No, we’re not talking about those outdated shiny disc that play music. In the financial world, a CD stands for Certificate of Deposit. It’s like a savings account because it is your money in the bank. It’s also not like a savings account because it often has a fixed term (meaning you cannot access the money until a certain amount of time passes) and a fixed interest rate. Here are a few important facts you should know about CDs:
• High interest rates. This is a good thing! Because you aren’t able to access the money in your CD like you would in a savings account, institutions typically provide higher interest rates, earning you more money over time.
• Minimum deposit. The institution requires a certain amount of money to be put in the CD initially, with higher interest rates for larger deposits.
• Early withdrawal fee. If you want your money before the fixed term is up, you may have to pay an “early withdrawal” penalty or give up some of the interest that has accrued.
• Non-traditional features. These days, institutions are offering more options for CDs, like no early withdrawal fees and variable interest rates.
• FDIC-Insured. Before purchasing a CD, make sure the institution is insured by the Federal Deposit Insurance Corporation, or FDIC.
As with any major financial decision, do your research and consider all options and pros and cons beforehand. For more information on savings options, click here.by sophie