Certificate of Deposit [CD] is a secure way to see your funds grow. What is a certificate of deposit? CD is a deposit account with specific terms ranging from 3 months to ten years. It increases your deposit through interest. If you are skeptical about how the certificate of deposit will benefit your financial plan, then read the reasons for how useful they are.
Everyone is not comfortable in the stock market investment or trapping their money in volatile products like bonds. FDIC insures CDs up to a maximum of as allowed legally. Therefore before approaching a financial institution make sure that they are FDIC insured. It means if the financial institution fails, your money is covered.
Besides FDIC protection, you get other protection too. In stocks, you can lose or gain large sum in a single day, but the funds put in a CD consistently grows regardless of the market environment. Use the Blackhawk CD calculator to get an idea of how much you are capable to earn with a certificate of deposit.
Fixed rates & terms
Real estate or stock market investments can be unpredictable because of the volatility in financial markets. There are some years fruitless and a few more fruitful. With CD, the fixed interest rate can be locked for the product life. The roller-coaster fluctuations like slow or steady market moves do not impact the CD growth.
Consider the three interest rate alternatives
- Fixed-rate CD – A 3-year fixed-rate CD with 2.25% annual percentage yield [APY] will bring in that rate for the entire three-year duration in spite of the interest rates increase or decrease within that term.
- Variable-rate CD – Pays a percentage based on the difference between interest rates at the start and end of CD terms. If you open a 3-year variable-rate CD with 2.15% APY, which saw an increase to 2.35% APY then your returns will be calculated on the increase during that term.
- Adjustable-rate CD – You get a chance to adjust the interest rate for a limited time, during the CD term.
Flexible maturity dates
You may be saving for your kid’s higher education of a lifetime trip, then CD is a safe option to park your money for a specific period, which aligns with your financial plan. For example, if your plan is to be prepared for your child’s higher education seven years in the future, then invest your funds in CD for a maturity period of 7 years.
No or low fee structure
A few banks don’t charge monthly fees for holding CD money, so there is no need to be concerned about the fees affecting your CD earnings. Another thing to consider is even if there are no monthly fees attached there may be early withdrawal penalties that can impact your principal or interest negatively. Therefore before you indulge, read the T&C to get a clear idea of the applicable fees and penalties.
- Shop and compare top CD rates
- Longer CD term means higher the rates you get [means more CD earnings]
With a CD, you enjoy reliable growth and priceless peace of mind.