3 Ways to Maximize Your Earnings from CDs

If you're investing in certificates of deposit (CDs), it's smart to try to maximize your returns. Fortunately, this doesn't have to be hard. Here are three really simple steps you can take to make sure you're getting the best yields possible from your investment.

1. Shop around

The best thing you can do to make sure you are earning the highest yields possible is to compare CD offers from different sources before you buy. The FDIC reports the national average on CDs as:

• 1.53% for 3-month CDs
• 1.79% for 6-month CDs
• 1.80% for 12-month CDs
• 1.52% for 24-month CDs
• 1.42% for 36-month CDs
• 1.33% for 48-month CDs
• 1.50% for 60-month CDs

However, if you buy a CD from a bank offering anything close to those rates, you're going to earn far less than you should. That's because there are tons of high-yield CDs of every term length that provide much better yields. In fact, The Ascent's list of the best 6-month CD rates shows many CDs paying upward of 5.00%.

If you don't shop around, you could miss out on the most competitive offers. Don't make that mistake. See what rates credit unions and online banks advertise to customers so you can get the best yields.

Our Picks for the Best High-Yield Savings Accounts of 2024

Capital One 360 Performance Savings APY 4.25% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of April 11, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings Member FDIC.	APY 4.25% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of April 11, 2024. Rates are subject to change at any time before or after account opening.	Min. to earn $0
American Express® High Yield Savings APY 4.25% Rate info 4.25% annual percentage yield as of July 1, 2024 Min. to earn $1 Open Account for American Express® High Yield Savings Member FDIC.	APY 4.25% Rate info 4.25% annual percentage yield as of July 1, 2024	Min. to earn $1
Citizens Access® Savings APY 4.50% Min. to earn $0.01 Open Account for Citizens Access® Savings Member FDIC.	APY 4.50%	Min. to earn $0.01

RELATED: Best High-Yield Savings Accounts

2. Look for a CD offering daily compounding

If you want to earn the most interest, you should look for another key feature when you're buying a CD: daily compounding.

When a CD compounds daily, the interest that accumulated on that CD over the course of a day is added to that CD at the end of the day. This means the next day, you're paid interest on a higher balance. A CD that compounds interest daily will make more money than one that compounds monthly or annually because the interest is not added on until the end of the month or year.

3. Be careful about CDs that auto-renew

Finally, you should look at what your bank's policy is regarding auto-renewing your CD. When your CD matures, sometimes banks just put it into another CD by default unless you take action to stop that from happening. In some cases, the new CD that your bank rolls your money into pays a much lower rate than the CD you purchased initially.

This doesn't necessarily mean you shouldn't buy that CD at all -- but if you do, you need to make a note on your calendar and set yourself a phone reminder. That way, you can take action before the money you have invested gets automatically moved into a CD with a lower yield at the end of the term.

If you pay attention to these three factors when you are buying certificates of deposit, you can make sure you're maximizing your earnings. You work hard for your money, and CDs are a great place to put it right now -- so you may as well make the most of them and get the very best possible returns available.