How to 'Ladder' to Maximize CD Rates

For those frustrated by abysmal rates but determined to stick with CDs, laddering can be a useful strategy to maximize returns without tying up all your cash for too long.

Here's how it works: Say you have $10,000 to invest. The rates on CDs with terms of 3 months to 30 months range from 2% to 3.25% -- better returns with more time, but still below inflation. Instead of locking up all your funds into the highest rate with the longest term, you put $1,000 in 10 different CDs with various rates and durations. You can roll over the short-term investments into new CDs once they expire, hopefully at better rates.

According to BankingMyWay.com's CD ladder calculator, you can earn $270 more over the two and a half years with laddering than you could by using a single CD. ...