If you are thinking about your options for savings tools, you may want to consider a CD. A certificate of deposit (CD) is a low-risk savings option designed to boost the amount of money you earn in interest while keeping your funds invested in a safe way with minimal risk.
When you purchase a CD with a financial institution that is insured by the Federal Deposit Insurance Corporation your funds will be insured for up to $250,000 as permitted by law.
What makes CDs different than other types of savings account is that they require you deposit funds for a set period of time, referred to as a term. CD terms can range from one month up to five years or longer. If you wish to withdraw your money before that time, you will have to pay a penalty.
Learn more about how certificate of deposits work, their benefits, and where you can go to get one.
How Does a Certificate of Deposit Work?
A CD is a way to save your money while earning more interest than you would with your standard savings account. However, unlike with a regular savings account, your money must remain in the bank for a certain period of time. The longer the term of the CD, typically the higher the interest rate and the more money you are able to earn from your deposit There is minimal risk when investing in a CD unless you decide to withdraw your money early, in which case may be subject to a penalty and reduce your principal and/or interest earnings.
Interest on a deposit will continue to accumulate until it matures. When you reach the maturity date, you may withdraw the full amount from the CD. There are several types of CDs to choose from, each with their own set of benefits.
For example, you may also want to consider getting an individual retirement CD which can be beneficial when held in a tax-advantaged account.
What are the Benefits of CDs?
A certificate of deposit has both pros and cons. It is important to weigh the benefits and downsides of a CD before making your decision. One of the biggest advantages of a CD is the security it offers as it is insured by the FDIC. Another major benefit of a CD is that it offers fixed rates at fixed terms. As a result, you are able to estimate your final earnings which allow you to better plan for your future. If you are looking for ways to diversify your money, CDs also earn a steady interest at a higher rate than most other savings tools.
Click here to learn more about the benefits of a CD.
Who Should Get a CD?
You may be wondering if you should invest in a CD. You may be a good candidate for a certificate of deposit if you have funds that you do not expect to need for a fixed period of time. A CD is also great for those who wish to make a larger return on their investment then they would with a traditional savings account.
What Other Options Are There?
Not sure if a CD is right for you? Consider alternative options for savings accounts. Savings deposit accounts and money market accounts are interest-bearing accounts that allow you to withdraw money at any time. This savings option allows your funds to remain liquid and not be in a fixed term. However, Federal Regulation prohibits more than a total of 6 transfers each month to other accounts from a savings or money market account (including transfers to another account for overdraft protection) or to third parties by check, preauthorization or automatic agreement, telephone, or electronic online transfer.
Learn More About CDs
Do you want a low-risk savings account with a great interest rate? Then you may want a CD. A certificate of deposit is a safe choice for adults of all ages who are ready to invest. For more information about CDs, terms and conditions, or for assistance setting up a CD, contact FVCbank to speak with an experienced banker.