Certificate Laddering: A Strong Alternative for Your Savings

You've accumulated a substantial amount in your share savings account and are thinking of shifting the funds into share certificates to earn higher interest. Here's your dilemma: Do you put your money in longer-term certificates to get the highest rate? Or do you invest in shorter-term certificates to keep your money more readily accessible-even if it means settling for a lower rate?

"Laddering" is a strategy that lets you have it both ways. Say you have $5,000 to invest in certificates. Put $1,000 each into certificates that mature in one, two, three, four, and five years. One year later, your first certificate matures, yielding you $1,000 plus dividends earned. If you need the money, you cash in. If you don't, you reinvest in a new five-year certificate, at a higher dividend rate.

The next year, the two-year certificate matures. Again, if you don't need the money, you reinvest in a new five-year certificate.

By the end of the fourth year, all your money is earning at the five-year rate. Yet a certificate matures each year, so you can tap into the cash if you need it. Laddering gives you both bigger savings and the advantage of maintaining access to your money.

Spreading the maturities from one to five years is just one strategy. If you prefer to tie up your money for shorter time spans, you could invest in two-, six-, 12-, 18-, and 24-month certificates.

You can ladder any way you wish to best meet your financial needs. For more information or to start your certificate ladder, contact FCFCU.

Shares:

The APY (Annual Percentage Yield) assumes that dividends are to be added to principal.  Minimum opening deposits for certificates (except where noted otherwise):$1000.  Substantial penalty for early withdrawal.  Share certificate account terms: Dividends are calculated by the Daily Balance Method which applies a periodic rate to the principal each day.  Dividends are compounded and credited monthly and at maturity.  The APY is quoted based on the assumption that dividends will remain in the account until maturity; a withdrawal will reduce earnings.  Minimums to open Savings - $25; Minimum Balance to avoid a low balance for savings - $100.; Vacation or Holiday Savings - $100.  All rates subject to change without notice.  Funds must remain on deposit for full term to achieve stated rate.  Fees could reduce earnings.  For more information about fees and rates for these accounts contact your local credit union office or phone (703) 218-9900.

Loans:

All rates and terms are subject to change without notice and credit qualification.  APR is Annual Percentage Rate.  Managed risk lending pricing is used for vehicle and personal loans.  Maximum interest rate for loans will not exceed the maximum allowed by law.  The APR for certificate secured loans are based on current certificate rate plus 2.500% and subject to change on CD maturity. 

HELOC and Home Equity Loans available only on primary residences in Maryland, DC, and Virginia.  Minimum line of credit is $10,000.  Maximum line of credit amount is $250,000 up to 95% Loan to Value (LTV). Variable rates tied to Prime as published in the Wall Street Journal.  Standard interest rate on up to 95% LTV is prime minus 1.000%.