Financial Institutions Offer CDs With Odd Maturity Dates

BY STEVE DINNEN

A flyer arrived in the mail touting the 1.80 percent interest rate that a local credit union will pay on a 16-month Certificate of Deposit. Stretch it to 35 months and you’ll earn 2.4 percent.

Why the odd months? Why not 12 months, which is standard, or 24 or 36 months?

They have their reasons. First off, this allows the bank or credit union to differentiate these special CDs from their normal lineup. And the folks at DepositAccounts.com say it “helps alleviate the problem that can occur when a bank suddenly offers, say, a special 12-month rate to new customers that is much better than the prior 12-month rate that [was paid to] existing customers.”

These relatively high rates are “teasers” – meant to entice your funds into the institution. At maturity they often roll over into one of the regular 12- or 24-month CDs, which typically pay a way lower rate of return.

Are you laddering your CDs —buying them at staggered intervals so that they come due in January, then February, then March, etc., to produce an income stream? Some people think the odd maturity dates untidy that approach. Others, however, see them as a way to fill in any gaps in ladders.

Whichever you choose, keep maturities short so that you can take advantage of rates once they eventually rise.