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If I purchase a 12 month CD at 5% interest... then hang on to that CD for four or five years... does it continue to earn the 5%, or will it change every year to whatever the new interest rate is?
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All of the CDs I have ever had, if I allow them to rollover at maturity, reset to whatever the new interest rate is at the time they mature. -
scfr is correct. A 12-month CD means the term and rate are set for 12 months. At the end of the term, if you wish to roll the money over by purchasing another 12-month CD, the rate would change to whatever they are offering at the time. The only way to lock in the rate for 5 years is to purchase a 5-year CD.
By the way, if you know of a 12-month CD paying 5%, please share that info with the rest of us.Steve
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disneysteve, it's available now at WaMu, 12-Months @ 5%.
Thanks for the info.Comment
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WaMu. That makes sense.
You may or may not also need to tell the bank that that's what you want to do: To keep rolling over your CDs until you inform them otherwise....Comment
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Obviously WaMu is having financial difficulties, but since CDs are FDIC insured, would getting one of these CDs at a high rate be a good idea?Comment
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It would depend upon how long you would be able to wait for the money. Most people put money in CD's knowing that they are for longer periods.
If they pay your interest in each month, that becomes part of your CD's worth. If they were to close down before your interest was put in for the month - you wouldn't receive it. I see more and more banks now inputing the interest even in savings accounts every 3 months.
If a new bank takes the other one over, they usually take on the banks former committments to its depositors.Comment
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Dime Direct is offering a 6 month 5% CD, no rumblings about them failing though a WaMu would be FDIC insured anyway.Comment
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