I Just Discovered This Unwanted Surprise in My Bank Account. Here's How I Could've Avoided It
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It's hard to complain about the interest rates savings accounts are paying today. For virtually no risk, you can easily score upward of 4.00% in a high-yield savings account if you shop around. And last year, when I had a bit of extra money on my hands, that's what I did.I do most of my banking at a certain institution where I also hold a checking account. And while my bank's rates aren't the best ones out there, they're pretty competitive. So I'm sometimes willing to accept a tiny bit less interest for the convenience of using a bank I'm familiar with and whose platform I find easy to navigate.But last year, I was truly on a mission to find the best savings account rate. And sure enough, after digging around, I found a savings account that would pay me over 5.00% on the funds I was looking to deposit.Recently, though, I checked up on that account and saw that my savings account's APY had fallen. And while I'm still earning a nice amount of interest, I'm no longer over the 5.00% mark. Not only am I frustrated by this change, but I'm sort of mad at myself, because it's a situation I easily could've avoided.The surefire way to guarantee yourself the interest rate you wantThe reality is that the interest rate I'm getting on my savings now is still very competitive, so I really shouldn't complain. But it bugs me that banks can simply change your APY without warning.It also bugs me that I didn't just put the money I had available last year into a CD. The reason I didn't was because CDs require you to keep your money in the bank for a preset period of time. And cashing out a CD before it comes due can result in a costly penalty, the exact amount of which will depend on the bank you use.Because I wanted the flexibility to withdraw these funds without risking a penalty, I opted for a savings account over a CD. In reality, here we are, one year later, with that deposit fully intact.Had I opened a 12-month CD, I would've locked in a rate at over 5.00% just like the rate on my savings I started out with. Only that rate would've been guaranteed, and I'd still be earning over 5.00% on my money instead of less.Consider a CD -- but only under the right circumstancesThe only way to lock in a guaranteed interest rate on your money is to choose a CD. The reason I didn't do so last year was because I wasn't sure if I'd be using the cash for a big trip this year versus postponing that itinerary.But it's not a good time to take a longer trip, so I won't be needing the money this summer. And to be fair, I didn't know that last year, which is why I didn't open a CD in the first place. I guess I also shouldn't be kicking myself too much for choosing a savings account, since there was a possibility of me needing the money.But if you have a situation where you're sure you won't need access to the money for the duration of your CD's term and you have a separate emergency fund with enough money to cover at least three months of bills, then opening a CD could make a lot of sense right now, what with rates being so strong.In fact, it's an especially good time to lock in a CD because there are talks of interest rate cuts happening at some point this year. If you get ahead of those, you can set yourself up with not only a guaranteed return on your money, but a stronger one than what you might lock in six months down the line.Alert: highest cash back card we've seen now has 0% intro APR until 2025
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