CD: A better way to invest
Are you looking for a place to hideaway your money for a longer period of time than a regular savings account? You may have already investigated about certificate of deposit or a CD. A CD (certificate of deposit) is a deposit made with a bank for a period of time. They can be either obtained from money-making banks or can be procured from brokerage firms. They have a particular maturity date ranging from months to years, a definite rate of interest on the investment, and can be given out in any denomination.
How much interest will I receive on my investment?
It is now easy for the consumers, as they can find a CD with the best rates and terms for their needs, from the numerous sites that list top CD rates and today’s highest CD rates. The CD rates are cited as an annual percentage yield (APY). The payment of the interest on the investment varies and the banks or brokerage firms can choose daily, monthly, quarterly, or annual compounding and this frequency can impact the expected return when compound interest is taken into account.
CD Types
Based on the investment amount, CDs can be broadly classified as small CDs (investment amount less than $100,000) and large or jumbo CDs (investment amount greater than $100,000). The term of a CD generally ranges from a month to five years. The CDs may be negotiable.
Some terms and conditions to keep in mind
There are many distinctions in the terms and conditions for CDs. People are generally unaware with the fact that only the written manuscript carries legal weight. Some of the CDs maybe callable and the terms may state that the bank or credit union can close the CD before the term ends. Interest maybe paid out as it gets accumulated in CD. The CD may start earning interest from the date of deposit. Some of the banks do not allow withdrawal or allows withdrawal with a penalty before the end of the term. A fee maybe specified for withdrawal or closure of for providing a certified check. The institution may or may not provide a grace period before automatically rolling over the CD to a new CD at maturity.