2012年7月8日 星期日

Invest on CDs - Step up Your Funds


For those who are trying to trace the connection between CDs and funds, let's clear it at the onset. The CDs under discussion are not the compact discs you play, but the Certificates of Deposit (CDs) that you invest on to grow your money in the bank or other financial institutions.

Commonly referred to as 'money in the bank', CDs are nothing but time deposits offered by banks, credit unions or thrift institutions. These are a type of savings accounts, but these are time-bound. CDs have fixed terms (three, six, twelve or more months) and fixed interest rates for each term. CDs are meant to be kept in the banks till they mature. One good thing is that these are insured by FDIC (for banks) or NCUA (for credit unions). Therefore, your investment is virtually risk-free.

CDs are the right choice for those who want to build their finances and secure their earnings. If you asked why, the reasons are not hard to guess. The interest rates on CDs are typically much higher than ordinary savings accounts. Now, you may be wondering why the banks and credit unions would offer CDs to investors if they have to pay high interests. It's simply because they expect you to keep your money with them for a fixed period of time so that they can use it for other purposes.

Having a certificate of deposit is easy. It is simpler than opening a bank account. All you have to do is tell your bank or credit union that you'd like to buy a CD. Next, you will have to fill up a simple form with some disclosures and they will move your money into your CD. There isn't any actual certificate; all you will see is a discrete category on your finance statements for the CD you created.

When the CDs pay interest, you have two choices: 1) to spend the interest, and 2) to reinvest it. It's always wiser to reinvest because if your interest earns some interest along with your deposits, your funds will grow faster. And when one CD matures, the bank automatically rolls out that money into a new CD, if you do not provide them clear-cut instructions.

However, interest rates on CDs keep fluctuating. If you want the best certificate of deposit rates, you will have to shop around and see who is offering the best rates in your area. Brokerage firms, online banks, finance blogs are some great places to shop for they offer attractive CD rates.

So go ahead, invest on CDs and step up your money now. Just make sure that your bank or credit union is insured and that you don't withdraw your money before maturity because the penalties are high in such a case. Happy banking!




Wain Roy is an Internet marketing professional expert in various industries like real estate, web design, finance and best certificate of deposit rates





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