Savers looking to get a little extra boost and lock in a yield for a set period of time often look into certificates of deposit (CDs). A CD can help you work toward your savings goals, whether they’re long-term or short-term.
In general, CD yields are based on the federal funds rate set by the Federal Reserve. However, once you lock in a yield, you can expect it to be consistent for the entire term of the CD — even if rates fall.
Here’s what you need to know about using a 6-month CD to your advantage.
What is a 6-month CD?
Anytime you deposit into a CD, you promise to leave the money there for a set period of time. When you get a 6-month CD, the money remains in the deposit account for six months. Because you’re willing to lock the money away, a bank might be willing to pay you a higher yield on the money.
If you want to know how much interest you could earn on a 6-month CD, try Bankrate’s calculator, which is designed to help you estimate potential earnings. Six months may not be a long time, but it can be useful when it comes to staying on track with your savings goals or setting up an emergency savings ladder.
Finding the best 6-month CD rates
To find the best 6-month CD rates, savers need to answer two questions:
- How much yield can I reasonably expect to earn?
- What direction are interest rates headed?
Rates are trending downward. But if you’re looking for a short-term CD, it’s best to shop around for the best rates.
The lower the CD term length, the less interest you can expect to earn. To find the best 6-month CD rates, evaluate offers from online banks and credit unions. Try to avoid accounts with high fees and minimum deposit requirements.
Who should open a 6-month CD?
Six months is one of the shortest terms available for savers interested in CDs. It’s a product that’s best for consumers with specific short-term goals who are looking for a temporary place to keep money that will be used soon for a specific purpose, like funds for an upcoming wedding, vacation or home down payment. A six-month CD could also be a place to keep cash that you’re hoping to put into a riskier investment vehicle.
The longer the term of your CD, the higher the yield you’ll have at your disposal. That means 6-month CD yields are typically relatively low. Consider whether it makes more sense to keep your money in a more liquid account, like a savings or money market account. That way, you won’t run the risk of losing interest if you need the money you stashed away before the 6-month time clock runs out.
Best 6-month CD details
Best Rate: CommunityWide Federal Credit Union, 2.25% APY, $1,000 minimum deposit
We consider CommunityWide Federal Credit Union to have the best rate because of its high yield and relatively low minimum deposit ($1,000). The credit union offers CDs across most standard terms ranging from six months to five years. Certificates do not automatically renew at the end of the term. According to their website, for an early withdrawal, the penalty is equal to the amount of the withdrawal times the remaining days of the term at the rate of twice the current APR paid on the certificate.
CommunityWide Federal Credit Union was established in 1967 as the West Washington Association Federal Credit Union. Its purpose was to provide services to people of modest means in South Bend, Indiana, where it is currently based. With 11 offices in the Michigan area, the credit union offers its products nationwide. Membership is open to employees, retirees or donor members of dozens of organizations. You can also qualify for membership by joining a group like Habitat for Humanity Helpers.
High Rate: My eBanc, 2.10% APY, $5,000 minimum deposit
My eBanc ranks high on the list of the best 6-month CD rates because of its competitive yield. The minimum deposit isn’t the highest, but it makes the account potentially inaccessible to new savers and bank customers with a small savings cushion. Interest, however, compounds daily and can be accessible to account holders before the CD matures by transferring it to a checking account or check. Interest can also be re-deposited until the end of the term.
Customers have access to CDs, a money market account and an interest-bearing checking account. There’s also a money management tool for consumers looking for help with budgeting and saving.
The online bank is a division of BAC Florida Bank, an FDIC-insured institution established in 1973 and based in Coral Gables, Florida. It’s owned by Grupo Pellas, a business consortium with more than 140 years’ experience operating across 10 countries in various sectors.
Best Credit Union Rate: State Department Federal Credit Union, 2.06% APY, $500 minimum deposit
Through membership at the State Department FCU, it’s possible to secure a high-yield certificate without locking up a large amount of money. The minimum deposit for a standard certificate is just $500 and dividends are compounded daily. Outside of traditional CDs across different terms, there’s the option to open a jumbo and bump-up certificate, which allows account holders to increase their yield before the end of the term.
Based in Alexandria, Virginia, State Department FCU was founded in 1935 and was originally named U.S. Department of State Employees Federal Credit Union. Today it serves more than 84,000 members worldwide.
Best Credit Union Rate for Super Savers: Advancial Federal Credit Union, 2.05% APY, $25,000 deposit to earn yield
Advancial Federal Credit Union consistently offers some of the highest yields available for credit union members interested in short-term share certificates. Terms range from three months to five years and members are rewarded with higher yields for larger deposits.
