Earn top dollar on your CDs

White piggy banks with stacks of money and moneybag

Make the most of your savings by following three simple investment strategies when buying certificates of deposit.

Strategy 1. Go a little longer.

For months now, the best rates have been on short-term CDs, and they still are.

Although rates have fallen a little over the past few months, you can still find 6-month and 1-year CDs with yields of 5% or higher -- that's the annual rate of return including interest on the interest you earn.

But if you have a CD maturing over the next few months, or if you're shopping for a new one, it's time to consider investing that money for a little longer -- perhaps 12, 18 or 24 months.

A spate of foreclosures, primarily on adjustable-rate mortgages given to borrowers with poor credit, has exploded into a world-wide financial crisis.

Lenders and investors are losing billions of dollars on those loans and pressuring the Federal Reserve Bank to push interest rates down. They argue that lower rates will mean smaller payments -- or at least smaller increases in payments -- when hundreds of thousands of ARMs reset this fall, reducing the number of additional defaults.

So far the Fed has refused to lower rates and given no indication it will do so.

The Federal Reserve lowered the discount rate on August 17 -- a move that will allow businesses to borrow money at lower rates. It has no effect on the interest you can earn on a CD or any other savings plans, such as a money market or savings accounts.

But with so much turmoil in the financial markets it's a very good bet the Federal Reserve won't be pushing rates up anytime soon.

That's your cue to go a little longer with your CDs.

Take advantage of the best one- to two-year rates you can find in our CD rate comparison charts.

Strategy 2. Be flexible.

To make the most of your savings you must be willing to move your money to a bank down the street, across town or to the other side of the country.

Right now, the best rates are consistently coming from two places: online banks and small to mid-size banks offering special promotions.

Online banks are just like any other banks except they don't have branch offices. All transactions are done electronically using your computer or an ATM machine, the phone or the good old U.S. mail.

But they're new, and like anything new, online banks have to offer better rates to get noticed and persuade consumers to give them a try. That's why you'll find online banks offering most of the top rates on our comparison charts.

Signing up is easier than you might think and the federal government insures your deposits, just like it does at most other banks.

If you've never worked with an online bank, our guide to getting started with online banks will answer many of your questions and show you to how to open an account.

Traditional banks, particularly those that are small and medium-sized, are desperate for deposits.

They depend on your money to fund the great majority of their loans. But since 1990, loans have grown faster than deposits at the nation's 8,700 federally insured banks and thrifts.

As a result, the percentage of bank loans funded by deposits has reached an all-time low.

To lure new deposits through their doors, most banks are using heavily promoted specials that pay exceptionally high rates on one or two types of CDs. It's not uncommon for these specials to be a full point or two higher than what the bank is offering on its traditional CDs.

What all this means is that you have to be willing to move your money to the best online bank or special offer you can find every time one of your CDs matures. You can't sit back and let a bank roll your money over into a new CD that's not earning top dollar.

Let's say you have $5,000 to invest. You'll make $191 on a 12-month CD that pays a very average rate of 3.75%. You'll make $272 on the same CD paying a top yield of 5.4%. You just have to shop for it.

Can you afford to throw that $71 away?

Strategy 3. Go odd.

Many of the best specials are for odd-term CDs that mature in five, seven, 11 or 13 months.

Banks do that so that existing customers won't be offered the higher rate when they're asked to renew a standard six- or 12-month CD. Sometimes the fine print on special offers even says, "New deposits only."

But we've never heard of a bank refusing to let existing customers take advantage of a special offer. You just have to ask.

You can find odd-term specials by doing an Internet search for terms like "13-month CDs," checking newspaper ads, window banners at local banks and bank Web sites. And again we advise you to consider longer-term specials -- in case rates go down. Pay particular attention to separate listings for specials or links to "Special Offers."

Last summer the bigger banks seemed to have the best specials. This summer it's the smaller banks and Internet institutions that are catching our eye with rates like these: