A certificate of deposit account (CD) is one of the most common bank accounts. It’s a financial product often traded by financial institutions like banks and credit unions. With a fixed term, CDs are in the bank for some periods before you can withdraw your money or product. Over time, there are also steady interest rates you’ll be required to pay.
When you opt for a certificate of deposit account, you’re simply securing a large chunk of your money in the bank. After this deposit has been made, you wouldn’t be able to touch your cash until the stipulated time you’ve put in place is reached or expires. Otherwise, some accompanying penalties are dependent on your bank or money market product for early withdrawals.
Similar to your saving account, CDs are special saving channels with different policies. While you can top your account regularly if it’s savings, a certificate of deposit only requires the inception deposit. Before opening one, there are four things you should consider. They are the available terms, interests, institutions, and principal. These complete your shopping process for a CD to buy.
The term is the period you’ve agreed to in writing to leave your funds. On the maturity date, your term elapses. Here, you’re free to withdraw your CD without attracting any penalties. It is the amount you’ve decided to deposit for your principal when you open your CD.
Your financial institution of choice and interests go hand in hand. The fixed interest provides you an open calculation of what your return would be after some time. However, this might be painful if rates eventually increase since you wouldn’t be able to change your interest and lose out on significant profits.
Agreements are determined by the banking institution where you open your certificate of deposit account. Suppose you don’t provide further instructions about your CD should you not withdraw on the maturity date. In that case, it can either be reinvested or not.
Certificate of Deposit Account for Your Security
One merit of CDs is that they are federally insured, making them secure. With their standard interests, there aren’t any unforeseen uncertainties. As an excellent option to earn more than the pay of checking, saving, and other accounts, CDs are best without going through the risk of market volatility.
To open a CD, each banking institute has its minimum deposit requirements. Although practically, putting a substantial initial fund works best. The more your principal, the loftier your return. Some banks offer rate tiers to customers meeting their high pay policy. This tiered structure provides them with a more significant annual percentage yield.
Now that you know what a certificate of deposit account is about, you can easily go ahead to keep that considerable amount you’re planning for your house in the bank. Banks like the CIT bank offer varying bank account options with this inclusive. So why not make that money (if you have a long-term goal) to yield additional interests?