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Why you may be getting ‘shortchanged’ on CD interest rates, researcher says

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2 years ago

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You may be leaving money on the table when it comes to certificates of deposit, some research suggests.

CDs have a set term, ranging from a few months to five or more years. Upon maturity, banks return the depositor’s principal plus interest.

Consumers who want their money early must generally pay a penalty, losing out on months of interest. However, paying that withdrawal penalty may be worthwhile for many savers who adopt the right strategy.

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That’s what is suggested in a recent research paper from Matthias Fleckenstein, associate professor of finance at University of Delaware, and Francis Longstaff, finance professor at the University of California, Los Angeles.

Rather than pick a short-term CD, consumers often get a higher return by choosing a long-term CD and paying a penalty to pull money out early, they found.

Consumers who are unaware of the strategy may get “shortchanged” by banks, Fleckenstein told CNBC.

‘The rule rather than the exception’

Here’s an example: If an investor puts $1 in a five-year CD with a 5% interest rate and cashes it out after one year with a penalty equivalent to six months of interest, they would receive about $1.03, which is slightly more than the $1.01 they would get from a one-year CD with a 1% interest rate, despite the penalty incurred for early withdrawal. 

Banks frequently price CDs this way, Fleckenstein and Longstaff wrote in their paper, published in October in the National Bureau of Economic Research.

The disappearance of the starter home

The researchers examined weekly CD rates offered by 16,891 banks and branches — ranging from small community banks to big nationwide institutions — from January 2001 to June 2023. Rates were for accounts up to $100,000.

About 52% of CDs offered during that period had such “inconsistencies” in pricing when comparing a given term against a longer-term CD cashed in early, they found.

“It’s the rule rather than the exception,” Fleckenstein said.

“There are banks that do this all the time,” he said, and “there are some that don’t do this at all.”

At banks where this happens, the difference in returns “is not tiny,” Fleckenstein said. In fact, the pricing inconsistency is about 23 basis points, on average, over the roughly two decades they assessed, he said.

Given that disparity, the average investor who invested $50,000 could have gotten an extra $115 of interest by picking a longer-term CD and cashing it in early, their research suggests.

The average size of that pricing difference rose as interest rates began to increase during the Covid-19 pandemic, Fleckenstein said.

CDs often for ‘safety and liquidity’

Households that save in CDs are generally looking for “safety and some liquidity” for a chunk of their assets, said Winnie Sun, co-founder of Irvine, California-based Sun Group Wealth Partners and a member of CNBC’s Financial Advisor Council.

The typical CD buyer has a goal in mind, like saving for a home down payment, and wants to earn a modest interest rate without subjecting their money to much risk, Sun said.

About 6.5% of households held assets in CDs as of 2022, with an average value of about $99,000, according to the most recent Survey of Consumer Finances.

Like any investment, there are pros and cons to CDs.

For example, unlike other relative safe havens like high-yield savings accounts or money market funds, CDs offer a guaranteed return over a set period with no chance of market-based losses. In exchange, however, CDs offer less liquid access to your cash than a savings account and lower long-term returns than the stock market.

“Shop around for the best CD rate across banks, but also look within banks at whether it actually may pay off to accept a longer term but pay an early withdrawal penalty,” Fleckenstein recommended, based on his research findings.

The option may not be as prolific in the current market environment, though.

Long-term CDs typically pay a higher interest rate than shorter-term ones, Sun said. But average rates for one-year CDs are currently higher than those for five-year CDs: 1.7% versus 1.4%, respectively, according to Bankrate data as of Jan. 20.

Households can pursue other CD strategies, Sun said.

For example, instead of putting all savings into a long-term CD, consumers might put a chunk of their money into a long-term CD and with the remaining funds build a “ladder” of shorter-term CDs that mature more quickly. They can then buy more CDs if they’d like once the shorter-term ones come due.

