Get to Know Certificates of Deposits
| Posted in Bank Blogs
Looking to grow your savings without worrying about losing your hard-earned money? There’s a smart solution that could work for you – certificates of deposit (CDs). Offered by banks and credit unions, CDs offer some attractive benefits, including:
- Higher rates than traditional savings accounts (in most cases)
- Guaranteed returns
- The assurance of deposit protection
- A choice of terms
But before you open one, there are some important things you should know about CDs.:
Interest rates:
- Interest rates for CDs vary by financial institution, terms, and rate conditions, so be sure to shop around.
- Rates are usually fixed and guaranteed for the entire term, though some financial institutions offer variable-rate CDs.
Terms:
- You can choose from shorter- or longer-term CDs – generally 3 months to 5 years. To determine the right term for you, think about when you need access to your money. For example, if you’re saving to buy a house in two years, you wouldn’t want to choose a 5-year CD.
- In many cases, the longer the term you choose, the higher the interest rate you will receive.
- During the term of your CD, you agree not to make withdrawals on your funds in exchange for the interest rate. If you access your money before the term ends, you’ll pay a penalty. The amount will depend on the terms of your CD and when you withdrew the funds.
CD Maturity:
- Your CD matures when you reach the term. At that point, you are given a grace period (often 10 days). You can withdraw your funds and put them in a bank account or choose another CD. You could also let the CD renew for the same term. If you choose not to do anything, your CD will be renewed for the same term and at the prevailing rate at the time.
- Certificates of deposit can be a great way to build your savings and financial security. Before you open one, make sure you understand how they work and shop around for the best rates.