Certificate of Deposit (CD)
Candlefocus EditorCDs are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor. Thus, they offer a safe and secure way to park funds and make a return. Interest is paid either annually or semi-annually, depending on the bank and the type of CD. Many banks may offer a one-time ‘bump up’ rate increase.
The quickest way to find the best CD rates is to shop around. MoneyMarkets.com, Bankrate.com, and NerdWallet are good places to start. It is also important to compare the fine print and make sure that you understand any additional terms and conditions that the bank may impose.
When opening a CD, it is possible to access the funds before the maturity date, by paying an early withdrawal penalty. This penalty may be anything from a few months’ interest to the entire amount of interest earned over the term, depending on the institution.
CDs offer a secure and accessible way to invest your funds, making them beneficial for both short and long-term savings. Opt for an FDIC-insured CD if safety and security are important to you. CDs are also a great option for investors who don’t want to commit funds for a long period of time while still earning relatively high interest rates. Although higher-paying CDs may exist, the potential returns may not outweigh the penalty if funds are needed before the maturity date.