4 Reasons to Open a Certificate of Deposit (CD)

Jul 5, 2018 8:15:00 AM

A certificate of deposit (or CD) is a type of savings account available from banks and credit unions that has a fixed interest rate along with a specified amount of time that you promise to keep your cash in the account (maturity date). If you’re looking for a place to put funds that you don’t need immediate or frequent access to, a CD might be the right option for you.


Typically certificates of deposits pay higher interest rates than traditional savings accounts and money market accounts. With a savings account you can deposit and withdraw funds relatively easily with minimal to no fees. But the main thing to be aware of with a CD is you have to leave your funds in the account for a set amount of time; during which time you can’t access the funds without potentially paying a penalty.


While there are other ways to increase your savings faster, opening a CD is not a risky option. Your deposits in a CD are FDIC-insured or covered under NCUA insurance if you decide to use HUECU or another credit union. CDs are a great option to keep funds that you can’t afford to lose because you’ve got the government guarantee of getting all your money back.


When you open a CD, you have the option to choose how long you want to keep your funds in a bank or credit union. Often there are different terms available along with different fixed rates. This gives you the flexibility to decide how long you can go without accessing your funds. Generally the longer the term, the more you will earn. So before opening a CD, it is beneficial to do some long term planning. Know exactly what big purchases or expenses you might encounter in the future and what you would need those funds for.


Tags: Savings, Money Tips