What is a 6-month CD?
A six-month CD is a type of savings account that helps your money grow faster without tying it up for years. However, there’s a catch. You can’t touch that money for six months. In exchange for your patience, the best CDs reward you with a higher interest rate than you would typically get from a regular savings account.
Who benefits most from a six-month CD?
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Goal-oriented savers: Whether it’s a down payment, a vacation fund or an emergency cushion, a six-month CD is suited to those with a clear near-future savings target.
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The “just in case” crowd: If you want the security of extra cash set aside for unexpected expenses but know you might need it within the next six months, a CD is a smart compromise. The shorter term reduces the risk of incurring hefty penalties if you do need to withdraw cash early.
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Impulse buyers: A six-month CD can help you resist those tempting but unnecessary purchases by making your savings a little less accessible.
How do 6-month CD rates work?
Let’s demystify how a CD impacts your hard-earned money:
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APY: The annual percentage yield gives you an idea of how much your money could grow over a year. With a six-month CD, you’ll earn half of that APY.
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Compounding frequency: Daily compounding means your interest starts earning its own interest sooner, helping your savings grow slightly faster.
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Maturity date: This is the end of your six-month term. Typically, you’ll have options such as withdrawing your funds plus interest, rolling over your balance into a new CD or letting it sit at the then-current rate.
Withdrawing funds before the maturity date usually comes with a penalty from the bank. These penalties will offset some or all of the interest earned, so be very careful. A six-month CD is best suited for money you’re confident you won’t need within that time frame.
6-month CD rates today
Past interest rate hikes from the Federal Reserve led to higher CD rates, but recent stabilization could see CD rates drop in the coming months. In a poll of 100 economists by Reuters, the majority said the Fed will wait until September 2024 to cut interest rates, which have held steady at 5.25% and 5.50% for a while.
As such, now’s the time to lock in high CD yields. If the Fed cuts interest rates, CD rates will likely follow. Unless your CD has a fixed APY, your CD’s interest rate will drop. If banks earn less interest on loans, they’ll have less money to reward savers via high-yield accounts such as CDs.
Pros and cons of 6-month CDs
Considering a 6-month CD? Here’s a Breakdown of the pros and cons.
How much can you earn with a 6-month CD?
APY can be somewhat misleading when it comes to CDs with terms shorter than a year. Keep in mind, APY is an annual percentage, and you’re looking at a six-month investment.
Here’s a quick guide to what would accrue if you invested $3,000 over six months with our banks’ CDs:
| Bank Name |
APY |
6-month CD earnings on $3,000 |
| Barclays |
5% |
$75.00 |
| BMO Alto |
5.15% |
$77.25 |
| Marcus |
4.8% |
$72.00 |
| PenFed |
3% |
$45.00 |
| Quontic |
5.05% |
$75.75 |
| Sallie Mae |
4.8% |
$72.00 |
| Synchrony |
4.8% |
$72.00 |
*Figures are correct as of May 2024.
How to choose the best 6-month CD rates
Choosing the right six-month CD can be a smart way to grow your savings while keeping money accessible in the near future. Here are the most important factors to look at when comparing different options.
APY
APY is the interest rate you’ll earn over a full year, expressed as a percentage. It’s essentially the growth rate of your savings in the CD. There’s a catch with six-month CDs, though. Unlike one-year CDs, as your money is locked up for half a year, you only earn half of the advertised APY.
For example, Barclays CD offers a 5% APY on a six-month CD. Over those six months, you’d actually earn around 2.5% interest on your deposit.
Early withdrawal penalty
An early withdrawal penalty is a fee your bank charges if you withdraw your money from the CD before the maturity date of six months. Penalties vary, but they always offset any interest you earn, so avoiding them is paramount.
Imagine you open a six-month CD with a $1,000 deposit and a 3% early withdrawal penalty. If you needed the money after three months and withdrew it, the bank might subtract three months’ worth of interest, around $15, as a penalty.
Compounding schedule
The compounding schedule reflects how often interest gets added back to your principal balance.
With daily compounding APY, your interest is calculated and added to your balance each day. This means you earn interest on your interest, creating a snowball effect. Weekly or monthly compounding are also good options, while simple interest, calculated once at maturity, is less advantageous.
The impact of compounding frequency is more noticeable over longer terms, but can still give your six-month CD earnings a small boost.
Safety
CDs offered by FDIC-insured banks and NCUA-insured credit unions are protected against bank failure, up to $250,000 per depositor, per insured institution. This guarantees you’ll get your money back, even if the bank encounters financial difficulties.
Peace of mind matters. Always confirm that your chosen bank or credit union is FDIC or NCUA-insured before opening a CD.
Minimum deposit requirement
Many CDs require a minimum deposit to open the account, but some have lower or even no minimum deposit requirements such as the Synchrony CD, making them more accessible. If you have several hundred dollars to save, look for a CD with a low or no minimum deposit requirement.
CD term
CD term is the length of time your money is locked up in the CD. While six-month CDs are a common option, you can also get three-month CDs or CDs with terms of several years.
Generally, CDs with longer terms offer higher APYs. That said, a six-month CD strikes a good balance between getting a better return than a regular savings account and making your money accessible soon.
How to open a 6-month CD
Opening a six-month CD is a straightforward process. Here’s what you can expect:
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Choose a bank or credit union
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Gather personal information, including personal details, proof of identity and your funding source
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Open the account
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Fund your CD
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Confirmation and tracking
Is a 6-month CD worth it?
A six-month CD can be a smart financial move if:
- You have short-term savings goals, such as a vacation or deposit on a big-ticket item
- You’re conservative with your investments and like a near-certain guarantee of returns
- You’re certain you won’t need the cash within six months
Alternatives to a 6-month CD
Here are a couple of alternative savings options to consider, along with how interest rates typically stack up.
High-yield savings accounts
This type of savings account typically offers higher interest rates than a standard savings account. However, even the best high-yield savings accounts have APYs that are variable and could tank at any time.
Money market accounts
The best money market accounts provide higher-than-average APYs because banks use the funds for highly liquid, short-term and low-risk assets. The downside of a money market vs a savings account is that they usually come with higher minimum balance requirements.
