How To Create a CD Ladder With Capital One
Written by
Kristopher Kane
Edited by
Lindsey Kloosterman
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Making the most of your savings and investments can seem challenging, especially if you don’t like taking unnecessary risks. One tried-and-true method to consider is the CD ladder strategy. This approach not only helps manage exposure to changing financial markets but also provides the potential for higher returns compared to standard savings accounts and greater flexibility than a single long-term CD investment strategy.
Capital One makes it easy with a variety of flexible CD options. But what exactly is a CD ladder, and how can you build your own? Keep reading to learn how to climb to easy, reliable returns.
Understanding CD Laddering
What is a CD ladder? Laddering is a strategic way of spreading your investments across multiple certificate of deposit accounts with staggered maturity dates. This method allows you to benefit from higher interest rates typical of longer-term CDs while also enjoying the regular liquidity of short-term ones.
When you’re ready to build your CD ladder, the process is simple and straightforward — here are three easy steps to follow.
Step 1: Divide Your Investment
Decide how much you’re willing to invest in Capital One CDs. Then, instead of putting all your money into a single CD, divide it into equal parts to invest in multiple CDs with different term lengths.
Step 2: Stagger Maturity Dates
Choose various term lengths for your Capital One CD accounts. A good strategy is setting your maturity dates at one, two, three or more years. Staggering the maturity dates of your CDs this way allows a portion of your investment to mature each year. You can reinvest, with potentially higher rates, or access the funds as cash on hand if needed.
Step 3: Reinvest Maturing CDs
As each CD matures, you have a choice: reinvest the funds into a new, longer-term CD to maintain the ladder or withdraw the cash if it’s needed. Of course, you can invest all of the proceeds of a CD, only your initial investment amount, or a combination of the two. This flexibility is part of what makes CD ladders such an appealing savings strategy.
Advantages of a CD Ladder
Is CD laddering a good idea? Building a CD ladder with your bank provides you with a number of benefits, including the following.
Interest Rate Advantages
As in any savings strategy, interest rates play a crucial role. A key advantage of a CD ladder is that it helps you manage the risk of fluctuating interest rates. In a rising rate environment, as each CD matures, it can be reinvested at a newer, higher rate.
Accessibility of Funds
A CD ladder also offers accessibility, similar to that of a checking account. Unlike locking all your funds in a single long-term CD, laddering ensures that you have regular access to parts of your investment at set intervals, which could be yearly or more frequently, depending on how you structure it.
Setting Up Your Capital One CD Ladder
Capital One provides a seamless process for setting up your CD ladder, combining efficiency with competitive interest rates. Here’s how you can set up a CD ladder with Capital One:
- Select your CDs: Capital One offers a range of CD terms to choose from, each with a fixed rate of return. Select the terms that best fit your laddering strategy.
- Allocate your funds: Once you’ve selected your CD terms, it’s as simple as allocating specific amounts of money to each. With Capital One, opening a CD account is straightforward. You can open a CD account either online or through the Capital One mobile app.
- Automate your laddering: Capital One offers tools to help keep your laddering strategy on track. Automatic renewal options ensure that when your CD matures, it reinvests in the term you’ve selected for your ladder without missing a beat.
Final Take
Capital One CD accounts can be an important part of building a secure and efficient CD ladder. By leveraging laddering with Capital One CDs, you gain a strategic approach to saving that captures the best of both worlds: the high-yield potential of longer-term CDs and the liquidity of short-term savings. Whether you’re saving for a dream vacation, a mortgage down payment or just building a nest egg for unforeseen events, a CD ladder could be just the thing you need to reach your financial goals.
Editorial Note: This content is not provided by any entity covered in this article. Any opinions, analyses, reviews, ratings or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by any entity named in this article.
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- Wall Street Journal. 2023. "What Is a CD Ladder and How Do You Build One?"
- Capital One. 2022. "What's a CD ladder? Is it worth it?"
