banks are small- to medium-sized institutions, like the Hampshire First Bank, which has five branches in New Hampshire and offers a 1.35% APY on a 13-month CD. Other standouts include the Gateway Community Federal Credit Union of Missoula, Mont., which advertises a 13-month CD with a 1.6% APY, half a percentage point higher than their 12-month CD. And if you’re more comfortable with a larger bank – understandable, considering that some of the small banks offering these rates are not FDIC insured – you can go with Citibank, whose 13-month CD has a 0.7% APY, compared to 0.55% for a 12-month term.

Many of these CDs are not publicized on the banks’ websites, so ask around and see if any special deals exist at your local branches. And if you do find such a certificate, do your homework. Confirm that the bank is FDIC insured, and if it’s not, ask yourself whether the rate is high enough to make up for the lack of security. And always check the fine print – see what minimums apply, check that the CD isn’t callable (that is, that the issuing bank can’t revoke the CD agreement after a given period), and make sure it’s not scheduled to automatically roll over into a CD with a less-favorable rate.

Still, if all the details look good, don’t miss out on the opportunity to bump up your rate while only adding a month to the term. You may get your money a bit later, but there will be more of it.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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