CandleFocus

Uninsured Certificate of Deposit

Candlefocus Editor
Uninsured CDs are an alternative to FDIC or NCUA-insured CDs, as these federally-insured programs come with lower interest rates due to the protection of your deposits. Uninsured CDs are similar to traditional CDs in terms of comparing terms, such as the amount of the deposit, maturity date, and the interest rate. The major difference, however, is the deposit is not protected by the FDIC or NCUA.

Uninsured CDs are well-suited for investors with a high risk-tolerance level, as the investor is taking on all the risk associated with the CD’s investment. Due to the lack of protection, investors should be aware that the principal could be lost if the institution issuing the uninsured CD went under. Additionally, uninsured CDs are not transferable, meaning the holder of the account is stuck with the CD in the event of an unforeseen change in circumstances.

The interest rates associated with uninsured CDs tend to be significantly higher than those of FDIC or NCUA-insured CDs. Despite the higher risk, the higher yield can be a great way for investors with a high risk appetite to diversify their investments.

Overall, uninsured CDs are well-suited for those investors willing to take on considerable risk in exchange for a higher yield. These types of investments are not for everyone, but for those that understand what they are getting into and do their research, uninsured CDs can potentially be a great addition to any portfolio.

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