Certificates of Deposits
CD’s are vehicles which allow you to save money for a specific period of time. Normally the period ranges from 30 days to 60 months and during that time you cannot withdraw the money. If you do decide to withdraw the money there could be a penalty you incur. However if you decide to leave the money alone for the term you have selected at the end you will be able to receive your initial deposit plus any interest that has accrued.
You can either roll the account over again for the same term or a different term and at the prevailing rates existing at that time. It may not be the same rate you had initially. The good thing about CD’s is the fact that the rates are fixed for the entire term which gives you peace of mind knowing that you will not lose your money. If you chose not to roll the money over your bank can issue you a check and some can have the money deposited right into a checking account for you; it all depends on the services offered by your bank.
With CD’s normally the initial deposit needed is $1,000 again this can vary. This makes it easy to get started with your investment portfolio and certainly it is a good idea to talk to a certified financial planner because they will look at your own individual situation and steer you in the direction that is going to be most beneficial for you. For example at certain stages of your life you don’t want the same type of investment strategy as you get older you want to get away from the most aggressive strategy and go in the direction of a more conservative strategy, but again a certified financial planner can help you map out all the details.
Rates on CD’s can vary. With CD’s you have a rate and an annual percentage yield. The rate is what you receive if your interest is not compounded and the anuual percentage yield is what you receive if the interested in compounded and stays on deposit for at least one year. The annual percentage yield will vary dependent upon the bank or financial institution you deal with. Obviously the higher the APY the more money you will receive during the term of your CD. Again beware of taking your money out early as that will incur a penalty. There are certain instances when you are allowed to take money from your CD without a penalty but it is best to check with your own financial institution to see exactly when that occurs. Also you can determine how much money you are going to earn with a CD if you know the annual percentage yield.
Some banks offer CD’s that have tiered rates which basically means the higher the balance the higher the interest rate , thereby earning you more money. You are given the option of letting the interest remain on the account or you can have it transferred into a checking account or savings account. For your security CD’s are insured by the FDIC up to $100,000 but this is based on ownership. You can contact the FDIC and get all the particulars.