Check out everything you need to know about the certificate of deposit

Check out everything you need to know about the certificate of deposit

Are you wondering what is a certificate of deposit (CD) and how do they work? In this article, you will find all the details you need to know. Keep reading to find out!

Are you wondering what is a certificate of deposit (CD) and how do they work? In this article, you will find all the details you need to know. Keep reading to find out!

A certificate of deposit (CD) is a low-risk savings tool that can boost the amount you earn in interest while keeping your money invested in a relatively safe way. Like savings accounts, CDs are considered low risk because they are FDIC-insured up to $250,000. However, CDs generally allow your savings to grow at a faster rate than they would in a savings account.

A certificate of deposit (CD) is a low-risk savings tool that can boost the amount you earn in interest while keeping your money invested in a relatively safe way.

In exchange for depositing your money into a bank for a fixed period, the bank pays a fixed interest rate that’s typically higher than the rates offered on savings accounts. When the term is up, you get back the money you deposited plus any interest that has accrued.

CDs come in varying terms and may require different minimum balances. The rate you earn typically varies by the term and how much money is in the account. In general, the longer the term and the more money you deposit, the higher the rate you are offered.

CDs come in varying terms and may require different minimum balances.

Like savings accounts, CDs earn compound interest meaning that periodically, the interest you earn is added to your principal. Then that new total amount earns interest of its own, and so on. Because of the compound interest, it is important to understand the difference between interest rate and annual percentage yield.

There are a number of factors to consider when choosing a CD. First, when do you need the money? If you need it soon, consider a CD with a shorter term. But if you’re saving for something five years down the line, a CD with a longer-term and higher rate may be more beneficial.

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