When it comes to saving money, there are a few banking tools that people are familiar with, like savings accounts, money markets, and 401k; however, CDs don't come into the conversation quite as often.
No, we’re not talking about compact discs, but certificates of deposit. Certificates of deposit (CDs) are great ways to grow your money faster, but before you choose to open a CD, here is some information on the features of this type of account.
A certificate of deposit, or CD, is a type of product offered by banks and credit unions that is similar to a savings account. It allows you to deposit funds with a financial institution to earn interest.
The difference between a CD and savings account is, a CD requires you to leave your money in the account without touching it for a certain amount of time. They have rates that are usually fixed, so the offer you get when you first open it will last the duration of the CD.
Most accounts last anywhere from 30 days to 5+ years depending on the financial institution’s options. Usually the longer the CD term, the higher the interest rate.
There are a variety of ways to invest in CDs.
There are a lot of financial institutions that will roll your CD deposit into a new account when it matures, as long as you don’t advise them otherwise. If you don’t need access to your funds and the interest rates are the same, an automatic renewal of your CD is convenient and allows you to keep earning interest without the hassle of entering a bank.
You can find out if your CD automatically renews when you open it, as well as the grace period on letting your bank know whether or not you want it rolled over.
Investing in long-term CDs without losing liquidity is known as CD laddering. It’s an investment strategy used by individuals who are interested in several long-term CDs, usually from one-to-five years, but want to avoid losing access to all their money for several years.
It spreads your money across CDs at various terms so that you can always have funds available every six months to a year, while still earning higher interest rates on long term accounts.
Before you decide to invest in one, do your research to make sure the interest rates will still be high enough to make a decent profit.
CDs can help you earn higher interest rates, but the terms and restrictions on them aren’t for everyone. Before you decide, ask yourself these questions:
The best thing about CD accounts is they almost always offer better rates than traditional savings accounts, and they are insured by the FDIC for up to $250,000 per depositor.
The best way to know if a CD is right for you is by educating yourself on how they work and finding the best rates before investing your money. In order to grow your money, have the conversation.
The information on this page is accurate as of January 2021 and is subject to change. First Financial Bank is not affiliated with any third-parties or third-party websites mentioned above. Any reference to any person, organization, activity, product, and/or service does not constitute or imply an endorsement. By clicking on a third-party link, you acknowledge you are leaving bankatfirst.com. First Financial Bank is not responsible for the content or security of any linked web page. Member FDIC / Equal Housing Lender.
First Financial Bank is not affiliated with any third-party websites. Any reference to any person, organization, activity, product, and/or services does not constitute or imply an endorsement. First Financial Bank is not responsible for the content or security of any linked web page.
Online banking services for individuals and small/medium-sized businesses
f1RSTNAVIGATOR is the single place to go to access the tools and resources that help you manage your business.