Does CD rates lock when opening account?

Submitted by PandaKing550 t3_zzw04b in personalfinance

I opened couple of cds with discover last year for a year term. Looking back I could of sworn the interest rate was good. Now looking at it there's 1.5 and 1.8% currently which is waaay lower than my current savings rate. I thought CD rates don't change? Or was I just unlucky that savings acc rate changed for the better?

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DeluxeXL t1_j2dv93z wrote

> Does CD rates lock when opening account?

Yes.

> I opened couple of cds with discover last year for a year term. Looking back I could of sworn the interest rate was good.

Because interest rates only really started going up in March of 2022. They were pretty low before.

  • March 2020: Interest rate tanked, stayed pretty much on the floor.
  • March 2022: Interest rate started increasing
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PandaKing550 OP t1_j2dvjal wrote

When researching to confirm I thought APY was the percent of how much I would get as interest into my account. But online says the APY is how much interest would be charged to me if I were to withdraw early. So say a 12m is offering 4.15% APY I thought that's the amount I'd get back so 100->104.15 end of month VS it being if I need to withdraw it'll be 100-> 95.85 I'd get back

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DeluxeXL t1_j2dx0zb wrote

> When researching to confirm I thought APY was the percent of how much I would get as interest into my account.

Correct, if you are able to hold continuously for 365 or 366 days.

> But online says the APY is how much interest would be charged to me if I were to withdraw early.

Wrong.

> So say a 12m is offering 4.15% APY I thought that's the amount I'd get back so 100->104.15 end of month

$104.15 after the 365 days (1 year), yes.

> it being if I need to withdraw it'll be 100-> 95.85 I'd get back

No. Early withdrawal penalty varies from CD to CD. Read the terms for that specific CD. Sometimes it's 3-month interest, sometimes it's 6 months. You will also still keep the interest you earned so far. It's just that the penalty might be greater than the interest you earn.

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PandaKing550 OP t1_j2dz2l9 wrote

Thanks for the clarification initial thought about apy rate being the rate I earned at end of term is correct

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NorthofDakota t1_j2dxbxy wrote

APY is the annual yield, so $100 at 4.15% will yield $4.15/12 per month ~$0.36/month. The penalty for breaking a CD early will depend on the bank you purchased it from. I don't think you should lose any principle, but will likely lose a certain number of months worth of interest.

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Werewolfdad t1_j2duwtf wrote

Cd rates were that low last year.

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93195 t1_j2e3fir wrote

Last year 1.5% and 1.8% was good. It obviously isn’t now. That’s the chance you take.

You can generally terminate early if willing to forfeit a few months interest. Figure out what the cancellation penalty is and if cancelling makes sense.

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PandaKing550 OP t1_j2ek9al wrote

I'll prob cancel need to see what penalty is maybe 3-6m interest which is fie if it auto does it for me

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