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Question 8

Certificates of deposit (CDs) are time-deposit accounts that pay a fixed rate for a fixed term in exchange for limiting withdrawals before maturity (which often carry penalties). A common tactic to keep money earning higher CD rates while maintaining periodic access is called a CD ladder: instead of locking everything into a single long-term CD, you buy several CDs of staggered maturities (for example, 3, 6, 9, and 12 months). As each CD matures you can spend, reinvest at current rates, or roll it into a new long-term CD — this gives you both higher average returns and regular liquidity events. Laddering is a predictable way to manage interest-rate risk while still benefiting from higher-term yields.

What is a “CD ladder”?

Did You Also Know...

By Wise Wallet

Keeping a small balance doesn’t improve your credit score—on-time payments and low credit utilization do.