Many people tend to look for a low-risk investment option for money, and hence turn to certificates of deposit (CD) in order to do so. If you would like such an investment, consider the following points so as to be fully aware of what you are getting into.
1. A CD is a type of deposit account that offers a higher rate of interest compared to a normal savings account.
2. CDs are covered by a federal deposit insurance up to $250,000.
3. When you purchase a CD for a fixed period of time, the bank pays you an interest periodically. You also have the option of collecting the interest accrued at the time of maturity of your CD.
4. Early cancellation of your CD has a penalty applied on it.
5. There are many deposit brokers in the market. These brokers will negotiate with the bank on a higher rate of interest and give you a less rate.
6. Contrary to earlier, CDs these days have been complicated with variable rates of interest which change depending on how long the tenure of the deposit is.
7. If you have a long term CD, the banks have a right to terminate the CD if the interest rates fall. However, if the interests rate rise, you will still get the lower rates.
8. When picking a CD, consider your financial goals and ensure that your choice meets your goals.
9. Understand potential pitfalls - these include the difference between the call period of a CD and its maturity date. Be clear with all terms and conditions on your CD.
10. Research any penalties and any other charges that might be applicable before hand so that you wont get rude shocks later.
Pauline is an online leading expert in the finance. She also offers top quality tips like: Ways To Save Money & Reconcile Bank Account
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