When talking about various CD rates out there, many people want to know just how long they should lock down their money in a CD. If you know anything about the market place, then you know that there are many different options, including long term CD rates and short-term rates, as well. How long you should lock your money down depends upon your personal investing needs and how your situation is playing out right now. For those people with extended liquidity, it might be a good idea to go with long term CD rates. For people who are not all that liquid, you might not want to commit to a long-term CD right now.

Starting at a year
Though three-month and six-month CD rates are available, you should start with the one-year rates that are available from almost all major lending institutions. The idea is to make sure that you’re getting some value out of your CD. When you commit to locking down your money for a year, you can earn anywhere from 1.5% to 1.8% with your CD rates. A year makes a lot of sense right now, because you won’t have to lock in to interest rates that might be set to go up in the current months.

Understanding the economy right now
In order to truly get the most value out of your CD, you need to understand how CD rates right now stand in comparison to the future of the market. Anyone who hasn’t been hiding under a rock over the last few years should know that right now, things are pretty ugly. Banks are offering rates that are somewhat low by comparison, which means you might be better off locking in a long term CD later on. For instance, you will have a hard time finding a 5-year CD right now that pays higher than 3.55% APR. Most rates from major banks like Wells Fargo and Merrill Lynch are closer to 3.0%, which are nice CD rates, but they should go up as the economy gets better.

Locking down your money for the short run makes a lot of sense right now, since it will give you a chance to reevaluate your options in the coming months. When you get the payout from your current CD, you can see where the market stands again.