Certificates of Deposits (CDs)

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Tips & Advice to help you make your decision on Certificates of Deposits (CDs)

Commonly known as CDs, certificate of deposits are financial products available from banks, credit unions and other financial institutions. Like savings accounts they are insured and therefore carry little to no risks, while generally offering a fixed interest rate that provides a good return once a CD has matured.

Certificate of deposits are available from financial institutions nationwide. They represent a solid and secure short-term investment. CDs are available for fixed terms, which can range from as little as three months but are often for as long as one to five years. Once a CD has matured the investor may withdraw their money along with the interest that has been accrued on the account.

CDs are attractive because they offer higher interest rates than standard savings accounts. High yield CDs that offer good interest rates compounded daily are available from financial institutions across the country. Some CDs require a minimum deposit while others have no minimum.

No matter how much or how long you intend to invest in a CD, Business.com can help you connect with a financial institution that can furnish you with a good CD. Simply visit the links to providers on the left to find out more information about investing your money in a CD.

Certificates of Deposit (CDs) Basics

After depositing enough savings or profits into liquid and emergency funds, consider low-risk bank certificates of deposit to store additional cash that you don't immediately need. Certificates of deposits are fixed-income investments from traditional and online banks, and you can choose either individual or business certificates of deposit. Compared to savings and money market accounts, CD rates of interest earned are higher. Unlike other accounts, certificates of deposit cannot be withdrawn on demand, unless you open a liquid CD. Otherwise, you must commit to the bank's or brokerage's holding a certain amount of money until it matures. Holding periods, or CD maturity dates, differ depending on the bank, but they usually range from seven days to 10 years.

One of the specifications for opening a CD account is type. Traditional and high-interest bank CDs are among the popular types. Traditional certificates of deposit allow you to save a specific amount of money at the current interest rate. High-interest bank CDs offer above-average rates, but sometimes come with high minimum deposit requirements.

1. Compare high-interest bank CD rates.

2. Learn about requirements to open a certificate of deposit.

3. Choose the bank or brokerage where you want to open the account.

Track the best high-interest bank CD rates

Once you've studied the certificates of deposit (CDs) basics, find neighborhood or online banks that offer competitive CD rates.
Try: Search for the most popular certificates of deposit at Bankrate.com. Compare the highest local and national CD rates as well as high-interest business CD rates. Bankaholic.com also posts the most current, high-interest bank CDs, and provides other information about certificates of deposit, such as savings strategies. The U.S. Securities and Exchange Commission also offers tips for investing in certificates of deposit.

Understand the requirements for opening a certificate of deposit account

Some banks require you to put large sums of money into bank CDs, while others allow you to open a CD with a smaller amount. Also, make sure that the individual or business CD rates are guaranteed, that you have online access to your account and that the account is FDIC-insured.
Try: Capital One requires a minimum deposit of $5,000 to open a CD, regardless of the term. Jumbo, high-yield CDs require a minimum deposit of $100,000. GMAC Bank requires a minimum deposit of $500 whether you want to open a one-year or a five-year term.

Open a certificate of deposit account once you've decided on the bank or brokerage

Once you've located a bank that meets your savings needs, and you've determined the amount of money you want to put into the CD investment, follow the instructions for applying for the account.
Try: Many national banks such as Bank of America feature an express application process online. At Discover Bank, the CD application process can be completed in four steps.

Other types of CDs include bump-up, callable and liquid. If the interest rate rises on a CD you currently own, then the bump-up option gives you a chance to request the higher rate for the rest of that term. Callable CDs are investments that can be "called" by a bank before the CD maturity date, then reissued at a lower rate. Liquid certificates of deposit are CDs that offer you the freedom of withdrawing some of the funds without any penalties.
Cashing out on high-interest bank CDs subjects you to paying early withdrawal penalties. In this case, it's possible to lose out on three to six months' worth of interest.