A few months ago, I wrote about a New CD Strategy for getting a 1.5% APY return on my savings. My plan involved opening an 11-month No Penalty CD at Ally Bank. As I may have predicted, CD rates have risen since my post. Ally is now offering 1.75% APY for the same CD.
The main risk of a long-term CDs is the chance that interest rates will rise and you’re committed to the lower rate until the CD matures. But the no penalty CD eliminates this risk.
At Ally, you cannot directly convert an old CD into a new one at the higher rate. As a result, I first opened a new CD at the higher rate. I then transferred money into the new CD at the higher rate. Withdrawals from the existing CD carry no penalty.
Disclaimer: The example provided here is for illustrative purposes only. I am not providing tax or investment advice.