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Feel Secure with a CD

Feel Secure with a CD Investment

What is a CD?

A CD is a savings account with a fixed interest rate and term. Among bank accounts that are federally insured, CDs—also known as share certificates at credit unions—usually carry the greatest interest rates. Here is a list of the many components that make up CDs:

CD Rates

CDs earn the same rate over time, unlike traditional savings accounts. If you lock in a high rate and later see rates drop across banks, this could be advantageous. Additionally, it can be detrimental if you're considering low rates that might increase soon.

CD Terms

To open a CD, you must select a certain time-period. Terms can affect rates and early withdrawal penalties, which are costs imposed if you cash out a CD before the term expires. Terms typically vary from three months to five years. In general, rates increase with term length, while penalties increase with term length.

CD Safety

At banks covered by the Federal Deposit Insurance Corp. and at credit unions covered by the National Credit Union Administration, CDs have federal deposit insurance up to $250,000, much like regular bank accounts. This means that if a financial organization fails, you will always receive your money back.

The major risk associated with a CD is opportunity risk, which means that if you open a CD just before rates rise, you could miss out on greater rates. But unlike investing in stocks or bonds, you normally don't run the risk of losing money from a CD due to variables that are out of your control, including the performance of the financial markets.

CD Maturity Date

CDs mature on a set day either months or years after you opened it, unlike any other bank account. Many banks renew CDs on auto-pilot, but this may not be in your best interest. When CDs are mature, think about your options.

CD Penalty

You'll probably have to pay a penalty equal to several months to a year's worth of interest if you open a CD's seal before the maturity date.

Types of CDs

You'll often look at certificates of deposit (CDs) with set rates, no provision for future growth, and a penalty for early withdrawal. These characteristics are not shared by all CDs, though. For instance, withdrawals from no-penalty CDs are always free. Step-up CDs have an occasional increase in CD rate throughout the duration.

CDs work best for people in specific situations, such as:

Securing funds for a future purchase: If you have money set aside for a significant purchase that will take place years from now, such a car or a down payment on a house, a CD can keep your funds secure and out of sight until the anticipated time you'll need them.

Long-term wealth protection: Long-term CDs may be chosen if you wish to avoid the dangers associated with equities and bonds, particularly if you're close to retirement. Even though CD returns are guaranteed and typically higher than those of other bank accounts, your money won't rise as much over time as it would in stocks.

Using CDs for pre-invested money: If you like to invest money gradually and you have a considerable amount of cash on hand, you may choose to spread out when you buy stocks or mutual funds using a method called dollar-cost averaging. The money you eventually plan to invest can be placed in CDs to generate greater interest than would be feasible if it were kept in a standard savings account.

CD vs. Savings Account

A certificate of deposit often locks away your money for a set duration and interest rate, and you aren't allowed to make additional deposits. CDs typically provide higher rates than conventional savings accounts in exchange for the loss of access.

Regular savings accounts are more adaptable because they allow for anytime deposits and at least monthly withdrawals.

CD vs. Bond

A CD is a savings account with federal insurance with a duration of typically up to five years. You often incur a penalty if you withdraw early.

A bond is a loan to a business or the government with a period up to 30 years. In contrast to most CD kinds, if you need to access the money before the bond matures, you must sell the bond.

How to Open a CD

Choose your CD first based on its rate, term, and type. Visit the BANK branch nearest you to find out what best fits your savings goals.

Where are CD rates right now?

At BANK, we are offering a CD special. For a limited time, you can open a secure CD with an interest rate of 4.10% APY for 11 months; or 4.0%APY for 22 months. Find out more about this CD Special at