Understanding Certificate of Deposit (CD's) : A Safe Investment Option

What is a Certificate of Deposit?

A Certificate of Deposit is essentially a time deposit that locks your money in for a fixed term, ranging anywhere from a few months to several years. In exchange for keeping your funds with the financial institution for the agreed period, you earn interest. Typically, the longer the term, the higher the interest rate, though this can vary depending on the institution and current market conditions.

How Do CDs Work?

When you open a CD, you agree to deposit a specific amount of money for a set term. In return, the bank pays you interest on that amount. The interest rate is usually higher than what you would get from a regular savings or checking account, making CDs an appealing option for conservative investors.

At the end of the term (known as the maturity date), you can withdraw your original deposit plus the interest earned. However, if you withdraw your funds before the CD matures, you may face a penalty, usually a portion of the interest earned. This is why it's essential to choose a term that matches your financial goals and timeline.

Benefits of CDs

Safety

CDs are considered low-risk investments. They are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor, per bank, offering peace of mind that your money is protected.

Predictable Returns

Since the interest rate is fixed, you know exactly how much you'll earn over the life of the CD. This makes them an excellent option for people who value stability and certainty.

Higher Interest Rates

Compared to savings accounts, CDs generally offer higher interest rates, allowing your money to grow faster over time.

Certificates of Deposit are a safe and reliable way to earn interest on your savings while protecting your principal investment. They are especially appealing to risk-averse investors or those who don't need immediate access to their funds. However, it's important to carefully consider your financial goals and the terms of the CD before committing to ensure it aligns with your overall strategy.

All rates are subject to change. The annual percentage yield assumes interest will remain on deposit until maturity. A withdrawal fee will reduce earnings. If you would like current rate and yield information, please call 1-877-698-3278.