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$20,000 Caution Bond Requirement for US Visa Applications imposed on 50 Countries

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6 days ago

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August 8, 2026

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The United States Department of State has officially implemented a revised visa policy introducing a mandatory posting requirement for caution payments of up to $20,000 on select foreign travel applications. Under the updated regulatory framework, consular officials are authorized to require temporary nonimmigrant visa applicants from targeted foreign countries to post a refundable financial bond of $20,000 as a condition for visa issuance. The policy mechanism is designed to address diplomatic concerns regarding high overstay rates among temporary visitor, business, and educational visa categories.

The caution bond pilot program applies selectively to foreign nationals from designated countries whose diplomatic entities record historical visa overstay rates exceeding established federal thresholds. Under administrative guidelines published by the State Department, the full financial deposit is posted directly to a dedicated federal escrow account prior to final visa issuance. The entire caution payment is automatically refunded to the applicant upon verified proof of timely departure from the United States in strict compliance with the authorized duration of stay. Conversely, failure to depart within the legal timeframe results in full forfeiture of the posted financial bond to the United States government.

Diplomatic representatives and travel policy experts have expressed varying perspectives regarding the operational implementation of the caution bond system. Administration officials emphasize that the measure serves as an effective, market-based incentive to enforce international travel compliance and preserve domestic immigration security standards. However, international trade organizations and foreign diplomatic missions have raised concerns regarding the financial burden imposed on legitimate business travelers, foreign students, and commercial partners from developing nations.

The United States finalized the rule to make the temporary visa bond program permanent, taking effect on August 3, 2026. The updated permanent regulation replaces the prior 12-month pilot, eliminates the lowest $5,000 tier, and raises the maximum required bond amount to $20,000 for specific B-1/B-2 business and tourist visa applicants.

Here is the list of the 50 countries on the list as o August 3, 2026

African Nations (31 Countries)

  • Algeria
  • Angola
  • Benin
  • Botswana
  • Burundi
  • Cabo Verde (Cape Verde)
  • Central African Republic
  • Côte d’Ivoire (Ivory Coast)
  • Djibouti
  • Ethiopia
  • Gabon
  • The Gambia
  • Ghana
  • Guinea
  • Guinea-Bissau
  • Lesotho
  • Malawi
  • Mauritania
  • Mauritius
  • Mozambique
  • Namibia
  • Nigeria
  • São Tomé and Príncipe
  • Senegal
  • Seychelles
  • Tanzania
  • Togo
  • Tunisia
  • Uganda
  • Zambia
  • Zimbabwe

Asian & Eastern European Nations (11 Countries)

  • Bangladesh
  • Bhutan
  • Cambodia
  • Georgia
  • Kyrgyzstan
  • Mongolia
  • Nepal
  • Papua New Guinea
  • Tajikistan
  • Turkmenistan
  • Uzbekistan

Caribbean & Latin American Nations (5 Countries)

  • Antigua and Barbuda
  • Cuba
  • Dominica
  • Grenada
  • Venezuela

Oceanian Nations (3 Countries)

  • Fiji
  • Tonga
  • Vanuatu

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Personal Finance

Next-Generation Retirement Planning: Managing Longevity Risk and Variable Income Streams

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1 week ago

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August 7, 2026

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Retirement planning strategies are evolving in 2026 to address increased life expectancies, shifting dynamic market conditions, and the transition away from traditional defined-benefit pensions. Individual investors and financial advisors are abandoning rigid retirement models in favor of flexible, multi-asset strategies designed to mitigate longevity risk and preserve purchasing power over multi-decade retirement horizons.

Mitigating Longevity Risk with Dynamic Asset Allocation
As average life expectancies extend past eighty-five years, one of the primary financial risks facing retirees is outliving their accumulated wealth. Traditional fixed income allocations—such as the standard 60/40 equity-to-bond portfolio—are being reevaluated to ensure portfolios generate sufficient capital growth alongside reliable income.

Financial planners recommend maintaining a meaningful equity allocation throughout retirement to offset long-term inflation erosion. High-dividend equity funds, global real estate investment trusts (REITs), and inflation-indexed Treasuries are combined to create diversified portfolios that deliver both growth and income stability.

