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Should I Invest In A Certificate Of Deposit

Updated on March 4, 2009

With the economy on a constant teeter, you may be wondering where to put your savings and have confidence in it's safety. If staying out of the stock market is your idea of a good time right now, A Certificate of Deposit might be the right choice for your financial savings.

Is A Certificate Of Deposit Right For You?

  • Do you have $1000+ just sitting around in your savings account month after month after month?
  • Can you go 3 or more months without touching those precious funds?
  • Are you comfortable earning just a small measly but better than a savings account interest rate?

If you can answer yes to these questions than a Certificate of Deposit is the way to go.

What is a Certificate of Deposit?

A Certificate of Deposit aka CD is a no risk way to earn a higher interest rate than what one currently receives in their savings account. It's nothing to write home about, only a few interest points higher than what you may be earning in your savings account. It's really not much higher than what your currently earning, but if the money is just sitting in your account you may as well make it work a little harder for you. It's FDIC insured so your money is safe even if your bank isn't. A Certificate of Deposit is an agreement to loan your bank you money with the intent to not withdrawal for a specified length of time

How much do I need to get a Certificate of Deposit?

The minimum at many banks is $1000. Some may be $250 or $500 though, so check with your own bank and ask about their minimum deposit requirements for their certificate of deposits. Don't forget all of your money is FDIC insured. There are also some Certificate of Deposit options that will offer your a higher interest rate for larger deposits.


Put your change into a certificate of deposit
Put your change into a certificate of deposit

How Long Is The Time Period of The Certificate Of Deposit?

It depends. Length can be 30 days to 10 years. This, like minimum deposit varies from bank to bank. Just keep in mind that getting a Certificate of Deposit is loaning the bank your money with the intent to not withdrawal for a specified length of time, if you do need to withdrawal your money early you will most likely incur tremendous added fees.

Where do I get a Certificate of Deposit?

You can get one at your bank or shop around for better rates at other financial institutions. Shop around for rates based on the amount of time you are comfortable not touching your money.

Is tThere Any Risk In A Certificate Of Deposit?

This one's tricky. No risk if your happy with the fixed interest rate you've received, remember FDIC insured. With that said, the only risk comes form changing interest rates. If rates go down then you've been lucky and locked in the interest rate higher than what people may earn if the interest rates drop. The actual risk is that the interest rates may go up higher than what you are receiving and you will not be able to get those extra percentage points without withdrawing your fixed rate CD and taking on stiff penalty fees.

Is a Certificate of Deposit right for me?

If you have the minimum deposit required for the certificate of deposit and the money is just sitting in you savings account with no plans to move any time soon then yes this would be for you. Think of it as a savings account you just don't have access to. If you can live with that then this is a great low risk option for making your money work harder for you.





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