CD (Certificate of Deposit) Accounts

Certificate of Deposit accounts are a an extremely safe situation for you to deposit your money. Educating yourself about CDs is a benefit to you if you want to keep your money safe and sound.

On one hand there are a couple of facts that you need to know about a CD from the onset. One is; they force you to leave your funds in the bank for a particular amount of time. In addition, they commonly have a higher interest rate than savings accounts.

Most banks want all of your money deposited with them. If they are not offering a good rate after you've shopped around, speak with an area manager. Sometimes to keep your money with them, they will make an exception. If not, move your money.

As you are about to open your CD Account, you will be given an option: length of time you want to 'tie' up your money. Remember, you are agreeing to leave your money in the CD for a certain period. This can be anywhere from 7 days to 7 years or more.

The rationale banks use; if you assign them your money to have and you assure not take it out before the end of the term, they can take that money and invest it. This makes them a bundle of money. So, they are willing to pay you a high interest so that you will choose to leave your money with them for a long time.

An addition to leaving your money for a certain term, there will also be a minimum amount to open your CD. Unlike a savings account, you can not add to it. You can expect some minimum amounts to open an account like this can be as much as $1,000.

An additional fact to find out is how your bank pays interest. Is is simple or compounded? Compounded means you are getting interest on interest plus principle. How often does your bank pay. Monthly, quarterly?

Many banks will offer you the opportunity of having the interest deposited into another account, such as your checking, but if you are trying to make and save money this isn't recommended. If you let the interest accumulate, you can wind up with a substantial amount after the term is up.

Also, keep in mind if you withdraw your interest along the way, you now have a different interest rate. If you leave it, it is annual percentage yield. If you keep withdrawing interest, this will affect the Annual Percentage Yield for the CD. Talk to your banker or accountant about this.

Once the agreed upon time frame is up, the money plus interest (if you did not take it out) is now yours to do whatever you want with. However, there is a 'grace' period after maturity, usually 7 days. So after the CD matures you have a certain amount of time to go to the bank and get your money. If you don't, the CD will renew itself. If you try to get it after it renews itself after the 'grace' period, you will be penalized.

CD (Certificate of Deposit Accounts)

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Ric Dalberri is a graduate of Columbia State University & has been involved in his own business (sold) employing over 100 people. Ric was also a top producer as a Financial Specialist for over a decade with one of the largest financial institutions in the U.S.
Ric is the founder of Retirement USA which provides complete solutions for your lifestyle. Please visit and sign up for the free newsletter.

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