Have you added our competitive CDs to your savings mix this year?
Did you know that a Delta Community Certificate of Deposit (CD) allows your money to grow at a higher interest rate than a standard savings account? Unlike a savings or money market, CDs are a term-based deposit account—they grow interest for a specific amount of time—with a locked-in interest rate that won’t change during the CD’s term. When the term is complete, the certificate of deposit will mature and can be rolled into another CD or converted into cash.
CDs are typically available for terms of different lengths. For example, Delta Community offers 6-, 12-, 24-, 36- and 60-month CDs, and we offer competitive rates on those products. Details on our CDs are available in this disclosure supplement. Whether the interest rate environment is rising, falling or stable during a time period, the rate assigned to your CD is fixed for its term. Because there is no certainty as to when rates will fluctuate or in which direction, there is a strategy that can hedge your individual CD holdings to optimize your earnings on those CDs. This strategy is called CD laddering and is explained in more detail below with an example of how it might work for a member.
Here is how the CD ladder savings strategy might be able to optimize your earnings
Using a ladder strategy, the money from each maturing CD is put into a new CD with a term equal to the longest-term CD. This strategy could allow you to take advantage of higher rates that sometimes can be associated with longer-term CDs, while maintaining regular access to your funds. If you need to take the cash from a matured CD, it will be available.
Here is just one hypothetical example to explain the CD laddering strategy and how it could operate with CDs offered by Delta Community:
- In this example, you would create a CD ladder by opening several CDs with different maturity terms; specifically, you open two 12-month CDs, one 24-month CD, one 36-month CD and one 60-month CD.
- When the two 12-month CDs mature, the funds from one are rolled into a new 60-month CD and the funds from the other is rolled into a 36-month CD (to set up the purchase of a 60-month CD during the fourth year). When the 24-month CD matures, the funds at maturity are used to purchase another 60-month CD. At the 3rd year, funds from the 36-month CD at maturity are used to purchase a 60-month CD. Lastly, at the fourth year, the maturing funds from the original 12-month CD that was rolled into a 36-month CD is used to purchase a 60-month CD.
- Now you will have five 60-month CDs purchased, likely with different interest rates, and each with a fixed rate for the entire term of the respective 60-month CD. Additionally, the CD maturities are evenly spaced 12 months apart, giving you the opportunity to access liquidity (turning a CD back into available cash) by cashing in any of these CDs when they mature in yearly increments. When a CD matures each year (unless cashed in), it is rolled over into another 60-month CD to keep this laddering in effect.
- A CD ladder can also be structured around shorter terms, such as only using 6- or 12-month CDs.
- You could create multiple CD ladders at the same time to further maximize locked-in interest rates.
- Because of fixed interest rates, using a CD ladder will let you know accurately how much money you will have when each CD matures, since there is no variability or uncertainty.
Do you want to try out how different CD ladders would work for you? Delta Community has a CD ladder calculator to help determine how rolling over CDs could help with your savings goals. If you have questions and want to learn more about CDs, then start with more information on our website.
Here is some more information about our CDs to help you better understand what these savings products offer
- CDs earn interest, which can be added to the principal of the CD balance and compounded, or the interest can be transferred monthly to your Checking, Savings, Additional Savings or a Money Market Account.
- As the above section explained, Delta Community offers CDs at various terms for those who may be interested in either short- or long-term savings options.
- Joint ownership and beneficiaries are permitted on our CD accounts.
- If your CD is scheduled to renew at maturity, there is a 10-day grace period after it renews to cancel the renewal and close the CD without incurring a penalty free.
- CDs are federally insured by the National Credit Union Administration (NCUA), a federal government agency. The basic insurance amount is $250,000 per individual account holder. Share insurance coverage can be increased if certain conditions are met; to learn more about coverage, please contact us for more details or view the NCUA’s insurance calculator.
What about other advice on savings and lowering some costs? We have some ideas to share
For more information that may help you manage your finances, look into the free Delta Community Financial Education Center webinars on a range of prudent and useful financial topics. Please visit the Financial Education Center's Events & Seminars page to register for its on-demand webinars.
The Credit Union’s blog has more information that could be educational and helpful:
Are you thinking that you may need more BALANCE™ in your finances?
BALANCE™ is a financial education and counseling organization that offers free services to Delta Community members. Some of its services include credit report reviews, debt management, and information on budgeting, money management and home buying.
Visit the BALANCE™ website to learn about their education and assistance programs. Members can also speak with certified credit and housing counselors to get personalized guidance.
Want to connect with a Financial Coach about your specific situation? Chat online, e-mail, or call 1-888-456-2227 to speak with a Financial Coach today.
Note that the services offered through BALANCE™ are separate and distinct from any business conducted with Delta Community and are not guaranteed by, nor are they obligations of, the Credit Union.
