What Is a CD Ladder?

7 Min Read | Published: March 28, 2025

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This article contains general information and is not intended to provide information that is specific to American Express products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.

Learn how CD ladders work and how they help you maximize returns on savings while giving you regular access to cash. Take steps to get started today.

At-A-Glance

A Certificate of Deposit (CD) ladder is a savings strategy that divides money across multiple CDs with different interest rates and staggered maturity dates.
A CD ladder is a great option for savers who want safe, steady returns for long-term financial goals but prefer intermittent cash access for short-term needs.
Certificate of Deposit accounts from American Express® can diversify your CD ladder while providing fixed rates, no monthly fees, and daily compounding interest.

Whether you’re saving for a home, planning for retirement, or supporting a family, a certificate of deposit (CD) lets you set aside interest-earning money for set periods. When the CD term ends, you receive your deposit plus interest. CD laddering is one approach that can help you maximize your CD earnings while keeping your funds within closer reach.

What Is a Certificate of Deposit Ladder?

A certificate of deposit ladder lets you divide your savings among CDs with different interest rates, maturity dates, and annual percentage yield (APY), which represents the CD’s total earnings.¹ You can use or reinvest mature CD funds in another CD with a different term length or APY, making CD ladders an investment to consider if you need periodic cash access and maximized investment earnings.

Benefits of a CD Ladder

CD laddering benefits boil down to investment security, growth potential, and flexibility:²

Competitive long-term CD ladder rates may let you earn more interest than a single CD while expanding short-term fund availability.
Reinvesting mature short-term CDs into higher-rate options may help you manage fluctuating rates more efficiently.
Banks insured by the Federal Insurance Deposit Corp (FDIC) that provide low-risk CDs cover up to $250,000, protecting your peace of mind.
CD laddering strategies can adapt to your financial goals, whether you’re building a long-term safety net or depositing extra cash for a short-term purchase.
CD ladder investment diversification may help offset risks from unpredictable investments like stocks.³

Disadvantages of a CD Ladder

Potential downsides to CDs include time commitments, modest returns, and added complexity:⁴

CD ladders may require extra time to track maturation dates, adding another item to your to-do list.
Many CD periods range from a few months to several years, so you may not have instantaneous access to your cash in an emergency.
CD ladder research and maintenance may feel overwhelming since different banks and credit unions provide different interest rates, deposit minimums, and withdrawal windows.
Even the best-performing CDs may only yield humble returns, as CDs may offer lower APY than riskier investments.

How to Build Your CD Ladder

If a CD ladder strategy matches your financial vision, follow these four steps to get started:

Compare CD ladder rates, lengths, and APYs from credit unions, banks, and brokers while remembering that not all CD providers are FDIC-insured.
Decide when you’ll need access to your funds and choose the appropriate term length for each CD in your CD ladder, whether quarterly, yearly, or multiple-year intervals.
Divide your total savings investment into portions that make sense for your goals and place them in various CDs to unlock periodic access and staggered returns.
Reinvest funds from mature CDs into new CDs with higher rates or longer terms as necessary. You can also withdraw available funds when necessary. Here’s an example of what a CD ladder may look like:

Deposit $2,500 in a 6-month CD for medical costs. If you don’t need the funds, reinvest them into a higher APY CD to keep your savings growing.
Put $3,000 in a 1-year CD to save for short-term goals like vacation expenses. At maturity, you can choose to reinvest or use the funds as planned.
Invest $5,000 in a 3-year CD to help you reach mid-term goals such as buying a home or making a car purchase.
Place $6,000 into a 5-year CD to focus on long-term savings for retirement or future educational costs while earning a higher return.

You may not be ready to invest thousands of dollars into a CD ladder, but you can create a smaller-scale ladder that uses 3, 6, or 9-month intervals to accrue interest and put cash back in your pocket every season.

Who Should Use a CD Ladder?

If you’re wondering how a CD ladder works for you, consider who might benefit from CD ladders and always do careful research first to inform yourself before investing. A few people who may benefit from CDs include the following:

Low-Risk Savers Who Like Steady Returns
A CD ladder might be a great fit for those nearing retirement who want to grow their nest egg without heavy exposure to market volatility.
Investors Who Balance Accessibility and Earnings
A CD ladder may work well for parents saving for their child’s education, offering long-term growth with short-term cash access.
Planners With Specific Financial Milestones
CD laddering can benefit anyone with a clear financial goal and a timeline, such as buying a car in two years, using a mature savings fund for travel, or creating a family savings plan.

Getting Started With CD Ladders

The process for getting started with a CD ladder can differ based on each financial institution. For example, getting started with an American Express^® Certificate of Deposit is simple:

First, open an American Express^® Certificate of Deposit account, complete the identity verification process, and wait for an email confirming your account’s activation.
Next, navigate to your online account, sign in, and link your bank account to deposit funds. Alternatively, you can mail a check with the necessary amount.
Watch your money work for you throughout your CD’s lifespan.

Frequently Asked Questions

The right option for you will depend on your goals. Treasury bills might fit your needs more if you need a low-risk option with shorter terms and penalty-free access to your money. CDs may work better if you prefer fixed rates over a longer period and don’t mind paying potential fees for accessing funds early.⁵

CDs ladders can contain as many CDs as you wish, but the minimum is three CDs per ladder. When laddered effectively, more CDs mean more insulation against changing interest rates.

The Takeaway

A CD ladder can be an effective strategy for growing savings while enjoying quicker access to your funds and secure returns. To manage your ladder effectively, stay informed about CD interest rates, APY, term periods, and reinvestment opportunities.

¹ “What Is Annual Percentage Yield (APY)?,” Experian

^2,4 “What is a CD Ladder?,” Experian

³ “How to Adjust Your CD Ladder When Rates Change,” Experian

⁵ “When to Invest in Treasury Bills vs. Bonds,” Experian

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Liv Gillespie is a Philadelphia-based writer with a double M.A. in English Linguistics & Literature and Secondary Education. Her work focuses on personal finance.

All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.

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