The Federal Reserve (“the Fed”) raised interest rates yesterday. That usually means that banks follow suit, raising interest rates in the loans they offer and some investment products, like CDs. I’m going to use this opportunity to change some of my cash investments into CDs at ING Direct. This bank already raised its interest rates on CDs, but it might do so again after September begins, or possibly after Labor Day.
I plan on waiting until after the holiday to lock in any new, higher rates, if ING decides to raise them again. I will take a portion of my emergency fund, currently in an ING Savings Account earning 2.2% interest, and use that money to build a CD ladder. It’s a little less liquid but I could be earning twice as much interest on a portion of that money.
Of course, if I have to pull money out of a CD, there is a penalty of half of the accrued interest. I should be okay if I leave some of the money in the cash savings account. Hopefully, I won’t have to draw from the CDs, but if I do, even with the penalty, I’m earning a good amount of interest— more than I would be if I left the money in a savings account from another bank, such as Wachovia, where my checking account is located.
Updated February 6, 2012 and originally published August 11, 2004. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @flexo on Twitter and visit our Facebook page for more updates.
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Luke Landes founded Consumerism Commentary in 2003 and has been building online communities since 1990. Luke, also known as Flexo, has contributed to PC World Magazine, US News, Forbes, and other publications. 