The Transition to Dynamic Withdrawal Strategies
The classic “4% safe withdrawal rule” is increasingly replaced by dynamic withdrawal strategies that adapt annually based on market performance. Under a dynamic withdrawal framework, retirees adjust their annual distribution rates within pre-set caps and floors:
– Market Upside: During strong market returns, retirees can increase discretionary spending or fund family legacy gifts.
– Market Downturns: During market pullbacks, spending distributions are temporarily reduced to prevent sequence-of-returns risk and preserve core investment principal.

Guaranteed Lifetime Income Options and Deferred Annuities
To establish a guaranteed baseline for essential living expenses, individuals are incorporating modern fixed-indexed and deferred longevity annuities into their broader retirement architectures. Modern annuity structures offer competitive return caps, transparent fee schedules, and inflation-adjustment options.

By funding essential expenses—such as housing, healthcare, and insurance—with guaranteed income streams from Social Security, pensions, and annuities, retirees can manage discretionary investment portfolios with greater flexibility and lower emotional stress during market volatility.

Actionable Steps for Future Retirees
1. Calculate Baseline Retirement Expenses: Determine fixed living costs and map guaranteed income sources to cover essential expenditures.
2. Adopt Flexible Withdrawal Rules: Implement dynamic spending rules to protect investment principal against market downturns.
3. Incorporate Inflation-Protected Assets: Maintain exposure to dividend-growing equities and inflation-indexed bonds to safeguard long-term purchasing power.

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Personal Finance

Building Generational Wealth: Family Governance, Estate Tax Optimization, and Asset Protection

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2 weeks ago

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August 1, 2026

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As the largest intergenerational transfer of wealth in history accelerates, high-net-worth families, entrepreneurs, and individual investors are placing heightened emphasis on comprehensive estate planning, family governance, and asset protection. Preserving capital across generations requires a balanced approach combining tax-efficient legal structures with open family communication and financial literacy education.

Optimizing Estate Tax Exemptions and Trust Structures
With potential modifications to federal estate tax exemption thresholds on the horizon, proactive estate planning is essential for high-net-worth households. Estate planning attorneys and wealth advisors are establishing multi-generational trust structures to transfer wealth efficiently while minimizing estate and gift tax exposure.

Popular structural strategies include:
– Irrevocable Life Insurance Trusts (ILITs): Utilizing life insurance proceeds to provide liquidity for estate tax obligations without expanding the taxable estate.
– Grantor Retained Annuity Trusts (GRATs): Transferring rapidly appreciating assets to beneficiaries with minimal gift tax consequences.
– Dynasty Trusts: Preserving wealth across multiple generations while providing long-term asset protection from creditor claims and legal liabilities.

Establishing Family Governance and Financial Education
Legal and financial structures alone cannot guarantee long-term wealth preservation without effective family governance. Financial advisors report that a significant percentage of multi-generational wealth dissipation stems from lack of communication and inadequate financial preparation among heir generations.

Families are establishing formal family governance frameworks, including periodic family meetings, written mission statements, and structured philanthropic foundations. Involving younger family members in charitable grant-making and investment discussions fosters financial stewardship and prepares heirs to manage family assets responsibly.

Digital Asset Custody and Legacy Planning
In today’s modern economy, estate planning must extend beyond physical real estate and traditional brokerage accounts to encompass digital assets. Comprehensive estate plans now include detailed inventories and legal access protocols for corporate domain names, intellectual property, digital media rights, and cryptocurrency holdings.

Fiduciaries and estate executors should be provided with secure, encrypted access mechanisms and clear legal authority to manage and transfer digital holdings in accordance with the owner’s estate directions.

Practical Steps for Legacy Planning
1. Review and Update Estate Documents: Ensure wills, revocable trusts, and power-of-attorney designations accurately reflect current family structures.
2. Establish Structured Trusts: Utilize irrevocable trusts to protect assets from creditors and minimize future estate tax liabilities.
3. Create a Digital Estate Inventory: Document access protocols and legal permissions for all online accounts, intellectual property, and digital assets.

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