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Expert Opinions

William Klinger

Professor of Business, Raritan Valley Community College

What are the biggest/most common mistakes that people make when shopping for certificates of deposit?

Many people do not shop around but stay with the institution where they currently have their money. It is amazing the different rates one can get. And yes, the difference between 4% and 5% is significant. The shopping should include online banks. They often pay higher interest because of their lower costs.

Does it make sense for savers to consider local banks and credit unions in addition to larger financial institutions?

Absolutely. Most CDs are FDIC-insured. Ask the institution if it is FDIC insured, and if it is, you are insured up to $250,000 for your total deposits. Besides good rates, local banks and credit unions often contribute to the community.

Is it a good idea to keep money in a CD right now?

CD rates today are at their highest in the last 15 years. With all the speculation about interest rates going down, it could be a good idea to lock in these high rates. Rather than speculating on what is going to happen, one might consider creating a CD ladder, i.e., buying CDs with staggered maturities. When a CD matures, it can be reinvested at the current rate.

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