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Benefits of Investing in a Certificate of Deposit

Certificates of Deposit (CD) are a safe way to secure a return on your money, especially if you have some extra cash that you will not need for a period of time. Essentially, a CD is a deposit account with a term that can run from 3 months to up to several years. The interest then accumulates depending on the terms and rate chosen and approved for.

For the most part, the longer the duration of the CD, the higher the interest rate you can potentially earn. Because you cannot access the money for the agreed upon time period, banks typically will offer higher interest rates than you would get with checking and savings accounts. Below are some examples that elaborate on why Certificates of Deposits can be a great investment opportunity.

• Because CDs have fixed interest rates, they provide a guaranteed return on investment. CDs are most effective at earning investors’ money when they are left alone and given the chance to accumulate. A unique feature that sets CDs apart from stocks or other investments is that earnings are based off interest and not off market fluctuations. Therefore, CDs require very little upkeep and attention.

• When the CD reaches its maturity date, it can be withdrawn or inserted back into an additional interest term. If you need access to your cash before the expiration date, you can withdraw the money early. However, there are usually varying monetary penalties associated with withdrawing your money early. The Federal Deposit Insurance Corporation ensures CDs, and for this reason they are one of the safest investments out there.

• The flexibility of term periods makes CDs an investment that can best fit your schedule. Before investing in a specific CD term length, decide what your savings goal is. Are you looking for short term or long-term reward? If your goal is to accumulate additional money before vacation in 1 year, then a short-term CD account will be more effective. If you are looking to save up for a longer term, then a 3 or 5 year CD will work better for you.

Overall, Certificates of Deposit are a very effective method for a dependable return on your extra money with little risk to the investor. If you want to learn more about Certificates of Deposit and to view rates, click below.

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