You’ll need at least $50,000 to earn the top yields at the credit union. But you’ll still earn a relatively impressive yield if you have at least $25,000 to deposit. In addition to regular share certificates, the credit union offers an add-on certificate that allows multiple deposits. The certificate can also potentially be used as collateral to secure a loan.
Advancial has been around since 1937 and is based in Dallas. Membership applications are available online and paper applications can be downloaded and printed. Membership is open to employees and individuals associated with specific groups and organizations in addition to locals who live, work or worship in certain parts of Louisiana. It’s also possible to qualify for membership by joining the Connex Professional Network and paying a $5 fee.
High Rate: Luther Burbank Savings, 2.05% APY, $10,000 minimum deposit
Customers of Luther Burbank Savings have the option of applying for standard CDs across terms ranging from three months to five years. Special CDs are also available, including a 6-month deal that puts the bank on the list of institutions offering the top 6-month CD rates.
Luther Burbank Savings offers business and personal accounts, including multiple checking products and a high-end money market account. The bank, which is based in California, is a privately-owned institution founded in 1983.
Compare CD rates offered by some of the most popular online banks:
- Citizens Access: 1.75% APY; $5,000 minimum deposit to open
- PurePoint Financial: 1.70% APY; $10,000 minimum deposit to open
- Synchrony Bank: 1.00% APY; $2,000 minimum deposit to open
- CIT Bank: 0.72% APY; $1,000 minimum deposit to open
- Barclays Bank: 0.65% APY; no minimum opening deposit
Comparing 6-month CDs vs. other savings vehicles
When considering a 6-month CD, it’s a good idea to compare it to other available accounts and understand when it might be the right choice for you — and when other options might turn out to be a better decision.
6-month CD vs. savings account
Because you’re willing to keep your money in a CD for a set period of time, you usually end up with a higher rate with a CD than a savings account. In fact, you might have a rate that is up to 10 basis points higher on a 6-month CD than on a savings account.
However, savings accounts are easier to access as needed. With a savings account, you won’t face the early withdrawal penalty that comes with tapping your 6-month CD before it matures.
6-month CD vs. money market account
There’s a good chance you’ll get a better yield on a 6-month CD than on a money market account. So, if you’re looking for a better yield in a safe account, it can make sense to use a CD instead of a money market account.
On the other hand, a money market account is much more accessible than a 6-month CD. You might even be able to use a debit card to access the funds in the money market account — something you can’t do with a CD.
6-month CD vs. 1-year CD vs. 5-year CD
Better yields are generally available on CDs with longer maturities. So, if you’re willing to lock up your money for a year — or even up to five years — you could receive a better rate.
However, the advantage of a 6-month CD is that you know you’ll be able to access the money in a shorter time frame. Because a CD typically comes with an early withdrawal penalty, you have to be willing to keep your money in the CD until the end of the term or lose out on some of the interest earnings.
How to make the most of a 6-month CD
A 6-month CD works well with short-term savings goals. If you want to set money aside for a specific purpose, but you’re worried that you’ll be tempted to tap into the funds, a 6-month CD can help make the money harder to get to. You can keep the money safe in an FDIC-insured (or NCUA-insured) account until it’s needed.
You can also make use of a 6-month CD in an emergency fund ladder. By setting up a CD ladder that includes shorter-term CDs, it’s possible to take advantage of slightly higher yields while knowing that a portion of your money will be available for unexpected expenses in the near future.
Maximize the power of compound interest
Anyone struggling to save money could benefit from having a 6-month CD. Because you could face an early withdrawal penalty, you may be less tempted to tap into your savings prematurely.
In addition to comparing rates, pay attention to how frequently interest compounds. You’ll end up with a higher yield if you choose a bank that compounds interest daily versus one where interest compounds on a quarterly basis.
Things to keep in mind with a 6-month CD
Before you get a 6-month CD, it’s important to understand the potential drawbacks. The early withdrawal penalty is probably the biggest issue. If you access your funds before the six months is up, you’ll pay a penalty.
Plus, the yield often isn’t much higher on a 6-month CD than you’d see with a traditional savings account. You can shop around for the highest rates, but you might need to meet deposit minimums in order to take advantage of the best yields.
Carefully consider your options before you move forward with a 6-month CD.
Best 6-month CD rates, November 2019
|CommunityWide Federal Credit Union||2.25%||$1,000|
|State Department Federal Credit Union||2.06%||$500|
|Advancial Federal Credit Union||2.05%||$25,000|
|Luther Burbank Savings||2.05%||$10,000|
|Barclays Bank||0.65%||No Minimum Deposit|