Choosing How To Save Money In A Certificate Of Deposit

If you have money that you can save for a period of time without touching it and you want an FDIC-insured product, a certificate of deposit may make sense for you. Use the tips below when you’re choosing a CD for your savings.

Determine how much money you will put into a CD and for how long. A certificate of deposit runs for a specific term so that you’ll see CD rates that describe how long your money will be locked into the CD ranging from a few months to several years. Choosing how much money to put into your CD means that you believe you won’t need to use that money for the time in which it’s in a CD.

Determine whether you are comfortable with dealing with an online bank that has no brick-and-mortar presence. This is an emotionally-based decision because in practice, once your account is set up and you’ve chosen a bank that offers FDIC-insured CDs, using an online versus a brick-and-mortar bank should not impact the safety of your account. It is important to note that setting up your online account will involve sending your personal information from your social security number to an image of your license over the Internet or through the mail which can be a concern if you’re worried about identity theft.

Determine whether the advertised interest rate is available for depositors with your amount of money. Some CD products have a minimum required investment amount in order to get the interest rate advertised. If this is the case then check around to see whether another bank offers a better interest rate for someone who has your amount of money to invest. Don’t assume that a promotional rate means that the bank’s other CD rates, those for different lengths of time or those requiring less initial investment are also competitive.

Look for promotional CD features, such as those that pay higher interest or offer another perk for opening a CD. For instance, you can search for no-withdrawal penalty CDs which are periodically offered by some banks in an effort to get you to open a CD with them. The reason this is a promotion is because in most instances if you need to take your money out of a CD, you’ll be charged a penalty. It is important to remember that CDs typically do not offer the option of a partial withdrawal.

Consider CDs that provide for bump-ups, which means that if during a specific period of time interest rates rise you have the option of getting the higher interest rate. Most CDs that offer the bump-up feature or the best interest rate features such as those occurring within a specific amount of time after you open a CD require you to find the better rate, so keep checking out interest rates during that period of time. Make sure that the CD period is not extended each time you bump up your interest rate as well as how many times you can bump-up your interest rate.

Having money to invest is a great opportunity for you to earn interest on your money. Use the tips above to determine whether a certificate of deposit should be part of your personal savings strategy.

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